COMMISSION STAFF WORKING DOCUMENT Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Interim Progress Report on the implementation of Council Directive 2011/85/EU on requirements for budgetary frameworks of the Member States
Date: 2012-12-14
Institutions: European Commission
Subjects: EU Member State, application of EU law, budget deficit, budget estimate, budgetary equilibrium, disclosure of information, national budget, national planning, stability pact

EUROPEAN 
COMMISSION 

Brussels, 14.12.2012  
SWD(2012) 433 final 

COMMISSION STAFF WORKING DOCUMENT 
Accompanying the document 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

Interim Progress Report on the implementation of Council Directive 2011/85/EU on 
requirements for budgetary frameworks of the Member States  

{COM(2012) 761 final} 

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TABLE OF CONTENTS 

COMMISSION STAFF WORKING DOCUMENT ................................................................. 3 

1. 

1.1. 

1.2. 

1.3. 

1.4. 

1.5. 

1.6. 

1.7. 

1.8. 

1.9. 

THE IMPLEMENTATION OF THE MAIN PROVISIONS OF THE DIRECTIVE 
BY MEMBER STATES .............................................................................................. 4 

Implementation of the main provisions of the Directive in BELGIUM ...................... 4 

Implementation of the main provisions of the Directive in BULGARIA.................... 6 

Implementation of the main provisions of the Directive  
in the CZECH REPUBLIC ........................................................................................ 10 

Implementation of the main provisions of the Directive in DENMARK .................. 14 

Implementation of the main provisions of the Directive in GERMANY .................. 17 

Implementation of the main provisions of the Directive in ESTONIA ..................... 23 

Implementation of the main provisions of the Directive in IRELAND..................... 27 

Implementation of the main provisions of the Directive in GREECE....................... 31 

Implementation of the main provisions of the Directive in SPAIN........................... 34 

1.10. 

Implementation of the main provisions of the Directive in FRANCE....................... 37 

1.11. 

Implementation of the main provisions of the Directive in ITALY .......................... 40 

1.12. 

Implementation of the main provisions of the Directive in CYPRUS....................... 43 

1.13. 

Implementation of the main provisions of the Directive in LATVIA ....................... 44 

1.14. 

Implementation of the main provisions of the Directive in LITHUANIA ................ 46 

1.15. 

Implementation of the main provisions of the Directive in LUXEMBOURG .......... 48 

1.16. 

Implementation of the main provisions of the Directive in HUNGARY .................. 50 

1.17. 

Implementation of the main provisions of the Directive in MALTA ........................ 54 

1.18. 

Implementation of the main provisions of the Directive in the NETHERLANDS ... 56 

1.19. 

Implementation of the main provisions of the Directive in AUSTRIA ..................... 58 

1.20. 

Implementation of the main provisions of the Directive in POLAND ...................... 60 

1.21. 

Implementation of the main provisions of the Directive in PORTUGAL ................. 63 

1.22. 

Implementation of the main provisions of the Directive in ROMANIA ................... 65 

1.23. 

Implementation of the main provisions of the Directive in SLOVENIA .................. 68 

1.24. 

Implementation of the main provisions of the Directive in SLOVAKIA.................. 71 

1.25. 

Implementation of the main provisions of the Directive in FINLAND..................... 74 

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1.26. 

Implementation of the main provisions of the Directive in SWEDEN...................... 75 

1.27. 

Implementation of the main provisions of the Directive  
in the UNITED KINGDOM ...................................................................................... 80 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

Implementation of the Directive by the Commission ................................................ 83 

Information on the steps taken by the Commission for the implementation of Article 
3 and Article 14 of the Directive................................................................................ 83 

Information on the steps taken by the Commission for the implementation of Article 
4(3) of the Directive ................................................................................................... 83 

Information on the steps taken by the Commission for the implementation of Article 
4(7) of the Directive ................................................................................................... 84 

Information on the steps taken by the Commission for the implementation of Article 
16(3) of the Directive ................................................................................................. 84 

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COMMISSION STAFF WORKING DOCUMENT 
Accompanying the document 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

Interim Progress Report on the implementation of Council Directive 2011/85/EU on 
requirements for budgetary frameworks of the Member States  

This  Working  Document  accompanying  the  Commission  Interim  Progress  Report  provides 
detailed country fiches on national steps or plans for the implementation of Council Directive 
2011/85/EU.  In  accordance  with  Article  15(3)  of  the  Directive,  Member  States  have  been 
asked  to  contribute  to  the  preparation  of  the  document  by  providing  answers  to  a 
questionnaire  distributed  on  23  May  2012  in  the  Economic  Policy  Committee.  The 
questionnaire  focused  on  the  following  topics:  (i) accounting  and  statistics;  (ii) forecasts; 
(iii) fiscal 
(v) mechanisms  of 
coordination  across  governments  sub-sectors.  Whenever  possible,  the  layout  of  the  country 
fiches  follows  the  above  structure.  As  Member  States  delivered  their  contributions  in 
September 20121, the information contained in the country fiches reflects the state-of-play in 
national transposition efforts at the time.  

(iv) medium-term  budgetary 

frameworks;  and 

rules; 

1 

NL, SI, LT PT, IT and HU reported in October; CY, LV, MT and UK in November. 

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1. 

IMPLEMENTATION OF THE MAIN PROVISIONS OF THE DIRECTIVE BY 
MEMBER STATES 

1.1. 

Implementation of the main provisions of the Directive in BELGIUM 

The  Belgian  authorities  report  that  on  27 March 2012,  the  Inter-Ministerial  Finance  and 
Budget  Conference  decided  to  set  up  a  working  group  at  administrative  level  in  order  to 
ensure the comprehensive and coordinated transposition of the Directive into the national and 
sub-national law. 

This  working  group  is  overseen  by  the  Federal  Budget  Ministry  and  brings  together 
representatives  from  the  Belgian  Communities  and  Regions  and,  at  federal  level, 
representatives from the Ministry of Finance and the Budget Ministry. 

A list has been drawn up of potential adaptations of the Belgian legislation to the Directive. In 
particular,  it  is  planned  to  modify  the  law  of  16 May 2003  (on  general  provisions  for  the 
law  of 
accounting  of 
the 
16 January 1989.  Cooperation  agreements  between 
Communities and Regions could also be adapted. 

the  special  financing 
the  federal  government  and 

the  Communities  and  Regions)  and 

The federated entities have been asked to compare their own legislation with the provisions of 
the Directive. Several provisions are already applied but are not legally binding. Their binding 
nature thus has to be explicitly specified in the legislation. The work of the group is still in 
progress and more details are expected in the coming months. 

1. Accounting and statistics 

The  law  of  22 May 2003  on  state  budgets  has  brought  public  finance  practice  in  Belgium 
somewhat  closer  to  the  requirements  of  the  Directive  by  introducing  accrual  accounting 
across  general  government  sub-sectors.  However,  local  accounting  does  not  currently  allow 
the provision of ESA95-compliant regional accounts. Fiscal data in the sense of Article 3 of 
the Directive are not available at state and federated entities level. 

The Belgian authorities report that the Council of the Ministers (federal level) of 15 June 2012 
decided  to  create  a  High-Level  Task  Force  with  the  aim  of  improving  the  governance  of 
statistics for the general government accounts. 

2. Forecasts 

Regarding Article 4(1) of the Directive, the National Accounts Institute (ICN) is tasked with 
the preparation of macroeconomic forecasts for the federal budget (Article 108 of the Law of 
21 December 1994).  It  brings  together  the  Federal  Planning  Bureau  (FPB),  the  National 
Statistical Institute and the Central Bank of Belgium. Although this is not a legal obligation, 
both the central government  and  sub-central governments use  the forecasts produced  by  the 
FPB  (through  the  ICN).  Regarding  ex  post  evaluation  in  line  with  Article 4(6)  of  the 
Directive,  the  FPB  occasionally  produces  ex  post  evaluations  of  forecast  accuracy  on  an  ad 
hoc basis (a recent assessment was issued for the 1994-2010 period). 

3. Fiscal rules 

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In the 2011 EPC peer review of national fiscal frameworks, the Commission’s country fiche 
noted  that  ‘(…)  numerical  fiscal  rules  and  medium-term  frameworks  appear  less  developed 
(as many of the former numerical rules have been abandoned) and show some shortcomings, 
which has contributed to frequent slippages in the past (…)’2. 

4. Medium-Term Budgetary Framework 

The  Commission’s  country  fiche  noted  the  existence  of  a  rolling  three-year  framework 
applicable to the entire general government. The framework is indicative3. 

5. Mechanisms of coordination across sub-sectors of general government 

As pointed out by the Court of Auditors and Belgium’s High Council for Finance of Belgium 
existing  mechanisms  for  coordination  between  central  (federal)  government  and  federated 
entities do not fully allow for budgetary coordination. 

2 

3 

European  Economy  Occasional  Paper  91,  Fiscal  Framework  across  Member  States:  Commission 
services’ country fiches from the 2011 EPC peer review, p.92. 
European  Economy  Occasional  Paper  91,  Fiscal  Framework  across  Member  States:  Commission 
services’ country fiches from the 2011 EPC peer review, p.93. 

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1.2. 

Implementation of the main provisions of the Directive in BULGARIA 

The Bulgarian Ministry of Finance (MoF) is preparing a draft law on public finances4 which 
is  expected  to  enter  into  force  on  1 January 2014.  If  adopted,  it  would  consolidate  and 
strengthen the budgetary framework in a single legislative act, repealing the Organic Budget 
Law and the Municipal Budgets Law, and amending other laws. The law would transpose the 
main  provisions  of  the  Directive  and,  more  generally,  implement  the  ‘six-pack’  provisions. 
The Bulgarian authorities report that the purpose of the law is to carry out a comprehensive 
reform of the medium-term budgetary framework to address existing weaknesses and support 
the fiscal consolidation process. The law is also intended to strengthen the interaction between 
central and local governments in the conduct of a prudent fiscal policy, while observing EU 
reference values and taking into account the independent nature of their budgets. 

1. Accounting and statistics 

Accounting 

Article 164 of the draft law stipulates that the MoF is to approve the accounting standards and 
charts of accounts and give instructions to publicly financed organisations in compliance with 
the  EU  requirements  governing  reporting,  statistics  and  budgeting  in  the  public  sector. 
Article 169  further  stipulates  that  the  standards,  instructions  and  chart  of  accounts  and  the 
accounting  systems  of  publicly  financed  organisations  and  undertakings  must  allow  the 
preparation of data on the general government sector and its sub-sectors in compliance with 
EU requirements. 

Statistics 

Monthly  cash-based  budget  execution  results  are  published  on  the  MoF  website5.  They 
include  main  aggregates  (revenue  and  grants,  expenditure,  transfers)  and  the  financing 
structure,  with  a  detailed  breakdown  by  sub-sector  and  special  entities  (republic’s  budget, 
judicial  authority,  social  security,  municipal  budgets,  extra-budgetary  funds  and  other 
accounts,  other  autonomous  budgets6,  and  the  national  assembly).  The  consolidated  debt  of 
the government sector is reported monthly on the website of the MoF (Article36 of the draft 
law on public finances). 

Regarding the reconciliation table referred to in Article 2(2)(b) of the Directive, the Bulgarian 
authorities report that the preparation of such a table will be regulated in MoF guidelines. 

Extra-budgetary entities 

According to the Bulgarian authorities, the draft law envisages discontinuation of the practice 
of  off-budget  funds  and  accounts  under  Article 45(2)  of  the  Organic  Budget  Law  and 
Article 42(1)(1)  of  the  Municipal  Budgets  Law.  Article 67(5)  of  the  draft  law  on  public 
finances stipulates that ‘the budget procedure shall cover also legal entities controlled by the 

4 
5 
6 

The document referred to is an interim draft sent by the Ministry of Finance. 
http://www.minfin.bg/en/statistics/1; http://www.minfin.bg/en/statistics/5. 
This  subcategory  includes  the  following  entities:  state  universities,  the  academy  of  science,  national 
TV, national radio, the news agency. 

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central  government  and/or  municipalities,  which  do  not  belong  to  the  Consolidated  Fiscal 
Programme  but  fall  within  the  scope  of  the  general  government  sector’.  Article 168  further 
provides  that  ‘the  Minister  of  Finance  may  require  from  the  undertakings  […]  which  are 
controlled  by  the  government  or  municipalities  or  supported  by  them  with  subsidies,  loans, 
sovereign  guarantees  and  other  forms  of  state  aid,  to  provide  additional  reports,  and 
information  in  forms,  content,  time  limits  and  procedure  established  by  the  Minister  of 
Finance’. 

Article  69(7)  of  the  draft  law  stipulates  that  ‘for  the  purposes  of  the  medium-term  budget 
forecast, the legal entities which fall within the scope of the general government sector and do 
not belong to the Consolidated Fiscal Programme shall present information and estimates of 
their forecasts’. 

Contingent  liabilities,  tax  expenditure  and  participation  in  the  capital  of  public  and  private 
corporations 

Articles 163, 165, 169 and 170 of the draft law contain enabling clauses for the MoF to obtain 
other types of fiscal data. 

2. Forecasts 

The  draft  law  on  public  finances  contains  a  number  of  provisions  for  the  preparation  of 
forecasts.  The  Ministry  of  Finance 
is  responsible  for  preparing  and  publishing 
macroeconomic  forecasts  in  spring  and  autumn  (Article  68  of  the  draft  law).  During  the 
preparation  of  the  medium-term  budget  forecasts  for  the  next  three  years,  macroeconomic 
scenarios  based  on  assumptions  regarding  domestic  and  global  economic  developments  are 
constructed by the MoF (Article 73 of the draft law). After taking into account the most likely 
or  conservative  scenario  (Article  72  of  the  draft  law)  and  justifying  potential  discrepancies 
with  the  forecasts  of  the  European  Commission  (Article  75  of  draft  Law),  the  Minister  of 
Finance  submits  the  medium-term  budget  forecast  every  year  by  the  Minister  of  Finance  to 
the Council of Ministers for approval (Article 72 of the draft law). 

In order to improve public access to fiscal data, the macroeconomic forecasts, the approved 
medium-term budget forecast, the main underlying assumptions and the results of the overall 
assessment of the forecasts are to be published on the website of the MoF (Articles 68 and 75 
of the draft law). 

The  results  of  the  ex-post  evaluation  of  the  forecasts  are  to  be  made  public  and  taken  into 
account for future macroeconomic forecasts (Article 75 of the draft law). 

3. Fiscal rules 

The  Bulgarian  authorities  report  that  the  draft  law  on  public  finances  preserves  the  current 
structure of their three major fiscal rules (budget balance, debt and expenditure). 

The draft law sets a medium-term budgetary target for the deficit not to exceed 0.5% of GDP 
in  structural  terms.  The  target  can  be  revised  every  three  years  and  an  automatic  correction 
mechanism  -to  be  defined  by  the  National  Assembly-  is  to  be  activated  in  the  event  of 
deviation  (Article 23).  The  draft  law  further  establishes  a  nominal  ceiling  of  3%  for  the 
general  government  deficit.  It  reasserts  the  objective  of  achieving  a  zero  or  positive  budget 

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balance  for  the  Consolidated  Fiscal  Programme7  and  the  general  government  sector,  and 
requires  offsetting  measures  in  the  event  of  deviation  (Articles 25  and  27).  The  existing 
nominal  consolidated  debt  ceiling  of  60%  for  the  general  government  sector  is  reaffirmed, 
with proposed actions in the event of non-compliance (Article 29). 

Additionally,  the  existing  expenditure  ceiling  (40%  of  GDP)  in  the  Consolidated  Fiscal 
Programme  is  supplemented  by  an  expenditure  rule  derived  from  the  SGP  provisions:  ‘the 
average growth rate of budget expenditure for the period of the forecast shall not exceed the 
forecast average growth rate of the potential Gross Domestic Product until the attainment of 
the medium-term structural balance target set out in the budgetary forecast’ (Article 26). 

The  scope  of  these  fiscal  rules  (Article 22)  is  extended  in  order  to  ensure  a  comprehensive 
coverage  of  the  general  government  sub-sectors.  Concerning  local  government,  a  medium-
term budget target on a cash basis is introduced (Article 30), together with further constraints 
on debt and debt payments (Article 32) and a requirement for municipalities to set a spending 
cap  for  new  commitments.  Additional  rules  restricting  the  accumulation  of  debt  and  the 
issuance  of  guarantees  are  stipulated  for  the  social  security  sub-sector  (Article 33),  and  for 
other  entities  whose  budgets  are  excluded  from  the  state  budget  but  are  included  in  the 
Consolidated Fiscal Programme, for which debt ceilings will also be introduced (Article 34). 

As regards the monitoring of compliance with the fiscal rules, transitional provisions stipulate 
that, within six months of the promulgation of the law, the Council of Ministers, ‘shall submit 
to the National Assembly a proposal on the designation of an independent body endowed with 
functional autonomy’. 

In  the  event  of  non-compliance  with  the  targets  for  budget  balance,  structural  deficit  or 
nominal  value  of  the  consolidated  debt  of  the  general  government  sector,  corrective 
mechanisms are provided for in the draft law (Articles 23 to 29). Article 41 stipulates that a 
minimum level of fiscal reserves should be included in the annual state budget. 

4. Medium-Term Budgetary Framework 

The Bulgarian authorities report that one of the objectives of the draft law on public finances 
is to turn the medium-term budget forecast into a real instrument for medium-term forecasting 
and  planning  through  observance  of  strict  fiscal  rules  by  central  and  local  authorities. 
Together, the  provisions  regulating  the preparation  of  the  medium-term  budget  forecast,  the 
state  budget,  the  budgets  of  the  state  social  security  system,  the  National  Health  Insurance 
Fund and municipal budgets, aim to introduce a multiannual budgetary perspective based on 
multiannual fiscal planning. 

The draft law proposes rolling three-year budget planning with a two-step annual budgetary 
procedure (Article 72). The first stage ends on 15 April with the approval of the medium-term 
budget  forecast  for  the  following  three-year  period  and  the  updated  government  debt 
management  strategy  by  the  Council  of  Ministers.  The  deadline  for  the  second  stage  is  31 
October, when the Council of Ministers has to submit to the National Assembly the draft law 

7 

The  Consolidated  Fiscal  Programme  is  a  system  of  summary  indicators  from  the  budgets  of  all  first-
level budget spending units, the central budget and the accounts for resources from EU funds, as along 
with  other  indicators  for  the  purpose  of  calculating  the  budget  balance  (Article  4).  It  covers  the  state 
budget, local authority budgets and other autonomous budgets, social funds and extra-budgetary funds 
and accounts. 

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on  the  state  budget  together  with  the  updated  medium-term  budget  forecast.  Article  79(2) 
provides  that  ‘the  parameters  of  the  approved  state  budget  bill  shall  comply  with  the 
parameters of the updated medium-term budget forecast’. 

The medium-term budget forecast includes fiscal policy objectives relating to the fiscal rules 
and  constraints,  the  main  budget  indicators  for  the  past,  current  and  next  three  years, 
expenditure  ceilings  for  first-level  spending  units,  a  description  of  the  priorities  of 
government  policies,  macroeconomic  scenarios  and  underlying  assumptions  (Article 73). 
Municipalities also have to prepare and adopt three-year budget forecasts (Articles 82 to 84). 
The  approved  medium-term  budget  forecast  is  made  public  through  notification  to  the 
National Assembly and publication on the MoF website (Article 72). Following adoption of 
the budget law, the parameters of the medium-term budget forecast have to be aligned within 
one month (Article 79(6)). 

5. Mechanisms of coordination across sub-sectors of general government 

The draft law on public finances states that the budget procedure covers ‘all budget spending 
units for the budget of public-financed organizations’ as well as ‘all legal entities controlled 
by  the  central  government  and/or  municipalities’  (Article  67).  The  Bulgarian  authorities 
mention that the responsibilities of ministers would be increased under the draft law, as they 
have to present to the Minister of Finance summary forecasts and indicators for legal entities 
outside the scope of the state budget but included in the general government sector. 

Regarding fiscal coordination with local government, the Bulgarian authorities report that the 
proposed  procedure  for  drafting  the  budget  forecasts  for  local  activities  is  aligned  with  the 
national procedure, including provisions governing the dynamic pattern and condition of the 
municipal debt and guarantees, the revenue and expenditure of the entities controlled by the 
municipality  and  the  expected  impact  on  municipal  finance  indicators.  The  Minister  of 
Finance is expected to discuss with the National Association of Municipalities ‘the amount of 
the budget relationships of the central budget with the municipal budgets’ within the medium-
term budget forecast and to submit the minutes of these consultations together with the draft 
state budget law to the Council of Ministers. 

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1.3. 

Implementation  of  the  main  provisions  of  the  Directive  in  the  CZECH 
REPUBLIC 

The  current  fiscal  framework  has  been  in  place  since 2004,  when  the  last  comprehensive 
reform  of  public  finances  was  carried  out.  The  main  components  of  the  reformed  fiscal 
framework included fiscal targeting within the medium-term budgetary framework and a new 
numerical expenditure rule. 

