2008/561/EC: Council Decision of 3 June 2008 abrogating Decision 2005/730/EC on the existence of an excessive deficit in Portugal
Date: 2008-06-03
Institutions: Council of the European Union
Subjects: Portugal, budget deficit, public finance, stability pact

10.7.2008

EN

Official Journal of the European Union

L 181/41

COUNCIL DECISION

of 3 June 2008

abrogating Decision 2005/730/EC on the existence of an excessive deficit in Portugal

(2008/561/EC)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty
Community, and in particular Article 104(12) thereof,

establishing the European

Having regard to the recommendation from the Commission,

Whereas:

(1)

(2)

(3)

the Treaty,

By Council Decision 2005/730/EC (1), following a recom-
mendation from the Commission in accordance with
Article 104(6) of
it was decided that an
excessive deficit existed in Portugal. The Council noted
that the planned general government deficit for the year
2005 was 6,2 % of GDP, above the 3 % of GDP Treaty
reference value, while general government gross debt was
expected to reach 66,5 % of GDP, above the 60 % of
GDP Treaty reference value.

in

20

September

On
accordance with
2005,
Article 104(7) of the Treaty and Article 3(4) of Council
Regulation (EC) No 1467/97 of 7 July 1997 on speeding
up and clarifying the implementation of the excessive
deficit procedure (2),
the Council made, based on a
recommendation from the Commission, a recommen-
dation addressed to Portugal with a view to bringing
the excessive deficit situation to an end by 2008 at the
latest. The recommendation was made public.

In accordance with Article 104(12) of
the Treaty, a
Council Decision on the existence of an excessive
deficit is to be abrogated when the excessive deficit in
the Member State concerned has,
in the view of the
Council, been corrected.

(4)

In accordance with the Protocol on the excessive deficit
the Commission
procedure annexed to the Treaty,

for

the data

implementation of

provides
the
the
procedure. As part of the application of the Protocol,
Member States are to notify data on government
deficits and debt and other associated variables twice a
year, namely before 1 April and before 1 October,
in
accordance with Article 4 of Council Regulation (EC)
No 3605/93 of 22 November 1993 on the application
the Protocol on the excessive deficit procedure
of
annexed to the Treaty
the European
Community (3).

establishing

(5)

Based on data provided by the Commission (Eurostat) in
accordance with Article 8g(1) of Regulation (EC) No
3605/93 following the notification by Portugal before
1 April 2008 and on the Commission services’ spring
2008 forecasts, the following conclusions are warranted:

— the general government deficit was reduced from
6,1 % of GDP in 2005 to 3,9 % of GDP in 2006
and to 2,6 % of GDP in 2007, which brings it
below the 3 % of GDP deficit reference value one
year before the deadline set by the Council. The
latter compares with a target of 3 % of GDP set in
the December 2007 update
stability
programme of Portugal,

the

of

— both a falling government expenditure-to-GDP ratio
and a rising revenue-to-GDP ratio contributed to the
improvement in the government balance. The expen-
diture ratio declined by 1¼ percentage points of GDP
in 2006 and almost ½ of a percentage point of GDP
in 2007. In parallel, the government revenue ratio
increased by some ¾ of a percentage point of GDP
in both 2006 and 2007. Fiscal consolidation hinged
mainly upon structural measures, with a marginal
contribution from a one-off operation worth 0,1 %
of GDP in 2007. The improvement in the structural
balance (i.e. the cyclically-adjusted balance net of one-
is estimated at
off and other temporary measures)
two percentage points of GDP in 2006 and one
percentage point of GDP in 2007, which is in line
with
under
the structural
Article 104(7)
balance by 1,5 % of GDP in 2006 and, at
least,
¾ % of GDP in 2007,

for a reduction of

recommendation

Council

the

(1) OJ L 274, 20.10.2005, p. 91.
(2) OJ L 209, 2.8.1997, p. 6. Regulation as amended by Regulation (EC)

No 1056/2005 (OJ L 174, 7.7.2005, p. 5).

(3) OJ L 332, 31.12.1993, p. 7. Regulation as last amended by Regu-

lation (EC) No 2103/2005 (OJ L 337, 22.12.2005, p. 1).

L 181/42

EN

Official Journal of the European Union

10.7.2008

— for 2008,

the Commission services’ spring 2008
forecasts project a further reduction in the deficit,
to 2,2 % of GDP, mainly driven by some additional
revenue, with the budgetary execution benefiting
from a 0,2 % of GDP one-off deficit-reducing
operation. This is broadly in line with the official
deficit targets of 2,4 % of GDP set in the December
2007 update of the stability programme of Portugal
and the revised target of 2,2 % of GDP announced by
the Portuguese authorities in late March 2008. For
2009, the spring forecasts project, on a no-policy
change basis, a government deficit at 2,6 % of GDP.
This indicates that the deficit has been brought below
the 3 % of GDP reference value in a credible and
sustainable manner,

— nevertheless,

the structural balance is projected to
improve by about ¼ percentage point of GDP in
2008 and, on a no-policy change basis, to worsen
by ¼ percentage point of GDP in 2009. This has to
be seen against the need to make progress towards
the medium-term objective (MTO) for the budgetary
position, which for Portugal is a structural deficit of
0,5 % of GDP,

— government debt declined from 64,7 % of GDP in
2006 to 63,6 % of GDP in 2007. The low GDP
growth and still relatively high government deficits
projected in the Commission services’ spring 2008
economic
a
government debt at some 64¼ % of GDP in 2009.

expected

forecasts

yield

are

to

(6)

in
In the view of
Portugal has been corrected and Decision 2005/730/EC
should therefore be abrogated,

the excessive deficit

the Council,

HAS ADOPTED THIS DECISION:

Article 1

From an overall assessment it follows that the excessive deficit
situation in Portugal has been corrected.

Article 2

Decision 2005/730/EC is hereby abrogated.

Article 3

This Decision is addressed to the Portuguese Republic.

Done at Luxembourg, 3 June 2008.

For the Council
The President

A. BAJUK