2008/563/EC: Council Decision of 3 June 2008 abrogating Decision 2005/185/EC on the existence of an excessive deficit in the Czech Republic
Date: 2008-06-03
Institutions: Council of the European Union
Subjects: Czechia, budget deficit, public finance, stability programme

10.7.2008

EN

Official Journal of the European Union

L 181/45

COUNCIL DECISION

of 3 June 2008

abrogating Decision 2005/185/EC on the existence of an excessive deficit in the Czech Republic

(2008/563/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 2005/185/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 the Czech Republic. The
Council noted that the general government deficit was
12,9 % of GDP in 2003 (5,9 % of GDP excluding a major
one-off operation related to imputed state guarantees),
well above the 3 % of GDP Treaty reference value.

On 5 July 2004, in accordance with 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 recommendation addressed to the Czech
Republic with a view to bringing the excessive deficit
situation to an end by 2008 at the latest. The recom-
mendation was made public.

value

in 2008,

the Council

In view of the forecast of a marked budgetary slippage in
2007 and a continuing excess of the deficit over the
adopted a
reference
Decision under Article 104(8) on 10 July 2007, based
on a recommendation from the Commission, stating that
the action being taken by the Czech Republic did not
appear to be adequate to correct the excessive deficit by
the deadline of 2008 (3). On 10 October 2007,
the
Council
under
Article 104(7), based on a recommendation from the
Commission,
recommending the Czech Republic to
further contain the budgetary deterioration in 2007
and reconfirming that the excessive deficit must be put
to an end by 2008 at the latest, with a deadline of
9 April 2008 for the Czech authorities to take effective
action. On the basis of the then available projections the
to ensure an
Council

invited the Czech authorities

new recommendation

issued

a

(1) OJ L 62, 9.3.2005, p. 20.
(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) Decision 2007/640/EC (OJ L 260, 5.10.2007, p. 13).

(4)

(5)

(6)

improvement in the structural balance (i.e. the cyclically-
adjusted balance net of one-off and other temporary
measures) of
least 0,75 % of GDP in 2008
compared to 2007.

at

the Treaty, a
In accordance with Article 104(12) of
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.

for

the data

implementation of

In accordance with the Protocol on the excessive deficit
procedure annexed to the Treaty,
the Commission
the
the
provides
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 (4).

establishing

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

— the general government deficit was reduced from
2,7 % of GDP in 2006 to 1,6 % of GDP in 2007,
which brings
it below the 3 % of GDP deficit
the deadline set by the
reference value before
Council. This compares with a target of 4 % of
GDP in the March 2007 convergence programme,

in particular with respect

— while tax revenues exceeded expectations due to
higher-than-projected economic growth,
the deficit
reduction in 2007 was also the consequence of
expenditure restraint,
to
the compensation of public sector employees and
intermediate consumption. Most of the expenditure
savings are of a permanent nature. The improvement
in the structural balance (i.e. the cyclically-adjusted
temporary
balance net of one-off
measures) is estimated at just above 0,5 % of GDP
in 2007,

and other

(4) 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 181/46

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Official Journal of the European Union

10.7.2008

as a

— for 2008, the spring 2008 forecast projects the deficit
to be reduced further, to 1,4 % of GDP, driven by
additional expenditure savings measures,
legislative
measures to reduce social expenditure and the intro-
duction of partial health charges. Revenue as a
percentage of GDP is expected to remain broadly
constant
tax
result of a wide
measures implemented in 2008. The spring forecast
is in line with the deficit target of 1,5 % of GDP in
the spring
fiscal notification. For 2009,
the April
forecast projects, on a no-policy change assumption
based on continued expenditure restraint, a further
decline
to 1,1 % of GDP. This
indicates that
the deficit has been brought below
the 3 % of GDP reference value in a credible and
sustainable manner,

in the deficit

range of

spring 2008 forecast, the debt ratio is projected to
fall further to below 28 % by the end of 2009 (on a
no-policy-change basis).

(7)

In the view of the Council, the excessive deficit in the
Czech Republic has been corrected and Decision
2005/185/EC should therefore be abrogated,

HAS ADOPTED THIS DECISION:

Article 1

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

— the structural balance is projected to improve by
about half of a percentage point of GDP in 2008
and again, on a no-policy-change assumption based
on continued expenditure restraint, in 2009. This has
the need to speed up the
to be seen against
achievement of
the medium-term objective (MTO)
for the budgetary position, which for the Czech
Republic is a structural deficit of 1 % of GDP, as
recommended in the March 2008 Council Opinion
on the November 2007 update of the convergence
programme,

— government debt remains well below the 60 % of
GDP reference value.
It declined from 29,4 % of
GDP in 2006 to 28,7 % in 2007. According to the

Article 2

Decision 2005/185/EC is hereby abrogated.

Article 3

This Decision is addressed to the Czech Republic.

Done at Luxembourg, 3 June 2008.

For the Council
The President

A. BAJUK