In order to transpose the Directive, the Czech authorities report that a project for modernising 
of the Czech Republic’s fiscal and budgetary system was launched at the Ministry of Finance 
(MoF)  in  August 2011.  Objectives  include  the  preparation  of  a  comprehensive  budgetary 
framework, the formulation of numerical fiscal rules and the preparation of a Constitutional 
Act  on  fiscal  responsibility.  Following 
the  government’s  programme  statement  of 
4 August 2010,  the  Minister  of  Finance  established  a  task  force  to  define  the  basis  for 
preparation of the Constitutional Act. The draft Act was approved by the government on 10 
October 2012 and was to be submitted to parliament in the following months. 

1. Accounting and statistics 

Accounting 

The Czech authorities report that the reform of the state’s accounting system was launched in 
January  2010.  Its  goal  is  to  unify  the  compilation  of  information  across  accounting  units 
managing  funds  from  public  budgets  within  a  Central  state  accounting  information  system 
(CSAIS).  An  ‘auxiliary  analytical  survey’  (PAP8)  was  carried  out  to  obtain  information  on 
public finance management and monitoring on the basis of requirements of the Regulation on 
the  European  system  of  national  and  regional  accounts  within  the  EU  and  the  SGP 
regulations. 

The  MoF  works  closely  with  the  Czech  Statistical  Office  (CSO)  in  order  to  ensure  the 
compilation of data according to ESA 95 standards. 

Internal control and auditing 

The  Czech  authorities  report  that  the  Chamber  of  Deputies  is  discussing  the  draft  Act 
No320/2011  Coll,  on  financial  control  in  public  administration.  This  action  addresses  the 
requirements of the Directive in the field of internal control by: 

- for  public  budget  administrators,  separating 
responsibilities from auditing responsibilities; 

financial  management  and  control 

- reinforcing the responsibility of managers of public funds by specifying their legal duties in 
the area of preliminary, regular and subsequent controls; 

8 

PAP  is  an  accounting  tool  used  to report  accounting  movements  on  selected  accounts not only  at  the 
level of ledger accounts. In 2012 PAP will be prepared and submitted to the CSAIS by governmental 
organisational units, state funds, the CR Land Fund, state allowance organisations with assets exceeding 
CZK 100 million, regions, municipalities with 3000 or more inhabitants, regional councils of cohesion 
regions and state allowance organisations with assets exceeding CZK 100 million. 

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- setting  up  independent  auditing  in  public  administration  and  ensuring  that  the  system  of 
preliminary, regular and subsequent control is effective; 

- ensuring coverage of all general government sub-sectors by specifying competences in the 
field of control for all providers of public financial support. 

Additionally, the MoF is preparing new legislation on financial management, financial control 
and audit in the public administration. It should follow the requirements of the Directive and 
ensure consistency across general government entities. 

An  amendment  to  Act  No  166/1993  Coll.  Section  3,  under  parliamentary  review,  should 
extend  the  audit  competence  of  the  Supreme  Audit  Office  to  nearly  all  general  government 
entities. 

Statistics 

Additional steps to meet the requirements of the Directive will be taken after enactment of the 
Constitutional Act on Fiscal Responsibility, which requires all general government bodies to 
prepare draft budgets, and after release of the conclusions of the Eurostat Task Force. 

The  Czech  Statistical  Office  has  been  tasked  with  the  release  of  tables  illustrating  the 
methodology for the transition between cash data and ESA 95. 

Regarding  the  implementation  of  Article  14(2)  of  the  Directive,  the  MoF  has  published 
research  on  tax  expenditures.  It  contains  an  extensive  theoretical  section  and  a  practical 
section on the quantification of tax expenditures in the Czech Republic in 2008. Legislation is 
to  be  prepared  to  require  the  MoF  to  issue  from  2014  onwards  an  annual  report  on  tax 
expenditures using the methodological basis of the research study. 

Regarding  the  implementation  of  Article  14(3),  a  decision  will  be  taken  following  the 
conclusions of the Eurostat Taskforce. 

2. Forecasts 

The  Czech  authorities  report  that  the  MoF  broadly  meets  most  of  the  requirements  of 
Chapter III of the Directive. However, the method of implementing the obligations in national 
legislation  in  operational  terms  is  currently  being  discussed.  The  MoF  is  also  preparing  a 
framework for the independent assessment  of  tax revenue forecasts and  a  description of the 
methods used during their preparation. Details will be determined in a legislative text. 

Government  Resolution  No 253  dated  11  April 2012  tasked  the  MoF  to  prepare  an 
amendment to Act No 2/1969 Coll. on the Establishment of Ministries and other Central state 
Administration  Bodies.  The  amendment  would  expand  the  MoF’s  powers  regarding  the 
system  of  public  finances  and  its  stability,  fiscal  planning,  and  the  preparation  of 
macroeconomic forecasts. The draft amendment is to be submitted to the government by the 
end of 2012. 

3. Fiscal rules 

The  Czech  authorities  report  that the  implementation  of  the  debt ceiling  rule  in  Article 5  of 
the  Constitutional  Act  on  Fiscal  Responsibility  should  help  ensure  consistency  with  the 
reference  value  for  debt  determined  in  accordance  with  the  TFEU.  The  article  requires  the 

EN 

11 

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government  and  the  parliament  to  ensure  that  public  debt  develops  in  a  way  that  does  not 
threaten the stability of the Czech Republic’s public finances. Articles 6 to 13 of the proposed 
Constitutional  Act  detail  the  obligations  of  individual  general  government  entities  to  ensure 
that  the  60 %  threshold  is  not  breached.  Corrective  measures  are  triggered  if  the  debt  ratio 
reaches 40 %. Additional measures are introduced at debt levels of 45 % and 48 %. If the debt 
ratio  reaches  50 %  the  government  immediately  calls  for  a  vote  of  confidence  before  the 
Chamber of Deputies. As the obligations are gradually stepped up, the 60 % threshold should 
remain an absolute ceiling not to be breached. Effective and timely monitoring of compliance 
would  be  based  on  EDP  notifications  and  rely  on  an  independent  fiscal  institution  –the 
National Budgetary Council9. Specific escape clauses are defined for the rule. 

An  expenditure  rule,  the  logic  of  which  should  be  closely  linked  to  the  concept  of  the 
expenditure rule implemented under the preventive part of the Stability and Growth Pact (the 
so-called  medium-term  expenditure  benchmark),  is  assumed  to  be  implemented  on  an 
operational level. This should be used to attain the medium-term objective and ensure long-
term  sustainability  of  public  finances.  The  rule  should  align  the  growth  of  adjusted  general 
government expenditure with average potential GDP growth. 

Specific restrictions in the form of a tailored balanced budget rule also exist for certain public 
sector units such as the General Health Insurance Company, public universities, regional self-
administration units, etc. 

Given  the  relatively  significant  fiscal  decentralisation  and  high  autonomy  of  the  local 
government sub-sector, Article 14 of the Constitutional Act includes a rule for territorial self-
government  units  (municipalities  and  regions).  Its  implementation  should  help  ensure 
comprehensive coverage of general government sub-sectors. Under this rule, a territorial self-
government unit (TSGU) should conduct economic activities so that its debt does not exceed 
60 % of its total average revenue for the last four years. If the TSGU’s debt exceeds the limit, 
it must reduce its indebtedness by at least 5 % of the difference between the total value of the 
debt and the 60 % value calculated as above. If the TSGU does not reduce its indebtedness in 
this  way,  the  state  will  retain  tax  revenue  to  the  tune  of  5 %  of  the  difference  between  the 
current  total  debt  and  the  60 %  value.  According  to  Article 14,  ‘the  retained  tax  revenue 
intended  for  territorial  self-government  units  can  only  be  released  for  payment  of  the 
territorial  self-government  unit’s  debt  obligations  concluded  before  the  year  in  which  the 
revenues was retained.’ 

The  Czech  authorities  also  mention  that  the  MoF  is  preparing  legislation  for  insolvency 
proceedings for TSGUs. 

4. Medium-Term Budgetary Framework 

The  Czech  authorities  mention  that  a  medium-term  forecast  and  budget  framework  was 
established  in  the  2002  reform.  However,  an  amendment  to  the  relevant  legislation  is  being 
discussed within the Chamber of Deputies. Following this amendment, the main features of 
the medium-term expenditure framework (MTEF) would be as follows: 

9 

Article 4 of the Constitutional Act on Fiscal Responsibility states that the National Budgetary Council is 
an independent body. It monitors adherence to the rules of budget responsibility. The Chairman will be 
elected by the Chamber of Deputies. Other statutory elements relating to the organisation of the fiscal 
council are to be specified by ordinary law. 

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- 
The  MTEF  proposal  would  be  submitted  together  with  the  state  Budget  Act  to  the 
Chamber  of  Deputies.  It  would  be  based  on  macroeconomic  forecasts  of  key  indicators 
processed by the MoF. 

- 
The  Chamber  of  Deputies  would  determine  an  expenditure  framework  for  the  years 
n+1  and  n+2  covering  overall  expenditure  from  the  state  budget  and  state  funds  (with  the 
exception of subsidies to state funds). 

- 
Under Section 8a of the Act on Budgetary Rules, the MTEF could be amended only in 
specified cases. If the MTEF targets are not identical to those determined by the Chamber of 
Deputies, then the government should provide justifications for the changes. 

Apart from the MTEF, a medium-term outlook for the state budget and state funds for 
- 
a further two years is to be prepared together with the State Budget Act. The outlook would 
contain  estimated  revenue  and  expenditure  categorised  according  to  the  national  budgetary 
classification. 

The  Czech  authorities  declare  that  they  are  currently  working  on  a  definition  of  the  steps 
needed  to  meet  the  requirements  of  the  Directive  regarding  the  medium-term  budgetary 
framework.  The  issue  will  be  dealt  with  in  accordance  with  the  decision  on  the 
implementation  of  the  expenditure  rule.  Subsequent  steps  leading  to  the  creation  of  a 
consistent medium-term budgetary framework are to be included in the Constitutional Act on 
Fiscal Responsibility. 

Finally,  a  ‘public  sector  strategy’  document  is  to  cover  the  medium-term  horizon  and 
interconnect the fiscal objectives presented by the convergence programme and the national 
budget  policy.  Under  Article 2  of  the  proposed  Constitutional  Act,  the  government  is  to 
submit  this  document  to  the  Chamber  of  Deputies,  which  will  then  issue  a  resolution  on  it. 
The drafts of state budget and budgets for state funds are to be prepared on this basis. More 
detailed  regulations  will  define  the  contents  of  the  public  sector  strategy  document  and  its 
integration within the budget process. 

5. Mechanisms of coordination across sub-sectors of general government 

The Czech authorities state that coordination mechanisms will be in place for implementing 
individual  chapters  of  the  Directive  (numerical  fiscal  rules,  fiscal  planning  –  medium-term 
budget framework, accounting and statistics). 

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1.4. 

Implementation of the main provisions of the Directive in DENMARK 

1. Accounting and statistics 

Danish  authorities  report  that  fiscal  data  are  already  publicly  available  on  a  quarterly  and 
monthly  basis  for  the  relevant  general  government  units10.  Consequently  no  additional 
measures  have  been  taken  in  relation  to  the  requirements  regarding  fiscal  data  in  Article  3. 
Work on the reconciliation table and on contingent liabilities is in progress. 

2. Forecasts 

The  Ministry  of  Economic  Affairs  and  the  Interior  (OIM)  is  responsible  for  preparing  and 
publishing  the  government’s  economic  forecasts.  It  does  this  in  collaboration  with  the 
Ministry of Finance (MoF). OIM is responsible for estimates regarding the real economy and 
financial  markets,  while  the  MoF  provides  estimates  for  public  finances  based  on  the 
economic forecast. The MoF also estimates the effects of fiscal policy on activity as well as 
the structural fiscal balance. 

The  forecasts  are  produced  three  times  a  year  (May,  August  and  December)  and  cover  the 
current year and next year, except in December, when estimates are provided for the next two 
years.  The  May  forecast  is  used  in  the  annual  budget  negotiations  and  agreements  on  the 
municipal  and  regional  economy.  The  August  forecast  forms  the  basis  for  the  government's 
budget proposal for the coming fiscal year, while the December forecast is the basis for the 
final budget bill. 

The forecasts are published in an ‘Economic Survey’, which can be found on OIM’s website11 
(where  a  short  English  summary  is  published  on  the  webpage  with  some  delay),  and  a 
‘Budget  Outlook’  (aggregates  are  presented  according  to  ESA95  standards),  which  can  be 
found  on  the  MoF’s  website12.  In  addition,  the  MoF  prepares  medium-  and  long-term 
projections at least once a year as part of Denmark’s Convergence Programme, which gives 
an account of Denmark’s medium-term objective and long-term fiscal sustainability. 

The Danish authorities report that  the forecasts make use of the latest macroeconomic data, 
external  assumptions  and  economic  models.  Expected  developments  are  incorporated  in  an 
empirical  macroeconomic  model  of  the  Danish  economy  (ADAM).  The  forecasts  include 
sensitivity  analyses  calculated  as  shocks  to  the  empirical  model.  The  type  of  sensitivity 
analysis varies depending on the macroeconomic risks to the forecast, e.g. changes in export 
market growth, interest rate assumptions, oil prices etc. 

The assumptions underlying the forecasts are presented in the Economic Survey. It describes 
the  government’s  political  and  economic  measures  in  the  light  of  projected  economic 
developments. 

The  forecasts  are  regularly  compared  to  forecasts  from  e.g.  the  European  Commission,  the 
OECD, and the IMF etc., in order to shed light on and explain disparities. The comparisons 

10 
11 
12 

http://www.dst.dk/en/Statistik/statistikbanken.aspx. 
See http://www.oim.dk. 
See http://uk.fm.dk/publications. 

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14 

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are published on the ministry’s website. Analyses of historical forecast errors are made and 
published approximately every 5 years. 

3. Fiscal rules 

Denmark’s Convergence Programme for 2011 –based on the former government’s 2020 plan– 
included a deficit target expressed in structural terms of no more than ½ per cent of GDP in 
2015  and  a  balanced  structural  budget  by  2020.  Since  May  2012  –based  on  the  current 
Government’s  2020  plan–  Denmark’s  medium-term  budgetary  objectives  imply  annual 
structural  deficits  of  no  more  than  0.5 per  cent  of  GDP,  and  at  least  a  budget  balance  in 
structural terms by 2020. 

Additionally, the Government signed the Fiscal Compact on 2 March 2012. It was ratified on 
31 May 2012 by the Danish parliament. In the Compact, the Government undertook to adopt 
a  budget  balance  rule  in  the  Constitution  or  in  permanent  legislation,  as  along  with  an 
automatic  correction  mechanism.  The  government  has  implemented  the  provisions  of  the 
Fiscal  Compact  regarding  a  budget  balance  rule  and  an  automatic  correction  mechanism 
within the Budget Law. The draft Budget Law was put forward by the government in April 
2012  and  was  passed  by  a  broad  majority  in  the  Danish  parliament  on  13  June  2012.  The 
Budget  Law  will  come  into  force  by  October  2012.  However  central  provisions  concerning 
the budget balance rule and the automatic correction mechanism will come into force no later 
than a year after the Fiscal Compact has come into force, while provisions for multi-annual 
expenditure ceilings will come into force by January 2014. 

The  Budget  Law  stipulates  that  the  target  for  the  structural  budget  balance  is  the  Medium-
Term Objective as specified in the Stability and Growth Pact, although with a lower threshold 
for  the  structural  deficit  of  0.5 per  cent  of  GDP  for  the  structural  deficit,  unless  the 
exceptional  circumstances  specified  in  the  Fiscal  Compact  occur.  If  the  structural  deficit 
exceeds the threshold by more than 0.5 per cent of GDP (a significant deviation), the Budget 
Law stipulates that it must be corrected. 

The Danish Economic Council has the task of monitoring compliance with the Budget Law as 
described  in  the  revised  Law  on  the  Economic  Council,  which  will  come  into  force  by 
January 2014. 

4. Medium-Term Budgetary Framework 

The  Budget  Law  adopted  in  June  2012  (see  above)  introduces  binding  multi-annual 
expenditure  ceilings  for  the  three  major  public  sub-sectors  in  Denmark,  i.e.  central 
government, the municipalities and the regions. The ceilings consist of nominal upper limits 
on actual spending. The Danish authorities consider that the agreed ceilings within each sector 
ensure clear responsibility for spending control and foster compliance within each sector. It 
also ensures a close connection between the expenditure ceilings, actual budgets and the final 
accounts  of  each  sector.  The  annual  Budget  Bill  for  central  government  and  the  annual 
economic  agreements  between  the  government  and  the  municipalities  and  regions  must 
comply with the ceilings13. 

13 

Budget  coordination  works  through  annual  negotiations  between  central  and  local  governments  on  a 
framework agreement for the two levels of local government (municipalities and regions). 

EN 

15 

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The expenditure ceilings must be enacted into law by the Danish parliament and will cover a 
rolling 4-year  period. Ceilings for the new fourth year will be determined on a yearly basis 
based  on  an  updated  medium-term  macroeconomic  projection.  The  ceilings  cover  a  broad 
range  of  public  expenditures.  More  specifically  the  ceiling  for  central  government  includes 
operating  costs,  expenditures  on  income  transfers  that  are  not  unemployment-related, 
subsidies  and  foreign  transfers.  The  expenditure  ceilings  for  municipalities  and  regions 
include  service/operating  costs.  Automatic  stabilisers  such  as  unemployment  benefits  and 
cash  benefits  are  not  included.  The  Danish  Economic  Council  is  to  conduct  an  annual 
assessment  of  compliance  with  the  expenditure  ceilings,  and  whether  the  ceilings  are 
consistent with the medium-term projections for public finances. The expenditure ceilings are 
to take effect from 2014. The ceilings for the years 2014-2017 are expected to be determined 
in spring 2013. 

5. Mechanisms of coordination across sub-sectors of general government 

The  Danish  authorities  state  that  the  overall  framework  for  fiscal  policy  coordination  in 
Denmark  is  based  on  a  long  tradition  of  budget  cooperation  based  on  voluntary  agreements 
between  central  government  and  local  government  bodies.  The  agreements  call  for  mutual 
cooperation  and  coordination  on  how  to  adjust  collectively:  (i)  to  the  agreed  limits  on 
spending  among  the  municipalities  and  regions;  (ii)  to  the  agreed  level  of  taxation  among 
municipalities. 

However, experience has demonstrated a need for improved expenditure control in local and 
central government. Therefore the new Budget Law adopted in June 2012 introduces separate 
expenditure  ceilings  for  central  government,  the  municipalities  and  the  regions  (cf.  above). 
Compliance with the expenditure ceilings should also contribute to meeting the requirements 
of the Fiscal Compact. 

To  improve  control  over  local  government  expenditure  and  taxation  levels,  permanent 
legislative acts containing sanction mechanisms have been approved by parliament in the last 
few  years.  Such  measures  have  increased  incentives  for  local  government  to  comply  with 
budget  agreements  in  the  last  two  years.  In  concrete  terms,  if  the  expenditure  of  a 
municipality or region exceeds the agreed ceiling, cuts in general grants are to be phased in. 
The cuts would affect both the collective part of the grant (i.e. the entire group of regions or 
municipalities  would  be  sanctioned),  and  the  individual  grant  of  the  municipality  or  region 
concerned.  The  grant  reduction  can  be  up  to  DKK  3 bn.  Cuts  can  also  be  triggered  at 
municipality level if taxes rise above the agreed level14. 

14 

The individual deduction amounts to 75 per cent in the first year, 50 per cent in the second and third 
years and 25 per cent in the fourth year. 

EN 

16 

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1.5. 

Implementation of the main provisions of the Directive in GERMANY 

1. Accounting and statistics 

Accounting 

Regarding Article 3(1) of the Directive, both for the Federal government and for the Länder, 
the consistency of the public accounting systems used to compile data for generating ESA 95 
data  is  required  by  federal  law.  Under  section  49a(1)  of  the  Budgetary  Principles  Act,  the 
federal  government  and  Länder  have  set  up  a  committee  to  ensure  a  uniform  basis  for 
procedures  and  data  by  laying  down  standards  for  cash-based  accounting,  double-entry 
accounting and product budgets. It reviews those standards once a year, verifying compliance 
with the requirements for financial statistics, including with those for national accounts. The 
German  authorities  report  that  their  national  accounts  are  compiled  in  accordance  with  the 
current  ESA  95.  General  and  specific  classification  issues  are  discussed  at  regular  intervals 
and harmonised as needed in this committee. 

For local governments, the German authorities report that there are corresponding committees 
in which representatives of the Länder ministries of the interior, the Federal Statistical Office 
(Destatis)  and  municipal  umbrella  organisations  discuss  and  vote  on  classification  issues  at 
local government level. 

For the social security system, budgeting and accounting are governed by title 3 (sections 67 
to 79) of Book IV of the Social Code (Sozialgesetzbuch) and by ordinances and administrative 
regulations.  The  General  Administrative  Regulation  on  Social  Security  Accounting 
(Allgemeine  Verwaltungsvorschrift  über  das  Rechnungswesen  in  der  Sozialversicherung) 
stipulates  binding  charts  of  accounts,  with  annexes  for  funds  in  each  social  security  sub-
sector. The charts of accounts are updated by decree of the federal ministries responsible for 
the  different  branches  of  the  social  security  system  after  consulting  with  the  supreme 
administrative authorities of the Länder. 

Auditing 

Under  Article  114(1)  of  the  Basic  Law  (Grundgesetz),  for  the  purpose  of  discharging  the 
federal government, the Federal Minister of Finance must submit annually to the Bundestag 
and to the Bundesrat an account of all revenues and expenditures, assets and liabilities during 
the  preceding  fiscal  year.  Parliament  is  assisted  in  its  supervisory  capacity  by  the  Federal 
Court of Audit (Bundesrechnunghof). Under Article 114(2) first and second sentences of the 
Basic  Law,  the  Federal  Court  of  Audit,  whose  members  enjoy  judicial  independence,  must 
audit  the  accounts  given,  including  for  federal  special  funds  and  enterprises,  and  determine 
whether  public  finances  have  been  properly  and  efficiently  administered.  Its  audit  covers 
annual revenue and expenditures, expenditure commitments, and federal assets and liabilities. 
As well as to the federal government, the Federal Court of Audit must submit annual reports 
directly to the Bundestag and the Bundesrat. Detailed stipulations on auditing are specified in 
section 42 ff. of the Budgetary Principles Act and Part V of the Federal Budget Code. 

The Länder courts of audit similarly audit the administration of Länder public finances. 

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17 

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Social security funds are audited by the responsible ministries at federal level in accordance 
with sections 87 to 90a of Book IV of the Social Code (SgB IV). 

Auditing of local authority finances is performed by audit offices at local authority level. For 
example, provisions for the land of Hessen can be found under sections 128-131 of the Hesse 
Local Authority Code (Hessische Gemeindeordnung). 

Statistics 

Regarding Article 3(2) of the Directive, the frequency of transmissions is laid down for the 
federal government, Länder and local authorities in the Finance and Personnel Statistics Act. 
Section  3(1)(3)  stipulates  monthly  transmission  for  the  federal  government  and  the  Länder; 
section 3(2)(2) stipulates quarterly transmission for local authorities. Under section 15(3) of 
the  Federal  Statistics  Act,  federal  statistics  (including  statistics  under  the  Finance  and 
Personnel  Statistics  Act)  must  be  transmitted  ‘within  the  time  limits  set  by  the  statistical 
offices of the federal government and of the Länder’. 

With  a  view  to  implementing  the  Directive,  the  federal  government  and  the  Länder  have 
committed  to  transmitting  monthly  data  by  the  20th  of  the  following  month.  For  quarterly 
cash-based statistics from local authorities, the federal government and the Länder have also 
agreed transmission dates that ensure publication in the next quarter. In response to a request 
from the federal government, social security funds have pledged timely compliance with the 
Directive’s requirements and to ensure monthly publication of data. 

Regarding Article 4(7) of the Directive, Germany transmits quarterly deficit data to Eurostat 
but  places  an  embargo  on  the  publication  of  data  for  the  current  year.  It  would  have  to 
discontinue this practice by the end of 2013 to comply with the Directive. 

Extra-budgetary entities 

Regarding  Article  14(1)  of  the  Directive,  the  German  authorities  report  that  the  Federal 
Statistical  Office,  under  section  2(4)  of  the  Finance  and  Personnel  Statistics  Act,  has 
identified  and  classified  extra-budgetary  funds,  bodies  and  enterprises  in  a  register.  This 
ensures nearly complete statistical coverage of the state sector from the 2011 reporting year. 
The Federal Ministry of Finance has initiated a legislative process to allow for publication of 
the  register.  As  the  national  system  of  budgetary  reporting  differs  slightly  from  the  ESA95 
framework regarding the definition of extra-budgetary units, the Federal Ministry of Finance 
is examining the possibility of eliminating these differences. 

Extra-budgetary funds, bodies and enterprises are also included as part of each sub-sector in 
public  finance  projections  for  reporting  debt  levels  as  defined  in  the  Maastricht  Treaty,  for 
example under the Stability Programme. 

Tax expenditures 

Regarding  Article  14(2),  the  German  authorities  report  that  it  is  a  standard  part  of  the 
legislative process to publish the medium-term impacts of all changes in tax legislation. Tax 
benefits that directly or indirectly favour businesses are analysed in federal subsidy reports. A 
report on the main tax benefits at federal level, as required under section 12(2) of the Stability 
and Growth Act, is updated annually in Tables VII and VIII of the Federal Budget. 

Contingent liabilities 

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18 

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Regarding Article 14(3), the Federal Statistical Office publishes contingent liabilities  for  all 
political subdivisions and for general government15. 

The federal assets and liabilities accounts include detailed tables on the status of guarantees 
given by the federal government and its special funds. Participation in the capital of private or 
public  corporations  is  reported  in  federal  and  Länder  assets  and  liabilities  accounts  and  in 
federal and Länder reports on government holdings. 

2. Forecasts 

The  federal  government’s  macroeconomic  forecasts  are  produced  by  an  expert  panel  led  by 
the Federal Ministry of Economics and Technology (BMWi) and including representatives of 
other  federal  ministries,  the  Deutsche  Bundesbank,  the  Institute  for  Employment  Research 
(IAB)  and  the  Federal  Statistical  Office.  The  Federal  Ministry  of  Finance  (BMF)  is 
responsible for budgetary projections. 

Detailed  macroeconomic  and  budgetary  projections  are  published  in  BMF  and  BMWi 
monthly  reports  and  on  the  BMF  and  BMWi  websites.  The  BMWi  presents  federal 
government  projections  to  the  public  and  discusses  them  at  press  conferences.  Detailed 
forecasts are also presented in the Finance Report and the stability programme. Forecasts are 
discussed,  where  applicable  together  with  methodologies,  assumptions  and  relevant 
parameters, by the independent Working Party on Tax Revenue Estimates. 

Macroeconomic forecasts are based on current data at the time of the forecast as provided by 
the  Federal  Statistical  Office  and  international  organisations.  The  federal  government’s 
forecasts  are  compared  with  the  most  recent  forecasts  from  the  European  Commission  and 
other  independent  institutions  (economic  research  institutes,  IMF,  OECD,  Deutsche 
Bundesbank) and the causes of any discrepancies are identified and evaluated. 

Medium-term  public  finance  forecasts  are  based  on  the  federal  government’s  latest 
macroeconomic projections and the findings of the Working Party on Tax Revenue Estimates. 
Reasons  are  given  for  any  major  discrepancies  from  other  institutions’  budget  projections. 
The German authorities consider that the macroeconomic projection data lie within the range 
of estimations by independent institutions such as economic research institutes, the Deutsche 
Bundesbank, the OECD, the IMF and the European Commission. As an added benchmark for 
its own projections, the federal government uses the Joint Economic Forecast compiled by the 
leading  German  economic  research  institutes,  which  publish  their  own  macroeconomic 
forecasts  –independently  as  academic  bodies– 
in  advance  of  Federal 
Government  projections.  Reasons  are  given  for  any  major  discrepancies  from  other 
institutions’ projections. 

immediately 

Additionally,  an  Annual  Economic  Report  describing  the  current  economic  situation  and  its 
foreseeable  development  is  published  by  the  independent  Council  of  Economic  Experts 
(Sachverständigenrat zur Begutachtung der Gesamtwirtschaflichen Entwicklung) established 
by law in 1963 (Act on the Appointment of a Council of Experts on Economic Development). 
The Annual Economic Report presents and appraises scenarios for a range of assumptions and 
their  impacts.  It  also  addresses  undesirable  developments  and  options  for  averting  or 

15

EN 

https://www.destatis.de/DE/Publikationen/Thematisch/FinanzenSteuern/OeffentlicheHaushalte

/Schulden/SchuldenOeffentlicherHaushalte2140500107004.html. 

19 

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remedying  them.  The  report  is  submitted  to  the  federal  government  by  15 November  each 
year. Each January, on the basis of section 6 of the Act on the Appointment of a Council of 
Experts  on  Economic  Development,  the  federal  government  presents  an  Annual  Economic 
Report to the legislative bodies stating its position on the report of the Council of Economic 
Experts. In accordance with section 2 of the Stability and Growth Act, the Annual Economic 
Report  presents  the  federal  government’s  economic  and  fiscal  policy  targets  for  the  current 
year  (annual  projection).  The  following  year’s  Annual  Economic  Report  compares  and 
evaluates them against the preliminary GDP data published by the Federal Statistical Office at 
the start of January. 

Sensitivity analysis 

The  German  authorities  report  that  the  German  stability  programme  includes  a  sensitivity 
analysis  with  projections  for  the  general  government  deficit  under  different  GDP  scenarios 
(generally  an  optimistic  and  a  pessimistic  scenario).  No  sensitivity  analysis  is  given  for 
interest  rates,  which  the  federal  government  refrains  from  explicitly  forecasting  in  keeping 
with monetary policy independence. 

3. Fiscal rules 

Description of fiscal rules 

Articles 109 to 115 of the German Basic Law (Grundgesetz) set out the fundamental budget 
rules  at  constitutional  level.  The  Budgetary  Principles  Act  additionally  lays  down  basic 
principles  for  the  implementation  of  budget  law  by  the  federal  government  and  the Länder. 
For the federal government, the Federal Budget Code (Bundeshaushaltsordnung) governs the 
preparation  and  execution  of  the  federal  budget,  rendering  of  accounts,  and  auditing  of 
accounts.  The  Länder  have  met  their  obligations  under  the  Budgetary  Principles  Act  by 
issuing Länder budget codes. 

Article 109(3),  first  sentence,  of  the  German  Basic  Law  normally  requires  the  federal 
government and the Länder to present balanced budgets without borrowing (‘the budgets of 
the federal government and the Länder shall in principle be balanced without revenue from 
credits’).  The  federal  government  and  Länder  may  introduce  rules  intended  to  take  into 
account,  symmetrically  in  times  of  upswing  and  downswing,  the  effects  of  market 
developments that deviate from normal conditions as well as to make exceptions for natural 
disasters  or  unusual  emergency  situations  that  are  beyond  government  control  and  are 
substantially harmful to the state’s financial capacity. Exceptional regimes of this kind must 
be accompanied by a corresponding amortisation plan. Article 115(2), second sentence, of the 
Basic Law stipulates for the federal government that the balanced budget condition is satisfied 
if  revenue  from  borrowing  does  not  exceed  0.35 per  cent  of  nominal  GDP.  Further 
stipulations are made for the federal budget in an implementing act (‘Gesetz zur Ausführung 
von Artikel 115 des Grundgesetzes’). The Länder regulate their budgets in such a way that the 
requirement  of  Article  109(3),  first sentence, of  the Basic Law  is  only  met  without  revenue 
from borrowing. Under a transitional provision (Article 143d  of  the Basic Law), the federal 
government has until 2016 and the Länder have until 2020 to comply. 

For  the  social  security  system,  self-correcting  contribution  adjustments  (e.g.  for  statutory 
pension insurance see sections 153 and 158 of Book VI of the Social Code (SGB VI), and for 
unemployment insurance, see section 363 ff. of Book III of the Social Code (SGB III)) ensure 

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more  or  less  a  structurally  balanced  budget.  Social  security  funds  are  not  allowed  to  have 
recourse to external borrowing but can fund any deficits out of reserves. 

Under the constitutional arrangements for public finances, the Länder are each responsible for 
their  local  authorities.  For  the  local  authorities  too,  balanced  budgets  are  ensured  in  the 
medium term by fiscal rules applying to them. Under local authority budget ordinances issued 
by  the  Länder,  transfers  from  the  administrative  budget  to  the  capital  budget  must  at  least 
cover existing debt service and the cost of borrowing. For larger transfers, there is leeway for 
funding  investment  or  additions  to  reserves.  New  borrowing  by  local  authorities  is  allowed 
only under the capital budget and only for investment and debt restructuring. For instance, in 
the  Land  of  Baden-Württemberg, 
the  Local  Authority  Code 
(Gemeindeordnung)  stipulates:  ‘a  local  authority  may  only  take  out  loans  if  other  forms  of 
funding are not possible or would be economically unviable’. 

section 78(3)  of 

Compliance arrangements 

The recent reform put in place the Stability Council, which, in accordance with Article 109a 
of  the  Basic  Law,  supervises  the  budgetary  management  of  the  federal  government  and  the 
Länder  to  avoid  budgetary  emergencies.  The  Stability  Council  has  the  task  of  monitoring 
compliance with the general government deficit limit. The federal government and the Länder 
are  expected  to  work  together  in  the  Stability  Council  to  prevent  the  general  government 
deficit limit under Article 3 of the TSCG from being exceeded. 

In  time  for  the  start  of  parliamentary  consultations  on  the  government  draft  for  the  next 
budget,  the  Federal  Court  of  Audit  also  presents  a  report  on  the  development  of  federal 
finances in which it analyses federal medium-term financial planning, providing members of 
parliament with an additional decision aid. 

Compliance with constitutional borrowing limits is further subject to judicial review, as cases 
can  be  brought  the  Federal  Constitutional  Courts  or  Länder  constitutional  courts  (see  e.g. 
Article 93 of the Basic Law). 

Under the budget rule, if the target is missed in one fiscal year, a structurally balanced budget, 
or  in  the  case  of  local  authorities  and  social  security  funds  one  complying  with  their 
respective fiscal rules, must be achieved in the next fiscal year. To ensure that the budget rule 
is also complied with at the execution stage of the budget, a federal ‘control account’ has been 
set  up  with  a  built-in  settlement  requirement.  The  control  account  documents  non-cyclical 
deviations from the threshold that arise each fiscal year during budget execution. If actual net 
borrowing is more than the maximum permissible limit –as determined after the fiscal year-
end  based  on  the  actual  impact  of  economic  activity  on  the  budget–  then  the  account  is 
debited  accordingly;  if  it  is  less,  the  account  is  credited.  The  annual  credit  and  debit  to  the 
control  account  are  netted  over  time.  Under  the  Basic  Law,  if  the  control  account  has  a 
negative balance exceeding a threshold of 1.5 per cent of GDP, the negative balance must be 
reduced  back  to  that  threshold  in  a  cyclically  appropriate  manner.  Implementing  provisions 
enacted  as  ordinary  legislation  thus  stipulate  that  any  such  reduction  may  only  be  applied 
during an upturn. Reductions must be phased in annual steps not exceeding 0.35 per cent of 
GDP.  Because  this  spreads  the  reduction  over  time,  however,  the  obligation  to  reduce 
borrowing, again enacted in ordinary law, kicks in at a lower threshold of 1 per cent of GDP 
for the control account. 

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The  German  authorities  report  that,  if  a  local  authority  is  in  or  moving  towards  deficit,  the 
relevant supervisory authority can make approval of its budget conditional on presentation of 
a  consolidation  plan  leading  to  a  balanced  budget  at  least  in  the  medium  term.  In  extreme 
cases,  the  supervisory  authority  can  enforce  consolidation  by  sending  in  a  ‘state 
commissioner’ and stripping local bodies of many of their powers. 

Escape clause 

Under  Article 109  of  the  Basic  Law,  the  federal  government  and  the  Länder  may  make 
exceptions for natural disasters or unusual emergency situations that are beyond governmental 
control and are substantially harmful to the state’s financial capacity. Exceptional regimes of 
this kind must be accompanied by a corresponding amortisation plan. 

4. Medium-Term Budgetary Framework 

The  German  authorities  report  that  under  section  50  of  the  Budgetary  Principles  Act  and 
sections  9  and  14  of  the  Stability  and  Growth  Act,  the  federal  government  and  the  Länder 
have a five-year fiscal planning horizon. Detailed projections of general government revenue 
and  expenditures  are  published  in  the  Stability  Programme  and  in  the  Federal  Ministry  of 
Finance’s Finance Report and monthly reports. 

As  for  reporting  on  fiscal  sustainability  matters,  the  impacts  of  individual  policy  areas  and 
specific measures on the sustainability of public finances are presented in the Report on the 
Sustainability of Public Finances (Bericht zur Tragfähigkeit der öffentlichen Finanzen). The 
report is published once every parliamentary term. 

The  German  authorities  report  that  medium-term  financial  planning  generally  provides  the 
starting point for the next planning cycle. The federal government and the Länder report on 
changes relative to the previous planning cycle in accompanying documentation on medium-
term financial planning as per section 10(2) of the Federal Budget Code. 

5. Mechanisms of coordination across sub-sectors of general government 

Under  section 51  of  the  Budgetary  Principles  Act,  the  Stability  Council  consults  on 
underlying  macroeconomic  and  fiscal  assumptions  in  order  to  coordinate  the  budgetary  and 
financial planning of the federal government, the Länder and local authorities. The Stability 
Council  may  decide  on  recommendations  for  the  coordination  of  budgetary  and  financial 
planning. 

Allocation of responsibilities 

Under Article 104(1) of the Basic Law, the federal government and the Länder each fund out 
of  their  own  budgets  the  expenditures  they  incur  in  discharging  their  constitutional 
responsibilities.  Under  Article  109(1)  of  the  Basic  Law,  the  federal  government  and  the 
Länder are autonomous and independent of each other in the management of their respective 
budgets.  The  federal  government  and  the  Länder  each  act  separately  on  their  own 
responsibility  in  making  decisions  on  the  compilation  of  budgets,  the  execution  of  budgets, 
control and auditing. 

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The SZAG law of 5 September 200616 regulates the sharing of fines and non-bearing deposits 
between  the  federal  government  (65%)  and  the  Länder  (35%)  in  relation  to  the  SGP 
(Regulation 1467/97). A new law in preparation will deal with sanctions imposed under the 
preventive arm of the SGP. 

16 

Sanktionszahlungs Aufteilungsgesetz vom 5. September 2006 (BGBl. I S. 2098, 2104) 

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1.6. 

Implementation of the main provisions of the Directive in ESTONIA 

1. Accounting and statistics 

Accounting 

The state budget is prepared and its execution monitored on a cash basis (based on the state 
Budget Act), whereas accounting and the financial statements are done on an accrual basis. 

The  Estonian  authorities  report  that  accounting  is  regulated  by  the  Accounting  Act  and 
the  Estonian  Accounting  Standards  Board  (Estonian  GAAP).  The 
Guidelines  of 
recommendation for accounting principles to conform to international accounting standards is 
contained  in  the  Accounting  Act.  Public  sector  entities  also  apply  General  Rules  for  state 
accounting, enacted by the Ministry of Finance, which came into force on 1 January 2004. In 
January 2004 the transfer to accrual accounting by all public sector entities was completed. 

Statistics 

According  to  the  General  Rules  for  state  Accounting  all  public  sector  accounting  entities 
submit financial reports to a dedicated MoF database. The reports are based on the common 
chart of accounts, which  consists  of  balance sheet accounts, revenue and expenses accounts 
and accounts for off-balance sheet information, such as guarantees, commitments, collaterals 
etc. The financial data also include trading partner codes for consolidation purposes, activity 
codes  based  on  COFOG  and  cash-flow  codes  for  cash-flow  statements.  All  general 
government  sector  accounting  entities  enter  their  monthly  reports  into  the  MoF  database. 
State-owned  enterprises  enter  their  reports  quarterly.  The  due  date  is  the  end  of  the  month 
following the end of the reporting period. Database reports are available to the public on the 
MoF  website.  The  main  accrual-based  results  of 
the  general  government  sector 
(surplus/deficit,  loan  liabilities  etc.)  are  also  published  monthly  together  with  the  budget 
fulfilment report of the state (cash-based) on the MoF website. The MoF’s reporting database 
is  used  by  the  Estonian  Statistical  Office,  which  transfers  all  the  accrual-based  information 
from that database to another database they use to produce statistical data in accordance with 
ESA 95. 

Internal control and auditing 

The National Audit Office (NAO) is responsible for auditing the Estonian consolidated annual 
report and the ministries’ stand-alone annual reports. The audited annual report of the state is 
published together with an NAO statement and transmitted to parliament. Local governments, 
social  security  funds,  other  public  corporations,  agencies  and  non-profit  institutions  are 
audited by private audit firms. Also NAO may also choose to audit these entities. 

Regarding  internal  control  activities,  these  are  laid  down  by  various  legal  texts  (the 
Constitution  of  Estonia,  the  Central  Government  Act,  the  state  Budget  Act,  the  Local 
Government  Financial  Management  Act,  the  Public  Assets  Act,  and  various  acts  governing 
legal persons in public law) and internal rules regulating work in various sectors. The general 
rules include due-date requirements for submitting documents and reports. The requirements 
for document checks must ensure that the authorised person (signatory) and the employee of 
the  accounting  unit  are  not  the  same.  A  Minister  must  guarantee  the  implementation  of  the 

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internal  control  system  and  internal auditing in the ministry, in government  agencies within 
the ministry and in the state agencies administered by government agencies. 

For  reconciliation  between  public  accounting  and  data  based  on  ESA  95,  the  detailed  table 
explaining the methodology of transition is under preparation. 

Regarding Article 14(1) of the Directive, a list of all bodies and funds that are part of general 
government  (around  3000 entities)  is  published  on  the  website  of  Statistics  Estonia.  In  the 
annual and multiannual budgetary process, information is given on the impact of these bodies 
on  the  general  government  budget  position  and  debt.  The  impact  is  shown  at  the  level  of 
general government sub-sectors. 

Regarding Article 14(2) of the Directive, information on tax expenditure is made available in 
the  official  forecast  of  the  Ministry  of  Finance,  as  well  as  in  the  state  Budget  Strategy,  the 
Stability  Programme  and  an  explanatory  note  on  the  Annual  state  Budgets.  Information  is 
given on the impact of tax expenditure, legal grounds and COFOG classification. 

Regarding Article 14(3) of the Directive, information about state guarantees is published on a 
monthly  basis  on  the  website  of  the  Ministry  of  Finance  and  in  official  forecasts  and 
multiannual  strategic  documents.  Regarding  local  governments,  extensive  fiscal  reports  are 
published on the MoF website on a monthly basis. 

Information about public corporations (including the government share, revenues, expenditure 
and assets) is published yearly in the annual state report17. 

2. Forecasts 

The  Estonian  authorities  report  that  the  following  rules  have  been  in  place  for  at  least  five 
years for the MoF’s macroeconomic forecasting: 

- External  assumptions  for  the  forecast  are  fixed  about  one  month  before  publication  of  the 
forecast. For the development of Estonian export markets, the most recent forecasts provided 
by  the  Commission  or  the  countries  concerned  are  used.  Major  changes  in  external 
developments  during  the  forecasting  process  are  taken  into  account  and  the  latest  domestic 
statistics are used as the basis for the forecast. 

- At  least  two  scenarios  are  always  produced  as  input  for  the  fiscal  forecast,  where  the 
probability  of  the  main  scenario  occurring  is  over  50 %.  Fiscal  outcomes  are  always 
calculated for both scenarios. In recent years, the risk scenario has been more negative than 
the main scenario. 

- Before  completion,  the  forecast  is  thoroughly  discussed  with  Central  Bank  experts.  In 
addition, a separate seminar is held with virtually all macro forecasters and experts in specific 
fields  at  commercial  banks  and  other  relevant  institutions  in  Estonia  (such  as  the 
unemployment insurance fund) to get appropriate feedback. 

- Forecast results and assumptions are discussed on a yearly basis with the Commission, IMF, 
OECD and rating agencies’ economists. 

17 

The  annual  state  report  is  released  upon  completion  of  the  annual  budget  cycle  and  provides  a  cash-
based fulfilment report. 

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- When  the  forecasts  are  published,  a  comparison  with  all  other  available  forecasts  for  the 
Estonian economy and their developments over time is presented. 

Together with the preparation of the new state Budget Act (see below), there is a plan to grant 
legal  independence  to  the  staff  of  the  Ministry  of  Finance  who  compile  the  forecast.  As 
described below, there is also a plan to introduce an Independent Fiscal Council in legislation. 

3. Fiscal rules 

Although there are no laws that require the general government or central government budget 
to be in balance, the Estonian authorities report that there is a ‘soft’ budget balance rule in the 
form of a coalition agreement that was followed by all governments until recently. The rule is 
usually set in the coalition agreements signed between coalition partners at the beginning of a 
new government’s term. All governments had adhered to it until the recent economic crisis, 
when  the  scale  of  the  economic  downturn  made  the  strict  implementation  of  the  rule 
impossible. 

As  regards  multiannual  expenditure,  the  state  authorities  may  enter  into  contracts  for  the 
account of the coming years provided that the total amount of the contractual payments due in 
any  coming  budgetary  year  does  not  exceed  50%  of  the  amount  of  the  relevant  item  of 
expenditure in the current budgetary year. 

Regarding  local  governments,  their  activities  have  been  regulated  by  the  Financial 
Management  of  Local  Authorities  Act  since  2012.  The  Act  stipulates  that  local  authorities 
must  ensure  that  the  operating  result,  i.e.  the  difference  between  operating  revenue  and 
operating  expenditure  is  balanced  or  positive.  Their  net  debt  burden  should  be  below  60-
100 %  of  their  operating  revenue  (the  exact  ratio  depends  on  their  individual  financial 
capacity).  All  local  authorities  are  temporarily  prohibited  until  the  end  of  2016  from 
increasing their net debt burden over 60 %. 

The  Estonian  authorities  report  that  a  new  state  Budget  Act  is  being  prepared  to  reflect  the 
changes needed in the light of the Directive and domestic needs. The legislation is expected to 
be submitted to the Riigikogu at the beginning of 2013. It will contain operational balanced 
budget and deficit rules for the general government and balance budget, deficit and debt rules 
for the sub-sectors. These rules are already in place for the local government sub-sector and 
are  also  planned  for  the  foundations  and  for  the  bodies  governed  by  public  law  (public 
entities) in the general government sector. Planning will be harmonised so that all of the sub-
sectors  process  their  multiannual  and  annual  plans  in  a  synchronized  way  in  line  with  the 
State Budget Strategy and the Annual state Budget. The fiscal policy objectives of the state 
budget will be binding on all general government sub-sectors and institutions. 

Deviations can be approved by the Riigikogu through the Annual state Budget Act as long as 
they  are  in  line  with  the  fiscal  policy  objectives  framework  set  out  in  the  State  Budget 
Strategy. 

Finally, it is planned to introduce an Independent Fiscal Council in legislation. The Council 
will give opinions on fiscal policy documents before they are approved and will monitor the 
execution of the fiscal policy objectives. 

4. Medium-Term Budgetary Framework 

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The medium-term budgetary framework has been set out in the form of the State Budgetary 
Strategy since 2003. The document is adopted annually in May and sets fiscal policy targets 
for  the  next  three  years  on  a  rolling  basis.  Under  the  state  Budget  Act,  the  State  Budget 
Strategy  forms  the  basis  for  the  compilation  of  the  draft  state  budget.  The  State  Budget 
Strategy is compiled for the following budgetary year and the subsequent three years. It sets 
out the budgetary policy principles and objectives, the priorities of the Estonian Government 
and its activity-based funding plan for these four years (including for the balance of the state 
budget and for the state budget surplus or deficit), an analysis of the economic situation and a 
forecast of economic developments, including forecasts of the income and expenditure of the 
general government, and other information essential for financial management. 

The State Budget Strategy is approved by the government on the proposal of the Minister of 
Finance at least seven months before the beginning of the budgetary year. 

The state Budget Strategy is drafted (jointly with the Stability Programme) in accordance with 
the  so-called  rolling  principle:  in  spring  of  each  year  the  previous  State  Budget  Strategy  is 
updated for the coming three years and plans are made for the fourth year. To that end, the 
ministries and state authorities update the organisation-based development plans for their area 
of government annually by one year, in order to ensure a constant four-year perspective for 
strategic  planning.  Such  development  plans  are  approved  by  each  Minister,  after  discussing 
them  first  with  the  Prime  Minister  and  other relevant  Ministers.  The  development  plans  are 
submitted  to  the  Ministry  of  Finance  by  1  March  each  year.  The  Ministry  of  Finance  then 
drafts  the  State  Budget  Strategy  for  discussion  in  the  cabinet.  After  the  cabinet  has  taken  a 
decision the government approves the State Budget Strategy. 

It  is  planned  to  make  the  content  requirements  for  the  State  Budget  Strategy  more  explicit, 
adding compulsory requirements for multiannual expenditure ceilings and for the fiscal policy 
objectives in terms of the deficit, debt, reserves and tax burden. The intention is to introduce 
an  obligation  to  set  the  previously-mentioned  ceilings  and  objectives  for  the  general 
government as a whole and also for the individual sub-sectors. 

5. Mechanisms of coordination across sub-sectors of general government 

According  to  the  Estonian  authorities,  the  general  government  sub-sectors  are  largely 
involved  in  the  fiscal  planning  process.  Central  government  institutions  (public  entities, 
foundations, state Real Estate Agency) are required to submit their multiannual budget plans 
to the Ministries for the official forecasts and State Budget Strategy. Local governments are 
required  to  submit  monthly  fiscal  data  and  approved  annual  budgets  to  the  Ministry  of 
Finance.  Regarding  the  social  security  funds,  the  Health  Insurance  Fund  is  adopting  a 
multiannual  expenditure  plan,  which 
in  government  fiscal  planning.  The 
is  used 
Unemployment Insurance Fund regularly updates its expenditure projections in line with the 
official macroeconomic forecast of the Ministry of Finance. 

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1.7. 

Implementation of the main provisions of the Directive in IRELAND 

1. Accounting and statistics 

Accounting 

The  Irish  authorities  report  that  Government  departments  and  offices  prepare  accounts  in 
accordance  with  the  provisions  of  the  Exchequer  and  Audit  Departments  Act  1866  as 
amended by the Comptroller and Auditor General (Amendment) Act 1993. The Appropriation 
Account, prepared  in accordance with  the above legislation, includes accrual  information in 
supplementary  notes  to  the  accounts  in  accordance  with  accounting  guidance  issued  by  the 
Department of Public Expenditure & Reform in the form of circulars. Appropriation accounts 
are  prepared  on  a  cash  basis.  The  notes  to  the  Appropriation  Account  contain  accrual 
information,  which  the  Irish  Statistical  Office  uses  (plus  relevant  information  from  other 
sources) to produce the data based on the ESA 95 standard. 

Internal control and audit 

timeframes  require  government  departments  and  offices 

their 
Legislative 
appropriation  accounts  prepared  and  presented  to  the  Comptroller  and  Auditor  General 
(C&AG) by 31 March of the year following the year of accounts. Legislation also requires the 
Comptroller and Auditor General to audit the accounts and present his report on those audits 
to parliament  by  30 September of the year following the year of accounts. Each accounting 
officer signs a statement of internal financial control, which documents their responsibilities 
for internal control within the department/office, is appended to the appropriation account and 
is reviewed by the Comptroller & Auditor General to ensure consistency with the results of 
his audit. All general government bodies are subject to independent audit by the Comptroller 
& Auditor General or another external auditor. 

to  have 

The Local Government Act (2001) provides the legal basis for audit of the local government 
sector. It requires the Local Government Audit Service to carry out audits of local authorities 
(e.g.  city,  county  and  town  councils,  regional  assemblies,  regional  authorities  and  other 
bodies).  The  auditor  appends  his/her  signature  to  the  audit  opinion  on  the  local  authority’s 
annual financial statement. Local government auditors may also issue associated audit reports. 
The audit opinion and any audit report are sent to the local authority, which must table them 
for discussion at its next available public meeting. Copies of audit reports are also sent to the 
Director of Audit, the Minister for Environment, Community and Local Government and the 
C&AG.  There  is  an  accounting  code  of  practice  issued  by  the  Department  of  Environment, 
Community and Local Government, which sets out accounting policies. Local authorities are 
required  to  prepare  their  annual  financial  statements  on  an  accruals  basis.  The  accounting 
year-end  for  local  authorities  is  31  December,  and  annual  financial  statements  are  to  be 
prepared by the end of March in accordance with the accounting code of practice. 

Statistics 

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Monthly  cash-based  fiscal  data  for  central  government  are  published  in  the  Exchequer 
Statement two  working  days after the end of each month18. For  local government, quarterly 
general government accounts, including local government accounts data on an ESA95 basis, 
are  submitted  to  Eurostat  by  the  Irish  Statistical  Institute  one  quarter  later.  They  are  to  be 
published  from  Q1  2013.  To  meet  reporting  requirements  under  the  EU/IMF  Programme, 
income  and  expenditure  reports  for  local  authorities  (comprising  the  main  part  of  local 
government)  are  supplied  to  the  Troika  within  90 days  of  the  end  of  each  quarter. 
Consideration  will  be  given  to  publishing  this  information  in  the  context  of  transposing  the 
Directive. 

Information on the receipts and expenditures of the Social Insurance Fund (SIF) is supplied to 
the Troika under the EU/IMF Programme reporting requirements. In addition, a further report 
is  to  be  added  to  the  Exchequer  Statement  giving  an  alternative  presentation  of  the 
information:  revenue  information  will  include  receipts  for  SIF  and  expenditure  information 
will include its expenditure19.  

Extra-budgetary funds 

A register of general government bodies is kept by the Irish Statistical Office and is included 
in the EDP inventory20. The register is to be updated by the end of 2012 and maintained by 
the  Irish  Statistical  Office.  The  combined  impact  of  these  bodies  on  general  government 
balances  and  debts  is  presented  in  a  detailed  reconciliation  table  now  published  5 times  a 
year21. 

Tax expenditure 

The  Irish  authorities  report  that  the  requirements  of  the  Directive  with  regard  to  tax 
expenditures are being met on an administrative basis. Information is provided in the annual 
budget  documentation  regarding  new  or  extended  tax  expenditures.  Information  on  existing 
tax expenditures can be found in the statistical reports produced by the Office of the Revenue 
Commissioners,  though  with  a  lag  (only  the  2010  report  is  available  so  far)22.  The 
Commission  on  Taxation,  which  undertook  an  in-depth  review  of  the  tax  system  in  2008, 
published  detailed  information  on  tax  expenditure  (using  OECD  methodology)  in  its  2009 
report. 

Contingent liabilities and participation in capital of corporations 

Only information on government guarantees is available, but is not published. 

2. Forecasts 

The  Irish  authorities  report 
is  producing 
macroeconomic and budgetary forecasts, uses up-to-date information and takes great care in 

the  Department  of  Finance,  which 

that 

18 
19 

20 

21 
22 

http://www.finance.gov.ie/viewdoc.asp?DocID=-1&CatID=5&StartDate=1+January+2012. 
The  existing  presentation,  which  will  continue  as  well,  shows  Central  Fund  receipts  and  expenditure 
only (not including the SIF, which is a separate fund). 
http://epp.eurostat.ec.europa.eu/portal/page/portal/government_finance_statistics/documents/ 
EDP_inventory-IE-Jun_2012.pdf. 
http://www.cso.ie/en/media/csoie/releasespublications/documents/economy/2011/nie_2011.pdf. 
http://www.revenue.ie/en/about/publications/statistical/2010/index.html. 

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ensuring its macroeconomic and budgetary forecasts are robust and are based on sound data 
and realistic assumptions. 

A  sensitivity  analysis  is  performed  by  the  Department  of  Finance  to  produce  macro-fiscal 
scenarios resulting from reflecting changes in key economic variables. A macro-fiscal model 
is used to simulate a situation in which real GDP differs from the baseline by +/-1 %, owing 
to (i) a change in world growth; (ii) a change in interest rates; (iii) a change in oil prices; and 
(iv) a change in the savings rate. 

As to regards ex post evaluation, the Irish authorities consider that the independent Irish Fiscal 
Advisory Council (IFAC), established in June 2011, has enhanced the robustness of Ireland’s 
budgetary  architecture.  The  role  of  the  Council  is  to  independently  assess,  and  comment 
publicly on, whether the government is meeting its own stated targets and objectives. IFAC 
assesses the appropriateness and soundness of the government’s macroeconomic projections 
and overall fiscal stance. These assessments are published23. 

3. Fiscal rules 

Following  the  new  legislative  developments  at  EU  level,  and  the  positive  outcome  of  the 
referendum held in May 2012 to approve ratification of the TSCG, the Fiscal Responsibility 
Bill (FRB) was published on 18 July 2012 to implement the obligations under the Treaty. The 
Irish authorities report that the requirements of the Budgetary Frameworks Directive are being 
examined in detail to ensure that it is transposed into Irish law by regulation during 2013. 

The Fiscal Responsibility Bill 2012 will require the government to comply with the budgetary 
rule and the debt rule set out in the legislation. 

The  budgetary  rule  states  that  the  budgetary  position  of  general  government  must  be:  (i) in 
balance or in surplus, to be determined by reference to the medium-term objective (MTO); or 
(ii) on an adjustment path towards the MTO set in accordance with EU Regulation 1466/97; 
unless  exceptional  circumstances  apply  in  accordance  with  the  Stability  and  Growth  Pact 
stipulations. 

The  debt  rule  in  the  FRB  fully  conforms  to  the  one-twentieth  debt  rule  provided  for  in  EU 
Regulation 1467/97. The FRB also provides for a correction mechanism in accordance with 
the  common  principles  adopted  by  the  European  Commission.  Accordingly,  the  target 
definition and scope of the fiscal rules is to be defined in legislation. The target to be set is the 
MTO and the scope of application will be general government. 

Under  the  FRB,  the  Fiscal  Council  will  be  tasked  with  monitoring  compliance  with  the 
budgetary  rule  and,  if  applicable,  the  correction  mechanism.  It  will  also  be  tasked  with 
assessing whether exceptional circumstances exist or have ceased to exist. In the event of non-
compliance, as highlighted by the Fiscal Council in its monitoring assessments, the Minister 
for Finance will be required to comply or explain the reasons why to parliament. 

The Irish authorities report that there is a separate fiscal rule applicable to local government. 
Section10A (1) of the 1994 Local Government Act states that: ‘if at any time an estimate of 
expenses for a local financial year has been adopted by a local authority and it appears to the 
Minister  that  it  is  insufficient  to  defray  the  expenses  to  be  incurred  by  the  authority  in  that 

23 

http://www.fiscalcouncil.ie/publications/. 

EN 

30 

   EN 

 
                                                 
financial  year  (…)  the  Minister  may  (…)  require  the  local  authority  (…)  to  amend  (…)  the 
estimate  (…)’.  However,  the  government  has  subsequently  decided  that  the  34 local 
authorities as a whole could run a deficit of up to €

 200 million each year24. 

4. Medium-Term Budgetary Framework 

The Irish authorities mention that legislation is being drafted to provide a statutory basis for 
the existing multiannual expenditure ceilings. The Irish medium-term budgetary framework is 
expected to be fully consistent with the Irish Stability Programme. 

5. Mechanisms of coordination across sub-sectors of general government 

The  Irish  authorities  report  that  ways  to  enhance  coordination  are  under  consideration  for 
transposition  of  the  Directive  and  in  the  wider  context  of  the  Stability  and  Growth  Pact 
Reform.  While  the  budgetary  responsibilities  of  the  various  sub-sectors  of  general 
government  are  considered  to  be  clearly  defined,  understood  and  implemented  by  the  sub-
sectors  in  question,  the  transposition  of  the  Directive  will  provide  an  opportunity  to  collate 
these rules and requirements in a single document. 

24 

Over the past three years, Irish authorities report that the Local Government Sector had a surplus of €16 
million in 2011, a surplus of €95 million in 2010 and a deficit of €44 million in 2009. 

EN 

31 

   EN 

 
                                                 
1.8. 

Implementation of the main provisions of the Directive in GREECE 

1. Accounting and statistics 

As of January 2011, the central administration has put in place a modified cash-basis double-
entry  accounting  system  (Presidential  Decree 15/2011),  containing  requirements  and 
procedures for generating accrual data and ensuring compliance with the ESA 95 standards. 
According to the fifth update of the assessment of compliance with the MoU (October 2011), 
the double-entry accounting system has been finalised in hospitals. 

A  report  on  state  Budget  execution  is  published  by  the  Ministry  of  Finance  (General 
Accounting  Office)25.  Cash  data  encompass  total  revenue,  total  expenditure,  and  the  state 
budget balance and are presented in cumulative form for the current fiscal year and compared 
to  targets.  With  a  one-month  lag,  the  Ministry  of  Finance  (General  Accounting  Office) 
publishes general government cash data (revenue, expenditure and balance), broken down by 
sub-sectors (state budget, extra-budgetary funds, local government and social security funds).  

The  Greek  authorities  report  that  monthly  data  are  collected  through  questionnaires  for 
970 entities  belonging  to  general  government  but  outside  line  ministries.  An  international 
auditing  company  has  been  mandated  to  prepare numerical  reconciliation  tables  for  all  sub-
sectors in order to bring the detailed cash data into line with the ESA and GFS codification 
system. 

In line with the economic adjustment programme, quarterly Quantitative Performance Criteria 
are in place, to monitor general government budget execution. 

2. Forecasts 

The  Greek  authorities  reports  that  the  Directorate  of  Macroeconomic  Analysis  and 
Forecasting  (part  of  the  MoF’s  Directorate  General  for  Economic  Policy)  analyses 
developments in the Greek and international economy and prepares both short- and medium- 
term  macroeconomic  forecasts.  These  draft  forecasts  and  the  underlying  assumptions  are 
discussed in a consensus roundtable with independent bodies. The Directorate participates in 
the formulation of the state budget and the update of the Stability and Growth Programme as 
well as in the preparation of the Medium-Term Fiscal Strategy. The macroeconomic forecasts 
prepared  for  these  documents  include  alternative  scenarios  and  sensitivity  analyses.  A 
sensitivity  analysis  is  to  be  conducted  by  mid-2013  in  the  newly  established  Directorate  of 
Fiscal  Programming,  Fiscal  Data  and  Methodology  for  the  main  fiscal  variables  under 
different macroeconomic assumptions. 

Finally,  in  the  context  of  the  economic  adjustment  programme  for  Greece,  all  the 
macroeconomic  and  budgetary  estimates  and  forecasts  are  discussed  and  agreed  with  the 
representatives of the European Commission, the ECB and the IMF. 

25

EN 

http://www.minfin.gr/portal/en/resource/contentObject/contentTypes/genericContentResource
Object,fileResourceObject,arrayOfFileResourceTypeObject/topicNames/budgetExecutionBulletin/reso
urceRepresentationTemplate/contentObjectListAlternativeTemplate. 

32 

   EN 

 
 
                                                 
 
3. Fiscal rules 

Greece  is  currently  subject  to  an  Economic  Adjustment  Programme,  which  requires  fiscal 
policy to achieve the objectives of the programme. A range of fiscal targets have been set and 
are closely monitored through regular missions by the European Commission, the European 
Central  Bank  and  the  International  Monetary Fund.  These  targets  concern,  for  example,  the 
general  government  deficit,  primary  general  government  deficit  and  debt.  The  second 
Economic Adjustment Programme for Greece calls for a primary deficit of 1 per cent of GDP 
in 2012 and a primary surplus of 4.5 per cent of GDP in 2014. The targets should ensure that 
there is sufficient progress towards the objective of a 120 per cent debt-to-GDP ratio by 2020. 
In  addition,  the  technical  Memorandum  of  Understanding  agreed  with  the  Greek  authorities 
defines  a  number  of  additional  quantitative  performance  criteria  and  indicative  targets 
covering  among  other  things:  (i)  a  floor  on  the  modified  general  government  primary  cash 
balance, (ii) a ceiling on state budget primary spending; (iii) a ceiling on the overall stock of 
central  government  debt;  (iv)  a  ceiling  on  the  new  guarantees  granted  by  the  central 
government;  (v)  the  non-accumulation  of  domestic  arrears;  and  (vi)  a  floor  on  privatisation 
proceeds.  In  order  to  support  implementation  of  the  fiscal  targets,  the  Medium-Term  Fiscal 
Strategy 2012-2015 sets annual spending ceilings for each line ministry and fiscal targets for 
other central and general government sub-sectors. 

A  number  of  accompanying  reforms  have  been  undertaken  to  strengthen  implementation  of 
the  fiscal  targets:  (i)  the  submission  of  supplementary  budgets  has  been  facilitated;  (ii) 
commitment  registries  have  been  established  in  all  ministries;  (iii)  accounting  officers  have 
been appointed in every ministry with increased responsibility for the accuracy and reliability 
of transmitted fiscal data. 

4. Medium-Term Budgetary Framework 

The  Mid-Term  Fiscal  Strategy  Plan  (MTFS)  makes  multi-year  projections  for  total  revenue 
and  expenditure  over  the  following  time  span:  the  two  previous  years,  the  current  year,  the 
budget year and the three following years. It covers: (i) central government, with a spending 
ceiling defined for each line ministry; (ii) the local government organisations (LGOs); (iii) the 
social  security  funds  and  hospitals  (social  budget);  (iv)  the  public-  and  private-law  entities 
forming  part  of  central  government;  (v)  state-owned  enterprises  reclassified  under  central 
government;  (vi)  several  organisations  and  accounts  (ELGA,  OPEKEPE,  Green  Fund, 
AKAGE). 

The  MTFS  lays  down:  (i) the  main  political  directions  and  priorities;  (ii) the  fiscal 
commitments  undertaken  for  the  following  period,  and  thus  the  fiscal  limits;  (iii) specific 
targets,  timetables  and  implementation  indicators  for  spending  control  and  gradual  deficit 
reduction; (iv) expenditure ceilings for each line ministry (central government) throughout the 
duration of the MTFS. 

At  the  planning  stage,  the  MTFS  takes  into  account:  (i) the  mid-term  targets  for  general 
government (general government deficit, primary general government deficit, level of public 
debt),  as  well  as  its  sub-sectors;  (ii)  the  macroeconomic  prospects  and  economic 
developments. In accordance with Law 3871/2010, it is submitted to the Ministerial Council 
by mid-April and to parliament for adoption at the latest by mid-May every year. It may be 
updated if the macroeconomic environment has changed significantly by September. 

EN 

33 

   EN 

 
According  to  the  Greek  authorities,  the  MTFS  promotes  a  top-down  approach  that  can  be 
described as follows: 

-  Specification  of  the  mid-term  fiscal  targets  for  the  period  covered  by  the  MTFS  for  the 
general government deficit, general government primary deficit and level of debt. 

-  Preparation  of  the  baseline  scenario,  i.e.  projections  of  fiscal  aggregates  over  the  medium 
term if corrective measures are not taken. 

-  Comparison  between  fiscal  targets  and  the  fiscal  projections  contained  in  the  baseline 
scenario and identification of deviations per year, i.e. the fiscal gap for the whole period. 

-  Stipulation  of  the  corrective  interventions  required  to  fill  the  fiscal  gap  (nature  and 
quantitative evaluation over the MTFS horizon). Corrective interventions may be permanent 
or one-off, affect revenues or expenditure, target specific entities or have a horizontal nature. 

-  Preparation  of  the  MTFS  to  specify  in  detail  the  fiscal  adjustment  required  for  the  whole 
period for each sub-sector of general government, so that fiscal targets can be met. 

5. Mechanisms of coordination across sub-sectors of general government 

As regards transparency requirements, general government sub-sector entities are obliged to 
provide monthly data for their economic performance one month after the reference month. A 
detailed  list  of  all  entities  providing  such  data  is  published  every  month.  Non-complying 
entities are not entitled to grants from the state Budget for as long as they do not provide the 
required data. 

In  addition  the  accounting  officers  (one  in  each  line  ministry)  monitor  the  monthly  budget 
execution of all entities supervised by the relevant ministry and the adherence to ceilings for 
their  ministry  and  submit  a  monthly  report  to  their  minister,  the  Minister  of  Finance  and 
parliament. 

EN 

34 

   EN 

 
1.9. 

Implementation of the main provisions of the Directive in SPAIN 

Spain  has  undertaken  successive  overhauls  of  its  fiscal  framework.  The  General  Budgetary 
Law (LGP), updated in 2003, established budgetary procedures for central government, while 
the  Organic  Law  on  Regional  Financing  (LOFCA)  laid  down  procedures  and  coordination 
arrangements  for  regional  budgets.  In  2011-12,  the  introduction  of  fiscal  principles  in  the 
constitution  (in  particular  a  balanced  budget  principle)  and  the  adoption  of  a  new  Organic 
Law  on  Budgetary  Stability  and  Financial  Sustainability  implementing  those  principles 
(referred to below as ‘the Organic Law’) defined a new framework for general government. 

1. Accounting and statistics 

Accounting 

Regarding  accounting  requirements,  the  general  government  sector  accounts  are  prepared 
annually by the comptroller’s office (IGAE) under the ESA standard, as defined by the LGP 
(Article  125.2.g).  Different  laws  regulate  the  accounting  and  budgetary  regime  of  each 
government level. 

Statistics 

For  central  government,  IGAE  already  publishes  monthly  information  on  budgetary 
execution,  both  in  national  accounts  terms  and  on  a  cash  basis26.  Procedures  are  being 
designed to collect monthly information in national accounts terms on autonomous bodies and 
other entities coming under central government. 

For  the  social  security  system,  procedures  are  also  being  designed  to  collect  monthly 
information on the accounts of its different entities for monthly reporting in national accounts 
terms. 

Regarding  the  autonomous  communities  and  local  entities,  Article 27  of  the  Organic  Law 
establishes that the Ministry of Finance and Public Administration can collect any information 
needed to ensure compliance with the Organic Law and the European requirements. This is 
complemented by a ministerial regulation to be published in September 2012 setting out the 
procedural  details.  Monthly  data  for  the  autonomous  communities  on  a  cash  basis  are  to  be 
published from September 2012 onwards and in national accounts terms as from 2013 (with a 
six-week delay). Quarterly information on a cash basis and in national accounts terms for the 
regions  is  already  published  with  a  delay  of  2-2.5 months.  For  local  entities,  quarterly 
reporting is expected as from 2013. 

The reconciliation table showing the methodology for the transition between cash-based data 
and ESA 95 data still has to be developed. 

Transparency 

26 

http://www.igae.pap.minhap.gob.es/sitios/igae/en-
GB/InformesCuentas/Informes/Paginas/publicaciones.aspx. 

EN 

35 

   EN 

 
 
                                                 
Regarding  the  obligations  in  Article  14  of  the  Directive,  the  Spanish  authorities  report  the 
following: 

- For  the  contingent  liabilities  of  public  administrations,  IGAE  has  information  on  the 
guarantees  granted  by  central  government  and  the  Bank  of  Spain  has  information  on  the 
guarantees granted by autonomous communities and local entities; 

- For non-performing loans, there is information in relation to central government; 

- For the liabilities of public companies, the Bank of Spain publishes information on the debt 
of public companies; 

- For  participation  in  the  capital  of  corporations,  there  are  three  registers  for  central 
government,  autonomous  community  and  local  entity  holdings,  managed  by  IGAE  and  the 
Ministry of Finance and Public Administration. 

Regarding tax expenditure, central government has published a tax expenditure budget since 
1979 as required by the Spanish Constitution (Article 134(2)) and the General Budgetary Law 
(Article 32(2)). It quantifies tax expenditure for central government taxes. From 1995 on, an 
explanatory memorandum27 has been included with every annual Budget Law (Article 37(2) 
of the General Budgetary Law). Regions are required to quantify tax expenditure under their 
statutes of autonomy and regional fiscal laws. Local governments have the same obligation. 
All regions publish information about the quantification of tax expenditure together with their 
regional budget laws. Most regions publish the methodology they use for this quantification, 
but there are differences among the regions, as some publish detailed information while others 
do not. 

2. Forecasts 

Regarding  Article  4(1)  of  the  Directive,  Article  15(5)  of  the  Organic  Law  requires  the 
government  to  produce  a  report  with  annual  and  multi-annual  macroeconomic  and  macro-
fiscal  forecasts,  prepared  with  input  from  the  Bank  of  Spain  and  after  consideration  of  the 
European Commission and ECB forecasts. 

Regarding Article 4(4) of the Directive, sensitivity analyses are required by the Organic Law, 
but  only  for  regions  that  are  in  breach  of  the  fiscal  rules  and  therefore  need  to  submit 
corrective  plans.  The  Spanish  authorities  state  that  they  follow  the  guidelines  given  in  the 
January  opinion  of  the  EFC  on  the  contents  and  format  of  the  Stability  and  Convergence 
Programme. 

Regarding Article 4(5), the Organic Law (Articles 6(2) and 27(5)) establishes the Ministry of 
Finance’s  responsibilities  regarding  the  public  provision  of  forecasts  and  corresponding 
methodologies. In addition, the Organic Law (Article 28) also provides for the establishment 
of  a  public  information  centre  ‘to  provide  information  about  the  economic  and  financial 
activity  of  the  various  public  administrations’.  The  Ministry  of  the  Economy  and 
Competitiveness  is  responsible  for  the  production  of  macroeconomic  forecasts.  These  are 
incorporated  into  the  overall  process  through  the  report  evaluating  the  expected  economic 
situation for each year, which is required by Article 15(5) of the Organic Law. 

27 

http://www.sepg.pap.minhap.gob.es/Presup/PGE2012Proyecto/MaestroDocumentos/PGE-
ROM/MnSerieAmarilla.html. 

EN 

36 

   EN 

 
                                                 
3. Fiscal rules 

Currently,  Spain  has  one  fiscal  rule  for  expenditure  in  place  at  all  levels  of  general 
government  (Organic  Law,  Article  12).  LOFCA  also  contains  provisions  regarding  the 
indebtedness of the regions. As the former laws (LEP and LOLEP) have been repealed by the 
Organic  Law,  Spain  currently  has  no  budget  balance  or  debt  rule  in  place  across  general 
government:  the  rules  to  be  introduced  by  the  Organic  Law  (Articles 11  and  13)  will  be 
effective from 2020. 

Under  Article 17  of  the  Organic  Law,  the  Ministry  of  Finance  is  in  charge  of  monitoring 
compliance  with  the  rules  set  by  the  Organic  Law  (the  expenditure  rule  and  the  future 
balanced budget rule and debt rule). 

Escape clauses and correction mechanisms are defined in the rules (Articles 11 and 13) and in 
Chapter IV of the Organic Law. 

The Organic Law mentions in Articles 11, 12 and 14 the binding character of the rules for the 
annual budgets within the general government sector. 

4. Medium-Term Budgetary Framework 

The  Spanish  authorities  report  that  the  features  of  their  medium-term  budgetary  framework 
are specified in Article 29 of the Organic Law. 

The articles of the General Budgetary Law 47/2003 that regulate the budgetary frameworks 
are now under study in order to adapt them to European regulation. This modification will be 
introduced  in  the  General  State  Budget  Law  for  2013.  They  will  be  used  in  the  Stability 
Programme. 

5. Mechanisms of coordination across sub-sectors of general government 

There are two forums for coordination. The Council for Fiscal and Financial Policy (CPFF) 
brings together central government and the autonomous communities. The CPFF participates 
in the setting of the stability objectives and in their monitoring, is informed of the expenditure 
limit for central government, approves the rebalancing plans of the regions, and coordinates 
the  budgetary,  debt  and  public  investment  policies  of  the  autonomous  communities.  The 
National Committee of Local Administration (CNAL) brings together central government and 
local administrations. 

The Spanish authorities report that the Organic Law establishes or reinforces the sub-central 
enforcement  of  national  fiscal  rules,  clarifying  the  role  of  different  government  levels.  For 
instance,  while  the  debt  rule  sets  a  ceiling  of  60 %  of  GDP  for  general  government,  it  is 
broken down into ceilings for central government (44 % of GDP), regions as a whole (13 % of 
GDP), and local government as a whole (3 % of GDP). 

The Organic Law also establishes correction mechanisms to address deviations from the rule, 
including  the  mandatory  submission  of  correction  plans  from  the  government  level 
responsible,  as  well  as  temporary,  total  or  partial  handover  of  budgetary  responsibility  to  a 
higher government level in the event of repeated breaches. 

EN 

37 

   EN 

 
1.10. 

Implementation of the main provisions of the Directive in FRANCE 

1. Accounting and statistics 

Accounting 

The French authorities report that most entities in the general government sector are subject to 
the French general public accounting conventions (Comptabilité publique) defined in Decree 
No.  62-1587  of  29 December  1962  and  Article 60  of  the  Law  No.  63-156  of  23 February 
1963.  Other  entities  apply  private  accounting  conventions  or  are  subject  to  other  specific 
rules. 

Article 30  of  the  Loi  Organique  relative  aux  Lois  de  Finances  No.  2001-692  of  1 August 
2001 (LOLF) stipulates that the general public accounting system used for the state is on an 
accrual basis. This is also the case for public institutions (Articles 51-52 of  Decree No. 62-
1587  of  29  December  1962),  compulsory  social  security  schemes  (Article  L.114-5  of  the 
Social Security Code) and local public bodies (Articles 51-52 of Decree No. 62-1587). Other 
legal texts ensure that accrual accounting is also used for the unemployment insurance scheme 
and supplementary schemes. 

Internal control and audit 

While internal control is in place for the state (Decrees of 29 December 1962 and No 2011-
775  of  28 June  2011)  and  social  security  funds  (Articles  D122-7  and  D122-8  of  the  Social 
Security  Code),  a  reform  of  the  provisions  governing  internal  control  is  expected  to  be 
finalised in the first half of 2013. 

Auditing is performed by the French state audit office (Cour des Comptes) and regional audit 
chambers  for  local  authorities.  Article  58(5)  LOLF  stipulates  that  the  state  audit  office 
certifies ‘that the state's accounts are lawful, faithful and present a true and fair view’. This is 
also the case for the general social security system (Article LO. 132-2-1). 

The French authorities report that a draft decree currently under examination will update the 
1962 decree and streamline existing requirements. The scope of the general public accounting 
rules  will  be  aligned  with  the  scope  of  government  in  the  sense  of  Council  Regulation  No 
2223/96  of  25 June  1996.  Entities  belonging  to  general  government  but  outside  the  state 
would be subjected to the general public accounting rules. The decree will also require other 
central and local government bodies (ODAC, ODAL) and social security administrations to set 
up internal control and audit mechanisms. 

Statistics 

Cash-based  fiscal  data  for  the  state  budget  is  released  every  month  on  the  MoF  website 
(‘Situation mensuelle du budget de l'état’)28. Fiscal data for the social security sub-sector are 
calculated  on a monthly basis (ministerial order of 11 February  2005) but are not published 

28 

http://www.performance-publique.budget.gouv.fr/ressources-documentaires/documentation-
budgetaire/la-situation-mensuelle-du-budget-de-letat.html. 

EN 

38 

   EN 

 
 
                                                 
for  the  time  being.  A  monthly  publication  is  to  be  launched  in  2013.  Local  government 
accounts, kept by the MoF, are to be released every quarter from 2013. 

Regarding Article 4(7) of the Directive, France transmits quarterly deficit data to Eurostat but 
places an embargo on the publication of data for the current year. It would have to discontinue 
this practice by the end of 2013 to comply with the Directive. 

Extra-budgetary bodies and funds 

Article 50 LOLF states that a report on the nation’s economic, social and financial situation 
and outlook, enclosed with the year’s budget bill, ‘presents and explains, for at least the four 
years following the tabling of the budget bill, projected growth in revenue, expenditure and 
the balance for all public and administrations detailed by sub-sectors (…)’. 

A list of bodies distinct from the state and assuming public duties with a number of budgetary 
information  is  to  be  found  in  an  annex  of  the  state  budget  (‘rapport  sur  les  opérateurs  de 
l'Etat’). 

Synthetic balance sheet information for bodies involved in the financing of social security or 
receiving social security funding is also included in an annex to the draft law on the financing 
of social security (PLFSS). 

The  French  authorities  report  that  an  organic  law  submitted  to  the  French  cabinet  in 
September 2012 aims to enhance the information published on sub-sectors. 

Tax expenditure 

Article 51 LOLF stipulates that the budget bill should present tax expenditures in an annex. 
The annual performance plan for each programme, also released in the form of as an annex, 
should  include  an  evaluation  of  tax  expenditure  for  the  programme  in  question.  The  listing 
and evaluation of individual tax expenditures under the annual social security budget is also 
required by Article LO. 111-4 of the Social Security Code. 

2. Forecasts 

The French authorities report that an organic law to be released in September will ensure that 
an  independent  body  is  tasked  with  assessing  government  forecasts,  in  line  with  the  future 
European ‘two-pack’ regulation. 

Comparisons  of  the  forecasts  with  those  of  other  institutions  are  already  included  in  the 
economic,  social  and  financial  report  (RESF)  annexed  to  the  budget  bill.  In  an  annex,  the 
forecasts  of  19 financial  institutions  and  economic  institutes  (‘Groupe  technique  de  la 
Commission  économique  de  la  Nation’)  are  compared  in  October  with  the  macroeconomic 
forecasts contained in the budget bill. The French authorities indicate that they are willing to 
mention the Commission forecasts in the RESF, but consider them outdated by the time it is 
prepared.  The  RESF  also  contains  explanatory  sections  detailing  the  main  macroeconomic 
assumptions  underpinning  the  preparation  of  the  budget.  The  effective  dissemination  of 
Treasury  working  papers  on  macroeconomic  models  is  considered  sufficient  to  provide 
complementary  information  on  the  methodologies  and  assumptions  underpinning  those 
forecasts. Finally the RESF contains a comparison with the previous forecast contained in the 
stability programme, which qualifies according to the French authorities as ex post evaluation 
in the sense of Article 4(6) of the Directive. 

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3. Fiscal rules 

A  dual  spending  norm  applies  to  central  government  level.  Under  the  second  multi  annual 
public  finance  planning  act  of  28 December  2010  covering  the  period  2011–14,  central 
government expenditure excluding interest payments and civil servants’ pensions is frozen in 
nominal  terms.  The  rule  comes  on  top  of  the  zero  volume  rule  introduced  in  2004,  which 
applies to all central government expenditure. As regards monitoring, the State Audit Office 
(‘Cour  des  Comptes’)  assists  parliament  and  the  government  by  monitoring  ex  post  the 
execution  of  the  state  budget  and  social  security  budget  and  more  generally  the  general 
government sector. 

Under Article LO. 111-3 of the Social Security Code, healthcare expenditure is subject to a 
nominal  spending  target  fixed  every  year  (ONDAM)  with  additional  sub-targets.  An  alert 
committee  monitors  execution  and  may  raise  the  alarm  in  the  event  of  any  significant 
deviation. 

For local authorities, a golden rule defined by Article L.1612-4 of the code applicable to local 
authorities (CGCT) does not allow current expenditure to be financed by debt. Compliance is 
monitored by the Prefect, backed up by regional audit chambers. 

French  authorities  report  that  a  new  organic  law  to  be  submitted  in  September  2012  will 
further promote the compliance of government sub-sectors with obligations under the TFEU 
and  with  the  Medium-Term  Objective  in  the  area  of  budgetary  policy  over  a  multi-annual 
horizon. 

4. Medium-Term Budgetary Framework 

The  French  authorities  mention  that  Article  34  of  the  constitution,  introduced  following  the 
amendment  of  23  July  2008,  stipulates  that  ‘the  multiannual  guidelines  for  public  finances 
shall be established by Programming Acts. They shall contribute to achieving the objective of 
balanced accounts for public administrations’. 

First adopted in February 2009, multi-annual public finance planning acts constitute the main 
vehicle  for  multiannual  planning.  Such  acts  define  expenditure  ceilings  for  the  state  at  a 
disaggregated level and for government sub-sectors over a three-year horizon and a minimum 
annual amount of additional revenues from new fiscal measures. 

It  is  expected  that  the  provisions  contained  in  the  new  organic  law  will  further  specify  the 
contents of the public finance planning act. 

5. Mechanisms of coordination across sub-sectors of general government 

The  French  authorities  highlight  a  number  of  provisions:  (i) the  multiannual  public  finance 
planning  acts  cover  the  entire  general  government  sector;  (ii) the  automatic  correction 
mechanism included in the organic law to be presented in September 2012 is also expected to 
cover  all  government  sub-sectors;  (iii) Article  108  of  Law  No  2011-1977  of  28  December 
2011  compels  regions,  departments  and  large  inter-communal  entities  to  provide  budgetary 
plans,  multiannual  commitments,  local  debt  statistics,  and  a  breakdown  of  expenditure.  The 
collected information will go into an annex to the Budget Bill. 

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1.11. 

Implementation of the main provisions of the Directive in ITALY 

1. Accounting and statistics 

Accounting 

The  objective  of  harmonising  accounting  systems  and  budget  schemes  across  the  general 
government sub-sectors is enshrined in Article 2 of Law No 196/2009 on Public Accounting 
and  Finances  —  covering  all  general  government  sub-sectors  excluding  regional  and  local 
(municipalities and provinces) governments — and in the amendments to Law No 42/2009 on 
fiscal  federalism  —  covering  regional  and  local  governments.  The  Italian  authorities  report 
that  secondary  legislation  is  being  drafted  to  implement  these  provisions.  They  further 
indicate  that  improvements  to  the  accounting  system  include  the  establishment  of  a  unified 
database29, the adoption of an integrated chart of accounts and common accounting standards, 
the functional classification of expenditures in missions and programmes and the adoption of 
a double-accounting system (financial and accrual) for non-local government levels30. 

Regarding  accrual  accounting,  the  Italian  authorities  consider  that  Law  196/2009  currently 
does not fully comply with Article 3 of the Directive. 

Statistics31 

Article  14  of  Law  196/2009  requires  the  Ministry  of  the  Economy  and  Finance  (MEF)  to 
publish  monthly  cash-based  fiscal  data  for  central  government.  The  aim  is  to  provide  full 
coverage of central government, with data published before the end of the following month. 
Quarterly  consolidated  cash-based  fiscal  data  covering  local  government  and  social  security 
are also available on the MEF website. 

A  reconciliation  table  is  currently  produced  under  the  joint  responsibility  of  ISTAT  (Italian 
National  Institute  for  Statistics)  and  MEF.  An  update  is  planned  to  ensure  compliance  with 
the upcoming guidelines from the Eurostat task force. 

2. Forecasts 

The Ministry of the Economy and Finance is responsible for delivering macroeconomic and 
budgetary forecasts. 

Article  2(4)  of  Law  No  39/2011  amending  Law  196/2009  stipulates  that  a  separate 
methodological note detailing the assumptions used to produce macroeconomic forecasts is to 
be attached to the second section of the Economic and Financial Document (DEF). The Italian 
authorities  state  that  all  assumptions  underpinning  the  macroeconomic  and  budgetary 
forecasts, as well as the results of their ex-post evaluation, are published by MEF. 

29 

30 

31 

The  single  database  covers  all  general  government  bodies’  budget  and  operating  data  (short  note  on 
Law 196 from MEF). 
Central  state,  health  entities,  university,  chambers  of  commerce,  research  institutions,  social  security 
institutions (at branch level). 
For  the  current  monthly  reporting  format,  see  http://www.rgs.mef.gov.it/VERSIONE-I/Rapporto-
m/2012-08/. 

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3. Fiscal rules 

The Italian authorities state that they aim to strengthen fiscal discipline by reinforcing their set 
of fiscal rules. Regarding local and regional government, the ‘Domestic Stability Pact’ defines 
the  measures  enabling  local  and  regional  authorities  to  ‘contribute  to  the  achievement  of 
public finance targets’. It includes conditions for taking on new long-term secured loans and 
other sources of market financing: annual debt service has to remain below a ceiling defined 
in terms of a percentage of the revenue collected in the two years before the year when loans 
are contracted. The ceilings are set at 8 % in 2012, 6 % in 2013 and 4 % in 2014. Additionally, 
a new decree is to detail new procedures for local government entities to reduce the size of 
public  debt,  as  well  as  sanctions  in  the  event  of  non-compliance.  Regarding  the  healthcare 
sub-sector,  the  Italian  authorities  mention  the  Healthcare  Pact  and  expenditure  ceilings  on 
pharmaceutical spending. 

The  constitutional  amendment  adopted  in  April  2012  introduces  the  principle  of  a  budget 
balance for the entire general government sector and the principle of a sustainable public debt 
(Article 1  amending  Article 81  of  the  Constitution).  The  Italian  authorities  indicate  that  the 
central  government  budget  has  to  ensure  a  structural  balance  between  revenue  and 
expenditure  unless  exceptional  circumstances  are  approved  by  parliament  with  an  absolute 
majority. 

Sub-national  governments  —municipalities,  metropolitan  cities,  regions,  provinces  and 
autonomous provinces— are required to contribute to public debt sustainability (Article 2(c) 
of Constitutional Law 1/2012) They are also subject to conditions for borrowing in Article 4 
of Constitutional Law 1/2012 amending Article 119 of the Constitution: borrowing is allowed 
only  (i) to  fund  capital  expenditure;  (ii) if  amortisation  plans  are  adopted;  (iii) if  the  overall 
budget  in  each  region  remains  balanced.  The  same  article  further  stipulates  that  no  state 
guarantee is allowed for loans contracted by sub-national governments. 

The Italian authorities state that the aim is to have secondary legislation in place to implement 
the constitutional reform by February 2013. This should define the constitutional principles in 
operational  terms  and  ensure  that  Italian  public  finances  meet  the  requirements  of  the  ‘six-
pack’  regulation,  the  Fiscal  Compact  and  the  common  principles  issued  by  the  European 
Commission. In particular, the secondary legislation is expected to introduce: (i) a fiscal rule 
on  public  spending  consistent  with  EU  Regulation  No  1175/2011,  (ii) a  fiscal  rule  on  the 
debt/GDP  ratio  in  line  with  EU  Regulation  No  1177/2011,  (iii) a  definition  of  exceptional 
circumstances allowing temporary deviations from the MTO and a definition of the automatic 
corrective  mechanism.  To  prepare  this  secondary  legislation,  a  task  force  of  public  finance 
experts has already submitted recommendations to the government. 

The constitutional reform provides for an independent entity to monitor public finances and 
assess  compliance  with  fiscal  rules  (Article 5  of  Constitutional  Law  1/2012).  Parliament  is 
expected to host this body. 

4. Medium-Term Budgetary Framework 

The  2009  reform  amended  Law  No 39  of  2011  with  the  aim  of  coordinating  the  Italian 
budgetary  timeline  with  the  European  Semester.  The  Economic  and  Fiscal  Document 
(Documento  di  Economia  e  Finanza  —  DEF)  is  the  key  document  for  the  rolling  medium-
term  budgetary  framework.  It  is  prepared  annually  by  MEF  and  submitted  to  parliament  by 
the government  in  April. Under Article 2 of Law 39/2011, it consists  of  three sections.  The 

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first  section  is  dedicated  to  the  Stability  Programme:  it  includes  the  objectives  of  economic 
policy  and  public  finance  forecasts  for  at  least  the  next  three  years,  broken  down  by  sub-
sector (central, local, social security); a forecast of the main budgetary aggregates; an update 
of  the  budgetary  forecast  for  the  current  fiscal  year;  a  report  on  the  sustainability  of  public 
debt;  an  analysis  of  sensitivity  to  GDP  growth  and  to  interest  rates  (Article  2(2)  of  Law 
39/2011).  The  second  section  details,  at  least  for  the  next  three  years:  (i)  macroeconomic 
trends; (ii) a forecast of the main fiscal aggregates assuming unchanged policies; (iii) results 
and  forecasts  for  public  administration  debt  and  for  the  main  expenditure  categories,  in 
particular public employment, social and healthcare. The third section contains the scheme for 
the National Reform Programme. 

The DEF presented in April may be updated in September by the ‘Nota di aggiornamento del 
DEF’, referred to in Article 2(3) of Law 39/2011. 

In October, a budgetary package consisting of the budget bill and the stability bill is presented 
to parliament by the government. The stability bill contains, for the three reference years, the 
qualitative and quantitative measures for achieving the fiscal objectives set in the DEF (and in 
any September update) (Article 3 of Law 39/2011). 

5. Mechanisms of coordination across sub-sectors of general government 

Article  8  of  Law  196/2009  and  its  amendment  in  Law  39/2011  stipulate  that  local 
governments have to determine fiscal objectives in compliance with the national ones, leading 
to  the  adoption  of  a  ‘Domestic  Stability  Pact’  defining  measures  to  achieve  fiscal  targets 
broken  down  for  regions,  provinces  (including  autonomous  provinces),  and  municipalities. 
The Italian authorities further report that the DEF is submitted to a permanent conference for 
the  coordination  of  public  finances  in  order  to  ensure  ‘involvement  at  the  sub-national 
government level’. 

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1.12. 

Implementation of the main provisions of the Directive in CYPRUS 

The Cypriot government prepared a draft Bill entitled ‘Law on the Medium-Term Budgetary 
Framework and Fiscal Rules’ which was submitted to parliament for adoption in mid-2012. 

1. Accounting and statistics 

Cypriot authorities report that the draft Bill foresees the publication of monthly data for the 
central government and the Social Security Fund before the end of the following month and 
quarterly data for the local government before the end of the following quarter. 

In relation to the implementation of Article 14, the draft Bill stipulates that information on tax 
expenditure,  on  contingent  liabilities  and  of  the  participation  of  general  government  in  the 
capital of private and public corporations are to be published. 

2. Forecasts 

Cypriot authorities report that the draft Bill specifies a number of measures. In particular, the 
MoF  should  ensure  that:  (i)  the  budgetary  planning/budgetary  policy  should  be  based  on 
realistic  macroeconomic  and  budgetary  projections,  using  the  most  up-to-date  information; 
(ii) the budgetary planning should be based on the most likely macro-fiscal scenario or on a 
more  prudent  scenario;  (iii)  the  macroeconomic  and  budgetary  projections  should  be 
compared  with  the  most  updated  projection  of  the  Commission  and,  possibly  with  the 
projection  of  other  independent  institutions,  such  as  the  Central  Bank  or  the  Budgetary 
Council; differences should be explained; (iv) a risk sensitivity analysis should be performed; 
(v)  methodologies,  assumptions  and  relevant  parameters  on  which  the  forecasts  are  based 
should be published; (vi) ex post evaluation should be conducted by the Fiscal Council. 

Additionally,  Cypriot  authorities  report  that  the  Fiscal  Council,  when  established,  would  be 
responsible for the assessment of macroeconomic and budgetary projections of the Ministry 
of Finance and the subsequent ratification or differentiation of the projections. 

3. Fiscal rules 

Cypriot authorities report that the draft Bill foresees the establishment of an expenditure rule, 
a debt rule, and a budget-balanced rule with associated provisions for an automatic correction 
mechanism. 

4. Medium-Term Budgetary Framework 

The draft bill indicates that the budgetary policy is based, among others, on the adoption of a 
horizon of multi-year budgetary planning, aiming at maintaining the medium-term budgetary 
Objective. 

5. Mechanism of coordination across sub-sectors  

Cypriot  authorities  report  that  the  MoF  is  responsible  to  ensure  that  suitable  coordination 
mechanisms  are  established  among  the  sub-sectors  of  the  general  government,  to  ensure 
overall and cohesive coverage of all sub-sectors of the general government in the budgetary 

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planning, the numeric and budgetary rules and in the preparation of the budgetary forecasts, 
as well as in the determination of the multi-year budgetary framework. 

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1.13. 

Implementation of the main provisions of the Directive in LATVIA 

1. Accounting and statistics 

The  Latvian  authorities  state  that  the  measures  to  be  taken  in  the  areas  of  accounting  and 
statistics will depend on the final proposals of the Task Force on the implications of Council 
Directive  2011/85  for  the  collection  and  dissemination  of  fiscal  data.  The  measures  will  be 
implemented by the Central Statistical Bureau, the Ministry of Finance and the Treasury. 

2. Forecasts 

The  Law  on  Budget  and  Financial  Management  (LBFM)  lays  down  the  principles  for  the 
preparation  of  the  Annual  State  Budget  Law  (ASBL)  and  the  Medium-Term  Budget 
Framework  Law  (MTBFL),  including  the  principles  for  producing  the  macroeconomic  and 
budgetary forecasts. 

The LBMF requires the Ministry of Finance, in cooperation with the Ministry of Economics 
and in consultation with the Bank of Latvia, to update every year the forecasts for medium-
term macroeconomic development. The budgetary framework for the next three years is then 
prepared based on a realistic macroeconomic development scenario. 

Budgetary  forecasts  are  prepared  taking  into  account  a  base  scenario  for  macroeconomic 
development.  Forecasts  are  expressed  in  a  cash-based  format  and  cover  all  sub-sectors  of 
general government. 

The  supporting  documents  prepared  for  the  ASBL  and  MTBFL  contain  the  following 
information: 

– 

– 

A description of the economic situation of the state and the macroeconomic strategy 
underlying 
together  with  a  scenario  for  macroeconomic 
development.  A  section  on  risks  outlines  the  main  positive  and  negative 
macroeconomic risks. 

the  state  budget, 

A description and analysis of the fiscal situation and development scenario, and the 
assumptions used in forecasts for all sub-sectors of general government using cash-
flow and accrual data based on ESA95 methodology. 

The  ASBL  and  MTBFL,  together  with  additional  explanatory  documents,  are  publicly 
available on the website of the Ministry of Finance. 

3. Fiscal rules 

On  the  12  January  2012  parliament  adopted  the  Fiscal  Discipline  law  (FDL)  in  its  first 
reading. Subsequently, in the period between the first and the second parliamentary reading, 
Latvia  signed  the  Treaty  on  Stability,  Coordination  and  Governance  in  the  Economic  and 
Monetary Union. Following the signature of the TSCG the government decided to supplement 
the provisions of the FDL with the provisions of the TSCG. Therefore, the FDL was amended 
and is expected to be adopted by parliament by the end of 2012. The draft FDL includes the 
following numerical fiscal rules: 

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•  Balanced  budget  rule:  the  budget balance  in  structural  terms should  not  be  in  deficit. 
Deviations are possible up to -0.5 % of GDP for productive public investment projects 
on  a  national  scale.  In  practice,  the  MTO  is  set  at  -0.5 %  of  GDP.  Likewise,  for  a 
particular public investment project on a national scale, a lower structural balance up to 
-0.5 %  of  GDP  could  be  planned  on  average  over  four  years  in  the  Medium-Term 
Budget Framework. 

•  Expenditure growth rule: real expenditure (the GDP deflator is used) should not grow 
faster  than  potential  GDP.  Exceptions  from  this  rule  are  allowed  in  accordance  with 
Article  9  of  Council  Regulation  No 1175/2011  amending  Council  Regulation  No 
1466/97  on  the  strengthening  of  the  surveillance  of  budgetary  positions  and  the 
surveillance and coordination of economic policies. 

•  Expenditure  ceilings:  the  FDL  provides  initial  fiscal  indicators  for  developing  the 
MTBFL. One of the key indicators is public expenditure thresholds for the next three 
years. The FDL states that the expenditure thresholds are inherited, i.e. the expenditure 
thresholds  for  the  first  and  second  years  are  inherited  from  expenditure  thresholds  in 
the  second  and  third  years  of  the  previous  version  of  the  MTBFL.  However,  if  the 
thresholds  according  to  the  latest  macroeconomic  forecasts  differ  from  the  inherited 
thresholds  by  more  than  0.5 %  of  GDP  then  the  expenditure  thresholds  are  not 
inherited. 

The  implementation  of  the  FDL  will  be  monitored  by  an  independent  fiscal  council.  Its 
mandate is set out in a separate chapter of the FDL. 

4. Medium-Term Budgetary Framework 

The  FDL  states  that  the  Medium-Term  Budget  Framework  Law  (MTBFL)  is  one  of  the 
instruments for fiscal planning. According to the FDL, the MTBFL is based on the following 
main principles: 

– 

– 

– 

– 

– 

it will be established for a three-year time horizon on an annual rolling basis; 

it will contain principles for inheriting expenditure ceilings; 

it will cover central government; 

it  will  be  linked  to  the  existing  policy  planning  documents,  thus  ensuring  a  more 
efficient  allocation  of  available  resources  to  government  priorities  in  the  medium 
term; 

the  draft  Annual  Budget  Law  will  be  a  detailed  extension  of  the  first  year  of  the 
current MTBFL. 

The MTBFL was prepared for the first time together with the 2013 Budget Draft Law for the 
years 2013-2015. It includes: 

– 

– 

– 

– 

the medium-term budget goals and priority areas of development; 

the fiscal aims of the government; 

the state budget revenue forecasts; 

the state budget financial balance (% of GDP); 

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– 

the  maximum  state  budget  expenditure  amount  (including  every  ministry  and  other 
central state institutions). 

The  Latvian  authorities  mention  that  the  MTBFL  will  be  finalised  in  accordance  with  the 
principles  set  out  in  the  FDL  only  after  the  FDL  has  been  adopted  and  launched  under  the 
transition provisions. 

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5. Mechanisms of coordination across sub-sectors of general government 

The FDL applies to all levels of general government. This coverage is ensured by calculating 
the general government budget balance. However, it should be noted that the FDL specifies 
expenditure  rule  and  expenditure  ceilings  directly  only  for  central  government  and  social 
insurance  budget  expenditure.  The  Latvian  authorities  consider  that  the  application  of  these 
rules  to  other  general  government  sectors  will  be  ensured  indirectly  by  limits  on  local 
government borrowing and guarantees already set in the State Budget Law. 

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1.14. 

Implementation of the main provisions of the Directive in LITHUANIA 

To  transpose  the  Directive,  the  Lithuanian  authorities  report  that  a  ‘draft  law  amending  the 
Law on the Budget Structure’ is currently being discussed in parliament. 

1. Accounting and statistics 

Under the current legislation in Lithuania (the Accounting Law, the public sector accounting 
and  financial  reporting  standards,  etc.),  data  for  annual  financial  reports  are  collected  on  an 
accrual basis. Data are submitted by all public sector entities32. 

For central government and non-budgetary funds, monthly budget revenue and expenditure is 
calculated  on  a  cash  basis.  This  is  done  on  a  quarterly  basis  for  local  governments.  The 
Ministry of Finance (MoF) then has 15 calendar days to prepare the State Budget Execution 
Report  for  the  previous  period.  Data  are  sorted  by  type  of  budget  revenue  and  functional 
classification of expenditure on a quarterly basis and are published on the MoF website. 

Regarding contingent liabilities, information is collected every quarter on the debt obligations 
of  state-owned  enterprises.  The  government  budget  report  includes  information  on  state-
guaranteed loans,  non-performing loans and the amount of their depreciation, and provision 
set aside (for central government). 

The Lithuanian authorities are considering additional legislation to fully transpose Articles 3 
and 14 of the Directive. 

2. Forecasts 

The  Lithuanian  authorities  state  that  the  draft  law  referred  to  above  will  transpose  the 
requirements of Chapter III of the Directive. Specifically, secondary legislation to be adopted 
after  the  draft  law  is  passed  will  establish  a  procedure  for  evaluating  the  impartiality  of  the 
central  economic  development  scenario  and  the  revenue  plans  based  on  objective  criteria. 
Methodologies will also be detailed for the projections of macroeconomic and budget revenue 
variables. 

3. Fiscal rules 

The Law on Fiscal Discipline contains a domestic fiscal rule. It states that the finances of the 
general  government  sector  must  adhere  to  the  medium-term  objective  of  ensuring  that  the 
general government sector is in surplus or close to balance. 

Where  the  arithmetic  average  of  the  general  government  balance  for  the  past  five  complete 
calendar years is in deficit, as known at the time of drafting of the state budget or drafting of 
amendments to the state budget, the annual growth of state budget appropriations approved or 
amended  by  the  Law  on  the  Approval  of  Financial  Indicators  of  the  State  Budget  and 
Municipal  Budgets  for  the  corresponding  year  (excluding  EU  financial  support)  may  not 
exceed  one  half  of  the  average  annual  growth  rate  of  state  budget  revenue  (excluding  EU 

32 

According  to  the  Lithuanian  authorities,  the  scope  of  public  sector  entities  and  the  scope  of  general 
government as described in the Directive are almost identical. 

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financial support funds) for the past five complete budgetary years. For compliance purposes, 
reports  are  prepared  on  the  implementation  of  the  budget  for  the  corresponding  year  with 
regard to state budget revenue and appropriations. 

The  draft  law  amending  the  Law  on  the  Budget  Structure  introduces  a  provision  requiring 
medium-term  budgetary  objectives  to  be  approved  by  parliament.  If  state  and/or  municipal 
budget  performance  statements  indicate  that  the  annual  improvement  in  the  general 
government balance has not been achieved, the Prime Minister must present to parliament the 
reasons for this failure. 

4. Medium-Term Budgetary Framework 

The  Lithuanian  authorities  report  that,  at  present,  the  medium-term  budgetary  framework 
(MTBF) is adopted by parliament together with the budget and specifies total national budget 
revenues  and  expenditures  for  the  next  three  years.  The  Lithuanian  authorities  therefore 
consider it to comply with Chapter V of the Directive. The Law on the Approval of Financial 
Indicators of the State Budget and Municipal Budgets is prepared and approved in accordance 
with  the  Law  on  Fiscal  Discipline,  which  means  that  the  projected  growth  of  state  budget 
expenditure cannot exceed the ceilings under the Law on Fiscal Discipline. 

5. Mechanisms of coordination across sub-sectors of general government 

The draft law amending the Law on the Budget Structure will introduce additional provisions 
for  local  government.  The  budget  of  any  municipality  whose budgetary  expenditure in cash 
flow terms exceeds 0.3 per cent of GDP at previous year’s prices should be implemented so 
that expenditure commitments (excluding investments) do not exceed revenue commitments. 
Moreover,  excess  municipal  revenues  (excluding  excess  revenue  legally  earmarked  for 
covering  the  revenue  shortfalls  of  other  municipalities)  must  go  primarily  on  covering  any 
debt. 

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1.15. 

Implementation of the main provisions of the Directive in LUXEMBOURG 

A  budgetary  reform  was  announced  in  the  government  programme33  2009-2014  and  is 
currently  under  way.  Luxembourg  states  that  it  intends  to  ensure  compliance  with  EU 
budgetary requirements, making use of the analysis and recommendations prepared by a 2011 
OECD working party. 

1. Accounting and statistics 

The  Luxembourg  authorities  report  that  their  accounting  system  covers  all  sub-sectors  of 
general  government,  including  special  funds  and  autonomous  bodies,  and  enables  the 
generation of data reports based on the ESA 95 standard. However, the envisaged budgetary 
reform should align national budgetary features more closely with ESA 1995 principles. 

Luxembourg intends to adjust coordination mechanisms in order to be able to publish cash-
based data in compliance with the requirements of the Directive. Regarding municipalities, an 
amendment to the Communal Law of 13 December 1988 should enable them to produce the 
relevant  statistical  information.  The  methodology for  reconciliation between cash-based and 
ESA 95 data is detailed in volume III of the draft budget bill, but might have to be adjusted 
depending on the outcome of the future reforms. 

Regarding internal control, the Luxembourg authorities state that dedicated procedures are in 
place in each of the three sub-sectors (central government, local government, social security). 
Further analysis of independent audit is expected. 

2. Forecasts 

The National Institute for Statistics and Economic Analysis (STATEC, Institut National de la 
Statistique  et  des  Etudes  Economiques)  is  responsible  for  providing  the  macroeconomic 
forecasts underlying budgetary forecasts. The Institute’s role and organisation are regulated in 
Law No 156 of 10 July 2011. 

The  Luxembourg  authorities  consider  that  the  preparation  of  macroeconomic  forecasts 
broadly meets the Directive’s requirements. However, improvements in the field of sensitivity 
analysis and  in  ex  post  evaluation  forecasts  and  a  clear  delineation  of responsibilities in  the 
forecasting process would be required. 

3. Fiscal rules 

Non-numerical  rules  targeting  debt  and  expenditure  growth  in  the  central  administration 
budget  are  contained  in  the  government  programme  2009-2014.  Under  the  Code  de  la 
Sécurité Sociale, minimum cash reserves need to be held by each social security fund, which 
should in principle ensure annual balanced accounts. Regarding municipalities, Article 118 of 
the Loi Communale limits their borrowing to the funding of investment spending needs. 

The Luxembourg authorities state that these rules will be updated in order to comply with the 
Directive  and  the  TSCG.  In  particular,  multi-annual  numerical  rules  will  be  introduced. 

33 

‘Programme Gouvernemental’: government strategy presented by the Prime Minister to the parliament. 

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Coordination  mechanisms  within  general  government  are  to  be  set  up,  backed  up  by  an 
automatic correction mechanism. The new rules are to be monitored by independent bodies. 

4. Medium-Term Budgetary Framework 

The Luxembourg authorities acknowledge that there is no medium-term budgetary framework 
in  the  sense  of  the  Directive.  A  medium-term  budgetary  framework  structured  around  the 
stability programme is to be established. It would include: (i) medium-term fiscal projections 
under a no-policy change approach; (ii) a medium-term strategy committed to enforcing fiscal 
rules with a description of the policies envisaged to this end; (iii) long-term fiscal projections. 
Care will be taken to ensure consistency between the MTBF and the annual budget process. 
Top-down  budgetary  procedures  within  the  annual  budget  cycle  should  be  strengthened  as 
well. 

5. Mechanisms of coordination across sub-sectors of general government 

An informal committee currently undertakes coordination tasks when preparing updates of the 
Luxembourg  Stability  Programme.  The  Luxembourg  authorities  state  that  budgetary 
coordination across sub-sectors will be reinforced in order to comply with Article 13 of the 
Directive. 

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1.16. 

Implementation of the main provisions of the Directive in HUNGARY 

1. Accounting and statistics 

Accounting 

A modified cash accounting system is applied in the preparation and execution of the budget, 
which contains the information required for compiling accrual accounting data in accordance 
with  the  ESA95  methodology.  However,  extra-budgetary  units  apply  general  (business) 
accounting. 

Internal control and auditing 

The  external  (legislative)  audit  of  public  finances  is  performed  by  the  State  Audit  Office 
(SAO).  Although  the  SAO’s  methodology  differs  from  independent  audit  standards,  the 
transparency  of  the  budgetary  process  is  ensured  by  appropriate  data  provision  and  its 
authenticity  is  approved  by  the  external  audit  performed  by  the  SAO.  Certain  units  (e.g. 
healthcare  service  providers,  local  governments  subject  to  certain  conditions)  are  subject  to 
external independent auditing. 

The  Hungarian  authorities  report  that  currently  there  is  no  intention  to  adopt  the  IPSAS 
accrual accounting standards. However, the government may revisit this question in the light 
of the Commission’s upcoming IPSAS suitability report. 

Statistics 

Monthly  flash  reports  on  budgetary  execution  are  published.  Both  the  Budget  Bill  and  the 
Final Accounting Bill include the budgetary balance and the revenues and expenditures of the 
budgetary  sector  and  its  sub-sectors.  However,  these  reports  are  based  on  the  national 
statistical  system,  which  does  not  necessarily  have  the  same  perimeter  of  government  as 
ESA95. 

The  monthly  budgetary  data  of  central  budgetary  institutions  in  terms  of  economic 
classification are available in the treasury information system. Local governments report their 
budgetary  revenues  and  expenditures  quarterly  in  accordance  with  the  uniform  economic 
classification (the same used at central level). 

The  authorities  indicate  that  they  are  planning  to  extend  the  application  of  the  economic 
classifications currently in use so as to produce summary tables for all public finances, as of 1 
January  2013.  They  are  also  planning  to  publish  monthly  figures,  by  the  end  of  the  month 
following  the  month  concerned,  showing  the  cash  accounting  revenues  and  expenditures  of 
the  central  government  sub-system  and  the  aggregated  accounting  data  of  other  units 
classified in the central government sub-sector. Action is to be taken as from 1 January 2013, 
with the first publication of data in 2014. 

In  addition,  a  further  quarterly  publication  is  planned  by  the  authorities,  by  the  end  of  the 
quarter  following  the  quarter  concerned,  including  figures  for  the  cash  accounting  revenues 
and  expenditures  of  the  local  government  subsystem  and  the  aggregated  accounting  data  of 
other  units  classified  in  the  local  government  sub-sector.  Action  is  to  be  taken  as  from  1 
January 2013, with the first publication of data in 2014. 

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In  accordance  with  Article  3  of  the  Directive,  the  authorities  plan  to  publish,  as  of  2014,  a 
methodological  compilation  describing  the  transition  between  the  cash  accounting  data  for 
public  finances  and  the  government’s  non-financial  accounts  published  by  the  Central 
Statistics Office in accordance with the ESA95 methodology. 

The statistical requirements in Article 14 of the Directive are partially complied with, insofar 
as  parliament  must  be  informed,  on  submission  of  the  State  Budget  Bill,  of  any  indirect 
transfers  via  tax  revenues  under  the  State  Budget  Bill,  including,  but  not  limited  to,  a 
statement of tax reliefs and tax allowances broken down by tax types. When the final accounts 
are produced, parliament is also given information on the portfolio of government guarantees 
and government counter-guarantees, the liabilities arising from the operations of state-owned 
business entities, and any changes in shares. 

Finally,  some  budgetary  units  also  disclose  indicative  data  on  PPP  obligations  in  their 
elementary reports. 

Further action is planned by the authorities, as from 1 January 2013, to require the Treasury to 
keep  a  register  of  direct  and  indirect  state/local  government  shares,  to  be  updated  through 
regular data transmission. Also, the development of a system is planned for 2013 to make data 
available  on  local  government-owned  corporations  in  the  database  of  the  Treasury  and  to 
present any claims on non-performing loans in the chart of accounts. 

2. Forecasts 

The  Hungarian  authorities  report  that  macroeconomic  and  budgetary  forecasts,  both  in  the 
convergence programme and in the Budget Bill, are based on the most likely scenario using 
the  latest  information  available.  The  macroeconomic  and  budgetary  forecasts  are  officially 
published together with the Budget Bill. 

Other  elements  required  by  the  Directive  (the  comparison  of  forecasts  with  those  of  the 
Commission or other independent bodies, a reasoned description of the differences  between 
the  forecasts  of  the  two  institutions  and  a  sensitivity  analysis  of  the  macroeconomic  and 
budgetary forecasts) appear to a limited extent in the convergence programme. The Hungarian 
authorities have pledged to bring legislation fully into line with the Directive by requiring the 
Budget Bill to include a comparison of the macroeconomic and budgetary forecasts with those 
of  the  Commission  (and  other  institutions)  and  a  sensitivity  analysis  for  the  key  budgetary 
variables.  The  authorities  also  plan  to  publish  the  methods,  assumptions  and  relevant 
parameters for the forecasts underlying the budget. 

The SAO audits the management of public finances, specifically the basis for the State Budget 
Bill  (Supplementary  Budget  Proposal)  and  the  feasibility  of  revenue  appropriations.  The 
convergence programme contains a comparison of key figures in the forecasts of previous and 
updated  programmes.  In  practice,  the  SAO  does  not  provide  a  numerical  assessment  of  the 
macroeconomic and budgetary forecasts. 

The  authorities  also  report  their  intention  to  modify  legislation  to  require  the  State  Audit 
Office  and/or  the  Fiscal  Council  to  assess  the  macroeconomic  and  budgetary  forecasts 
presented in the convergence programme and to make this assessment public. 

3. Fiscal rules 

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Hungary has a numerical fiscal rule, which is a debt reduction rule enshrined in the Economic 
Stability  Act.  Its  scope  includes  central  government,  local  governments  and  other  bodies 
classified in the government sector. Compliance with the debt reduction rule is monitored by 
the  Fiscal  Council.  While  the  numerical  rule  applies  to  the  central  budget,  a  separate  set  of 
administrative  rules  are  in  place  for  the  local  government  sub-sector  to  take  central  control 
over transactions that would lead to a higher debt burden. 

Under an escape clause, deviations from the debt reduction rule are allowed in the event of a 
permanent and significant economic recession (defined as a decrease in the annual real gross 
domestic product) to the extent necessary for restoring balance. 

The authorities have indicated that the development of a medium-term budgetary framework 
aimed at meeting the provisions of Stability and Growth Pact is in progress. There are plans to 
define rules for the budget balance to ensure compliance with the provisions for improvement 
of the structural balance, the adjustment path to the MTO, and debt reduction. With a view to 
complying  with  the  Intergovernmental  Treaty  (Fiscal  Compact),  a  correction  mechanism  in 
the event of non-compliance will also be considered. 

Consequently, the authorities aim to define rules for the structural balance and the medium-
term budgetary objective in Hungarian legislation and, to this end, a methodology to calculate 
the potential GDP and the output gap. Compliance with such fiscal rules will be monitored by 
the Fiscal Council. 

In  addition,  the  authorities  plan  to  set  up  mandatory  mid-year  corrective  mechanisms  if  the 
deficit or debt figures fail to comply with the rules. Ex post reputational or financial sanctions 
could also be applied. Such sanctions would be based on statistical data that can be properly 
measured (e.g. spring-autumn EDP notification) and can actually be influenced by the entity 
against  which  the  sanction  would  be  applied.  Also,  the  application  of  sanctions  would  be 
subject to the principle of progressivity. 

The planned numerical rule is expected to contain escape clauses in three areas: special legal 
order, natural disasters and significant economic downturn. 

4. Medium-Term Budgetary Framework 

The  current  regulations  contain  a  provision  for  medium-term  planning  under  which  the 
government  establishes  the  planned  amounts  of  state  budget  revenues  and  expenditures  and 
the budget balance for three years, to be updated as necessary in accordance with budgetary 
and  macroeconomic  trends.  Within  this  budgetary  framework,  defined  in  law,  the 
appropriations  of  the  budgetary  sectors  are  presented  for  at  least  three  years  in  advance  in 
transparent  and  quantified  terms.  In  addition,  the  annual  budget  is  compared  with  the 
previously planned medium-term figures. 

Despite the three-year perspective described above, Hungary’s current budgetary framework 
focuses on annual planning and government measures are planned for one budgetary cycle in 
advance. 

Therefore,  the  development  of  a  medium-term  budgetary  framework  complying  with  the 
Directive  requires  an  overall  reform  of  the  Hungarian  budgetary  process.  To  this  end,  the 
authorities aim to develop a mandatory budgetary regime that is well defined and transparent. 

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Within this new framework, overall revenue and expenditure would be determined for three 
years  in  advance.  However,  this  would  not  necessarily  impose  any  restriction  on  the 
government.  Revenue  and  expenditure  aggregates  could  be  modified  if  justified  by  any 
change  in  the  macroeconomic  situation,  but  only  to  the  extent  justified  by  those 
macroeconomic circumstances. 

For implementation, it would be necessary to modify the state budget structure.  This would 
offer  an  opportunity  to  simplify  it.  One  of  the  actions  the  authorities  are  examining  is  the 
introduction of a programme-based budget regime, which would support reconciliation of the 
medium-term budget framework with sectoral policies. 

The authorities report that specific actions on these lines are being developed. They are also 
considering the following issues: i) in what sense should the medium-term budgetary planning 
be binding and ii) in what form should it be presented (in combination with or separate from 
the annual budget). 

5. Mechanisms of coordination across sub-sectors of general government 

To  ensure  budgetary  balance,  Hungary’s  Fundamental  Law  provides  that  legislation  may 
impose  conditions  on  certain  local  government  commitments  or  may  require  the  central 
government’s consent. 

To this end, the Economic Stability Act sets out conditions aiming to reduce the debt of the 
local  government  sub-system.  In  particular,  it  states  that  the  payment  obligations  of  local 
governments  arising  from  debt-generating  transactions  must  not  exceed  50 %  of  their  own 
revenues in any year. 

This rule is intended to ensure that local governments  do not  become insolvent due to their 
debt  service  obligations.  Simultaneously,  it  restricts  growth  in  local  government  debt  by 
banning additional borrowing over the threshold. Furthermore, the law also provides that, as a 
general  rule,  a  local  government  may  only  enter  into  a  debt-generating  transaction  with  the 
central government’s prior consent. 

As  of  January  2012,  a  significant  number  of  institutions  (controlled  by  the  county)  were 
transferred from the local government sub-sector to the central administration along with the 
assumption  of  their  outstanding  debt.  Additionally, hospitals  operated  by  local governments 
were transferred to the state in May 2012, and the related local government debt will be taken 
over  by  the  central  government  by  the  end  of  2013.  These  actions  have  reduced  local 
government  debt  and  its  expected  future  growth  (at  the  expense  of  an  increase  in  central 
government liabilities). 

The  authorities  plan  to  introduce  a  district  system  in  January  2013,  which  is  expected  to 
improve  the  coordination  of  local  government  tasks.  Also,  the  authorities  were  looking  to 
amend  the  Economic  Stability  Act  so  that  the  central  government’s  consent  will  also  be 
required for amending an existing loan agreement of a local government. This is considered 
necessary  as  amendments  may  affect  the  essential  elements  of  a  contract  (term,  value  or 
interest  rate),  which  could  then  affect  the  level  of  debt  or  the  debt  service  of  local 
governments. 

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1.17. 

Implementation of the main provisions of the Directive in MALTA 

1. Accounting and statistics 

As  regards  national  systems  of  public  accounting,  the  Maltese  authorities  report  that  they 
already  have  in  place  a  public  accounting  system  that  comprehensively  and  consistently 
covers all sub-sectors of general government and contains the information needed to generate 
accrual data in order to prepare data based on the ESA 95 methodology. 

Fiscal  data  for  the  Consolidated  Fund  of  Government  (excluding  extra-budgetary  units)  is 
published  on  a  monthly  basis34.  Fiscal  data  for  the  general  government  sector  is  published 
quarterly35. Additionally, a reconciliation table between the working balance and the ESA95 
deficit and relevant information on government guarantees is published. 

2. Forecasts 

The Maltese authorities state that they produce macroeconomic forecasts that reflect the latest 
macroeconomic  data  available.  Detailed  discussions  are  held  at  staff  level  with  other 
independent  institutions  (the  Central  Bank  of  Malta,  the  European  Commission,  the  IMF 
during  Article  IV  missions)  to  share  with  them  the  government’s  views  on  the  main 
macroeconomic  trends  that  can  be  expected  to  influence  growth  prospects  over  the  short  to 
medium run. 

3. Fiscal rules 

The Maltese authorities report that, in order to enhance budget execution discipline and better 
integrate  the  medium-term  strategy  in  budget  formulation,  the  MoF  is  considering  the 
implementation of additional national budgetary rules. In this context, discussions are under 
way  within  the  different  departments  of  the  MoF  on  a  number  of  concrete  proposals  from 
experts working for the MoF. A decision is expected in the coming weeks. 

In recent years, a number of measures aimed at enhancing budgetary policy at both the design 
and implementation stages have sought to strike a balance between greater autonomy of those 
institutions  charged  with  laying  down,  designing,  implementing  and  closely  monitoring  the 
execution  of  budgetary  policy  and  the  need  for  lean  institutional  structures  in  the  public 
administration  of  a  small  state.  The  Maltese  administration  recognises  the  value  of  greater 
autonomy,  accountability  and  transparency  for  the  budgetary  framework  and  institutions,  so 
discussions  are  under  way  within  the  different  departments  of  the  MoF  on  a  number  of 
concrete  proposals  for  a  functionally  independent  institution.  A  decision  is  expected  in  the 
coming weeks. 

4. Medium-Term Budgetary Framework 

34 
35 

http://finance.gov.mt/page.aspx?site=TRS&page=default. 
The  general  government  sector  is  made  up  of  the  central  government  sector  (S.1311)  and  the  local 
government sector (S.1313). The central government sector includes the budgetary central government, 
made up of government ministries and departments, and the extra-budgetary units (EBUs) classified as 
part of this sector. 

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Currently,  the  Budget  Speech  presented  in  parliament  sets  out  three-year  fiscal  targets  for 
deficit and debt ratios as guiding principles for the conduct of fiscal policy. The first year of 
these multi-annual targets is approved by parliament. 

The  Maltese  authorities  report  that  discussions  are  under  way  on  ensuring  a  more  multi-
annual fiscal planning perspective for national fiscal planning. A decision is expected in the 
coming weeks. 

5. Mechanisms of coordination across sub-sectors of general government 

In  Malta,  the  general  government  sector  consists  of  the  central  government  and  the  local 
councils.  Under  Maltese  law,  the  Department  for  Local  Government  is  responsible  for 
coordinating, guiding and supervising the local councils. At the same time, it coordinates and 
consults with the Budget Affairs Division within the Ministry of Finance, the Economy and 
Investment. 

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1.18. 

Implementation of the main provisions of the Directive in the NETHERLANDS 

1. Accounting and statistics 

Accounting and statistics 

The Dutch authorities report that their public accounting systems are already able to generate 
ESA  1995  data.  The  public  accounting  systems  in  place  are  subject  to  internal  control  and 
independent audits. 

Central  government  fiscal  data,  including  social  security  funds,  are  produced  in  accordance 
with the Directive’s requirements, with the exception of a minor part of the expenditure and 
revenue of non-profit institutions under central government. 

For  local  governments,  the  Dutch  statistical  office  receives  but  does  not  publish  quarterly 
data. A reform is under consideration. Like at central government level, a minor part of the 
expenditure and revenue of non-profit institutions at local  government level is not available 
on  a  quarterly  basis.  The  draft  law  on  the  sustainability  of  public  finances  (Wet  Houdbare 
Overheidsfinanciën),  submitted  to  parliament  on  24 September  2012  specifies  that  local 
governments should provide data of sufficient quality to the Dutch statistical office at a faster 
pace (within a maximum of 10 working days, instead of the current 30 days). 

The publication of a reconciliation table for all sectors of general government is expected in 
the coming months. 

Transparency requirements 

The  Dutch  annual  budgetary  process  and  the  medium-term  budgetary  plans  include  the 
relevant general government bodies and funds that do not form part of the regular budgets at 
sub-sector  level.  An  updated  list  of  all  general  government  units  will  be  published  by  the 
Dutch Statistical Office in 2014-2015. 

Information  on  tax  expenditures  is  published  every  year  in  a  separate  annex  to  the  Budget 
Memorandum. Relevant information on contingent liabilities with a potentially large impact 
on public finances, in particular guarantees, is published for central government in the yearly 
Budget Memorandum and Financial Report. 

Information  on  central  government  participation  in  public  corporations  is  published  in  the 
balance sheet of the state and separately in an overview of the public corporations of central 
government.  As  regards  local  governments,  contingent  liabilities  are  usually  part  of  their 
annual reports, but there is no aggregation at national level. 

2. Forecasts 

Before  the  start  of  each  government  term,  the  CPB  (Bureau  for  Economic  Policy  Analysis) 
publishes  a  medium-term  macro-economic  outlook  for  the  Dutch  economy.  The  CPB 
provides macro-economic forecasts within the annual budget cycle. There is currently no legal 
obligation  for  the  government  to  do  so,  but  the  new  law  on  the  sustainability  of  public 
finances is to make this practice mandatory. All assumptions and parameters, the model, the 

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data  and  the  results  for  the  forecasting  period  are  made  available  in  accordance  with 
established practice. 

About  every  five  years,  the  policy  relevance  and  scientific  quality  of  the  CPB’s  work  is 
assessed by ‘visitation commissions’. Moreover, the CPB itself regularly publishes alternative 
economic  and  budgetary  scenarios  to  its  own  central  forecasts  (‘onzekerheidsvarianten’). 
Also,  the  CPB  regularly  uses  several  methods  to  evaluate  ex  post  the  accuracy  of  its  own 
forecasts. 

Finally, the Dutch authorities state that any significant differences between the CPB macro-
economic forecasts and the forecasts of the European Commission will be explained in future 
in the annual Budget Memorandum. 

3. Fiscal rules 

The central feature of the rules regulating Dutch budgetary policy is the implementation of a 
medium-term  expenditure  framework  (MTEF)  along  with  other  de  facto  fiscal  rules  for  the 
budget process (acting as a revenue rule). The MTEF itself is established as a set of principles 
covering  the  term  of  the  government  implementing  it.  It  is  therefore  not  subject  to  legally 
anchored fiscal rules, but is rather the product of a longstanding political tradition. The Dutch 
authorities indicate that a new framework is under consideration to enshrine this process more 
formally  in  law,  while  combining  it  with  the  European  fiscal  framework,  i.e.  numerical 
obligations under the SGP. 

The  draft  new  law  on  the  sustainability  of  public  finances  will  anchor  in  law  the  basic 
principles of the Dutch trend-based budgetary policy. The law will also stipulate that trend-
based  budgetary  policy  needs  to  conform  to  the  Treaty  reference  values  and  procedures  on 
debt and deficit, and the MTO. If trend-based budgetary policy does not lead to outcomes in 
line  with  the  Treaty  reference  values  or  the  MTO,  additional  measures  will  be  taken  to 
increase revenues and/or cut expenditures. 

4. Medium-Term Budgetary Framework 

The current budgetary process of the Netherlands is already based on a four-year cycle with 
minimal  annual  revisions  allowed  to  initial  projections.  As  detailed  in  section  3  above,  this 
process is not fully formalised in statutory law. 

To  ensure  sound  public  expenditure,  the  government  adheres  to  an  expenditure  framework 
that  fixes  the  overall  level  of  expenditure  during  the  government’s  term.  The  framework  is 
usually drawn up in the new government’s first Budget Memorandum. It is based on multi-
annual  expenditure  estimates,  which  are  in  turn  derived  from  the  cautious  economic 
development scenario presented by the CPB. The CPB estimates are extrapolations of current 
expenditure levels as a result of policies already in place. For the expenditure framework, the 
effects of new policies in the coalition agreement of the new  government  are  included.  The 
expenditure  framework  is  calculated  in  real  terms.  Each  year,  the  framework  is  adjusted  by 
the latest index for the development of prices and wages, resulting in a nominal expenditure 
ceiling (the ‘price of National Consumption’, pNC, is used for this). The pNC adjustment is 
the only adjustment allowed during the government term. 

5. Mechanisms of coordination across sub-sectors of general government 

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The  Dutch  authorities  report  that  the  draft  law  on  the  sustainability  of  public  finances  will 
legally  anchor  the  obligation  for  local  governments  to  contribute  their  fair  share 
(‘gelijkwaardige  inspanning’)  to  achieving  the  Medium-Term  Objective.  The  central 
government and local governments would need to conclude a multi-annual agreement on the 
budget balance for local governments. To this end, the Minister of Finance, in agreement with 
the  Minister  of  the  Interior  and  the  Minister  for  Infrastructure  after  consulting  the  local 
governments, would determine the ‘fair share’. Two sanction mechanisms will apply if local 
governments do not adequately contribute to reaching the MTO. As a first step, they would be 
required  to  place  a  deposit  with  the  central  government.  As  a  second  step,  they  would  be 
required  to  contribute  to  any  EU  financial  sanction  if  the  Netherlands  as  a  whole  does  not 
comply with SGP requirements. 

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1.19. 

Implementation of the main provisions of the Directive in AUSTRIA 

1. Accounting and statistics 

The  Austrian  authorities  report  that  fiscal  data  presented  in  accordance  with  national 
standards are available on a monthly basis for central government. For State governments and 
social  security,  implementation  is  under  way,  but  the  necessary  changes  in  law  will  not  be 
made until the data requirements are agreed in the Eurostat Task Force on the implications of 
Council Directive 2011/85/EU for the collection and dissemination of fiscal data. 

The National Statistical Institute has the task of implementing the provisions in relation to the 
quarterly  publication  of  fiscal  data  for  local  governments  and  preparing  a  detailed 
reconciliation table. 

The  identification  of  all  general  government  bodies  and  funds  that  do  not  form  part  of  the 
regular  budget  at  sub-sector  level  is  provided  for  in  Article  12(4)  of  the  Austrian  Stability 
Pact.  It  will  enter  into  force  retroactively  from  1  January  2012  on.  Work  on  contingent 
liabilities will be linked the outcome of the Eurostat Task Force. 

2. Forecasts 

The  Austrian  authorities  report  that  Article  14(2)(d)  of  the  2012  Austrian  Stability  Pact 
provides for sensitivity analyses. 

3. Fiscal rules 

The second edition of the Austrian Stability Plan (ASP), released in 2012, has been enhanced 
and  contains  several  fiscal  rules.  Deficit  targets  have  been  set  for  the  years  2012-2016 
(Article 3 of the ASP). From 2017 onwards, Article 4 provides that a budget balance rule in 
accordance with TSCG rules will kick in. The lower limit for the structural deficit of general 
government will be set at 0.45 % of  GDP (0.35 % for central government; 0.1 % for  Länder 
and  municipalities).  The  new  expenditure  rule  introduced  in  the  SGP  at  EU  level  under  the 
revised  Regulation  1466/97  will  apply  to  all  sub-sectors  of  general  government  (Article 9 
ASP).  Similarly,  a  debt  rule  will  apply  to  all  general  government  sub-sectors  following  EU 
specifications (Article 10 SGP). National (Article 4(4) ASP) and EU (Article 21 ASP) escape 
rules will apply. 

Overall,  the  Austrian  authorities  consider  that  the  numerical  fiscal  rules  conform  to  Article 
6(1)(a)  of  the  Directive.  As  regards  the  monitoring  criteria  of  Article  6(1)(b),  the  National 
Statistical  Institute  and  the  Federal  Court  of  Auditors  participate  in  the  enforcement 
mechanism  (Articles  17  and  18  ASP).  If  an  inquiry  by  Statistics  Austria  concludes  that  a 
fiscal  rule  of  the  ASP  has  not  been  met,  the  Court  of  Auditors  is  to  provide  a  public 
assessment.  If  the  Court  of  Audit  concludes  that  a  party  is  not  in  conformity  with  an  ASP 
fiscal rule, a deadline of two months is given to the party to design consolidation measures to 
improve 
to  a  conciliation  body 
to 
(Schlichtungsgremium). The body contains representatives of all government sub-sectors (two 
from federal government, two from the provinces, and two from the cities and towns). If the 
consolidation  measures  are  not  delivered  or  deemed  insufficient,  the  conciliation  body  can 
impose  fines  amounting  up  to  15 %  of  the  deviation  (the  sub-sector  responsible  for  the 

the  budgetary  position  and 

report 

them 

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deviation  is  not  allowed  to  vote  on  the  decision).  The  fined  party  can  appeal  against  the 
decision to a court of arbitration (Article 19 of the ASP). The court has to decide unanimously 
that an excessive deviation does not exist. In that case, the decision is reversed. 

4. Medium-Term Budgetary Framework 

The medium-term expenditure framework (MTEF) is adopted every year as a basic law and is 
regulated by Article 51 of the constitution and section 12 of the Federal Organic Budget Act. 

The  Federal  Medium-Term  Expenditure  Framework  Act  stipulates  binding  statutory 
expenditure ceilings for four years in the future and for five ‘headings’. These correspond to 
the main responsibilities of the federal government. Headings are broken down into chapters, 
each assigned to one specific line ministry. They are likewise subject to binding expenditure 
ceilings.  Staff  ceilings  for  each  department  are  also  set.  Expenditure  limits  allow  for  some 
counter-cyclical effect on the economy: while about three quarters of the expenditure ceilings 
are expressed in nominal terms, the other quarter vary along defined parameters. This mainly 
concerns  expenditure  directly  correlating  with  the  business  cycle  (e.g.  unemployment 
benefits).  Each  year  the  MTEF  is  amended  by  adding  ceilings  relevant  to  the  final  year  of 
projections. 

The Federal Medium-Term Expenditure Framework Act is accompanied by a strategy report. 
The report provides the public with additional information on the Act and explains its main 
budgetary  and  economic  policy  objectives.  It  gives  an  overview  of  the  development  of 
revenues  of  the  federal  government  and  reviews  the  economic  situation  and  its  expected 
development. 

5. Mechanisms of coordination across sub-sectors of general government 

The Austrian authorities report that the objective of the Austrian Stability Pact is to have all 
participating  parties  strive  towards  coordinated  budgetary  positions  across  the  levels  of 
government  to  ensure  appropriate  coordination  across  sub-sectors  of  general  government. 
Article  14  of  the  ASP  establishes  a  committee  for  coordination  between  the  federal 
government, the States and local governments. 

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1.20. 

Implementation of the main provisions of the Directive in POLAND 

The main elements of the Polish budgetary framework are defined by the Public Finance Law 
and its consecutive amendments. 

1. Accounting and statistics 

The  Polish  authorities  report  that  all  entities  classified  as  ‘public  finance  sector  entities’ 
follow  common  provisions  specified  in  the  Act  on  Accounting,  in  particular  its  Articles 
2(1)(1) and 2(1)(4). In addition, the entities classified as a part of the ‘budgetary sector’ (sub-
category  of  the  ‘public  finance  sector’)  follow  a  MoF  regulation  on  special  accounting 
requirements and charts of accounts. This regulation was issued under Article 40 of the Act 
on Public Finances. Public sector entities apply the principle of accrual accounting for issuing 
financial  statements.  As  a  result,  it  is  possible  to  generate  cash-based  reports  on  budget 
execution and accrual-based financial statements. 

With  respect  to  audit,  some  public  sector  entities  with  a  legal  nature  are  subject  to  external 
audit  on  the  basis  of  the  Act  on  Accounting  (Article  64(1))  or  the  statutory  provisions 
establishing these entities. Additionally, central government and local government entities are 
subject to audits carried out by the Supreme Audit Office. Local government entities are also 
subject to audits by the Regional Chambers of Audit. 

Further  steps  in  the  area  of  accounting  will  depend  on  the  recommendations  in  the 
Commission  report  assessing  the  suitability  of  International  Public  Sector  Accounting 
Standards (IPSAS). 

Analysis is being carried out in order to assess whether the provisions of the Directive relating 
to the public availability of fiscal data require any changes in domestic law, including possible 
extension of the budgetary reporting system. 

As regards Article 14(1) of the Directive, for statistical needs, all entities that are classified as 
a part of the general government sector but are not included in the public finance sector are 
identified. 

2. Forecasts 

The Polish authorities report that the government compares its forecasts with the projections 
of  other  institutions  and  presents  them  to  different  institutional  bodies  (Monetary  Policy 
Council,  Tripartite  Commission  for  Social  and  Economic  Affairs,  parliament,  banking 
analysts) to receive their opinion. Some of these procedures are regulated by legal acts. 

Firstly,  budgetary  forecasts  are  assessed  by  the  Central  Bank  and  its  Monetary  Policy 
Council. Article 23(1)(2) of the Act on the National Bank of Poland calls for the President of 
the NBP, on behalf of the Monetary Policy Council, to submit opinions on the draft Budget 
Act to the Council of Ministers and the Minister of Finance. 

Secondly,  the  government  submits  its  forecasts  to  the  Tripartite  Commission  for  Social  and 
Economic  Affairs.  The  Commission  is  a  forum  for  social  dialogue  in  order  to  reconcile  the 
interests of employees, the interests of employers and public welfare. Under Article 3 of the 
‘Act  on  the  Tripartite  Commission  for  Social  and  Economic  Affairs  and  Voivodship  social 

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dialogue commissions’, the government should present a preliminary macroeconomic forecast 
to the Tripartite Commission each year as a basis for the budget bill for the next year. No later 
than  15  June,  the  government  must  send  the  Commission  its  assumptions  for  next  year’s 
budget draft. The social partners (i.e. representatives  of  employers and employees) have six 
days to express their views. 

Thirdly,  at  the  beginning  of  the  budgetary  process,  the  Ministry  of  Finance,  which  is 
responsible for preparing macroeconomic forecasts, usually organises a meeting with private 
bank  economists  to  exchange  views  on  the  short-  and  medium-term  prospects  of  the  Polish 
economy. 

Finally, after submission of the budget bill to the Polish parliament’s lower chamber (Sejm), 
the members of parliament can express their opinion on it. 

The  Polish  authorities  also  mention  that,  as  a  rule,  the  macroeconomic  forecasts  used  for 
budgetary  planning  are  based  on  the  external  assumptions  provided  by  the  European 
Commission  (spring  or  Autumn  Forecast).  If  these  are  not  available  when  the  Polish 
projections are prepared, the projections of other international institutions are used (e.g. IMF 
or OECD). 

Finally, the macroeconomic forecasts used for budgetary planning are assessed ex post by the 
Supreme Audit Office. Under Article 182 of the Public Finance Act, the Council of Ministers 
must submit to the Sejm and to the Supreme Audit Office by 31 May an Annual Report on the 
implementation  of  the  budget  act  for  the  previous  year.  The  Supreme  Audit  Office  (SAO) 
presents its opinion on the implementation of the previous year’s budget act, with reference to 
the macroeconomic assumptions. 

3. Fiscal rules 

According  to  the  Polish  authorities,  the  current  fiscal  rules  are  only  partially  in  accordance 
with Articles 5 and 6 of the Directive. This applies especially to the debt rule, which promotes 
adherence to the reference value for debt but does not prevent breaches of the reference value 
for  deficits  in  the  TFEU.  Other  fiscal  rules  currently  in  place  only  partly  cover  the  general 
government sector. 

The  design  of  a  fiscal  rule  fully  compliant  with  the  principles  of  Articles 5  and 6  of  the 
Directive  is  almost  completed.  The  rule  is  to  be  implemented  in  Polish  law  through  an 
amendment  to  the  Public  Finance  Act.  It  is  intended  to  stabilise  the  nominal  general 
government  balance  at  the  MTO  level  in  the  medium  term  and  prevent  public  debt  from 
breaching a predefined threshold corresponding to the reference value stipulated in the TFEU. 
The medium-term horizon for meeting the general government balance target should provide 
space for countercyclical fiscal policy, as deviations from the target would be allowed in the 
short run. To reach the MTO, the rule also sets an overall expenditure growth cap for general 
government, net of expenditure financed with non-returnable EU funds. The formula for the 
growth cap is based on the medium-term GDP growth rate. 

Significant deviations of the general government balance from the MTO in the medium term, 
a  high  level  of  public  debt,  or  the  initiation  of  the  EDP  procedure  will  trigger  a  correction 
mechanism.  This  will  reduce  the  expenditure  growth  limit  below  the  medium  term  GDP 
growth  rate  until  the  excessive  deviation  from  the  target  is  corrected.  The  correction 
mechanism  is  not  expected  to  be  fully  automatic,  as  it  will  take  into  account  cyclical 

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developments.  Escape  clauses  will  come  into  effect  only  in  the  case  of  war  or  martial  law. 
Monitoring of compliance with the rule is to be carried out by the Supreme Audit Office. 

4. Medium-Term Budgetary Framework 

Article  103(1)  of  the  Act  on  Public  Finances  defines  the  Multi-Year  Financial  Plan  of  the 
State (WPFP) as a ‘plan of revenues and expenditures as well as incomes and expenses of the 
State budget drawn up for four budget years’. The Polish authorities state that the Council of 
Ministers  uses  the  WPFP  as  a  tool  for  joint  strategic  planning  and  budgetary  decisions  for 
these  particular  budgetary  years.  The  WPFP  covers  all  functions  of  the  state,  along  with 
objectives  and  measures  of  the extent to which specific objectives have been achieved. The 
WPFP takes into consideration: (i) the objectives of the medium-term development strategy of 
the  state,  referred  to  in  the  Act  on  Development  Policy  Making;  (ii) the  directions  of  the 
Council  of  Ministers’  social-economic  policy  (Articles  103(2)(1-2)  of  the  Act  on  Public 
Finances). 

Under  Article  105(1-3)  of  the  Act  on  Public  Finances,  the  WPFP  constitutes  the  basis  for 
preparing a draft budgetary act for the subsequent budget year. For example, it stipulates the 
level of deficit not to be exceeded in the draft budgetary act. It also specifies ‘the directions of 
fiscal policy’ (Article 104(1)(2) of the Act on Public Finances), key elements of which also 
correspond to the current Convergence Programme adopted by the Council of Ministers. 

The  WPFP  also  specifies  the  amount  of  public  debt (Article  104(1)(8) of the Act  on  Public 
Finance).  The  public  finance  sector  debt  management  strategy  (medium-term,  four-year 
strategic document) covers the WPFP’s time horizon. This strategy contains an analysis and 
forecasts of public debt and its servicing. The Council of Ministers accepts and submits the 
document to the Sejm together with the draft budgetary act (Article 75(3) of the Act on Public 
Finances). 

Article  107  of  the  Act  on  Public  Finances  provides  for  yearly  updates  of  the  WPFP  (‘The 
WPFP  shall  be  updated  by  the  Council  of  Ministers  by  resolution  on  an  annual  basis  for 
preparing the budgetary act for the subsequent budget year’). 

In  order  to  strengthen  the  framework  described  above,  further  analytical  studies  are  being 
conducted. 

5. Mechanisms of coordination across sub-sectors of general government 

Coordination  between  general  government  sub-sectors  is  in  accordance  with  the  Act  on 
Development  Policy-Making.  Under  this  Act,  the  minister  responsible  for  regional 
development coordinates the execution of development strategies and the national strategy for 
regional development 2010-2020. The financing of development policy is to be based on the 
multi-annual financial plan of the state and regional contracts. 

The  MoF  prepares  guidelines  concerning  basic  macroeconomic  indicators  for  multi-annual 
planning at the level of local government units. If local government units do not adhere to the 
assumptions prepared by the Ministry of Finance in their forecasts, they must justify this. 

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1.21. 

Implementation of the main provisions of the Directive in PORTUGAL 

1. Accounting and statistics 

Regarding the comprehensive nature of public accounting systems, the Portuguese authorities 
report  that  the  implementation  of  POCP  (Official  Public  Accounting  Plan;  required  by 
Decree-Law No 232/97) is not yet complete. 

Although there is no specific legal provision, monthly cash-based fiscal data are published on 
the  website  of  the  government  directorate  in  charge  of  the  budget  (DGO)36,  providing  a 
comprehensive breakdown by sub-sector of the execution of the main fiscal aggregates37. The 
explanatory framework for the transition from cash-based data to ESA95 standards is set out 
in the State Budget Law Report. The methodology for the transition is not yet explained. 

Internal  control  and  independent  audit  are  ensured  through  Articles 50,  59  and  62  of  the 
Budget Framework Law (BFL). 

Regarding  Article  14  of  the  Directive,  detailed  information  on  tax  expenditure  is  to  be 
published  (Article  32  BFL).  The  publication  of  information  on  contingent  liabilities  is  not 
required by Portuguese law. 

2. Forecasts 

While the State Budget Law Report contains forecasts by the Commission and other entities, 
it presents no justification when national forecasts deviate from the Commission’s forecasts. 
Sensitivity  analysis  is  only  presented  in  the  context  of  the  Stability  and  Growth  Pact 
procedures.  Within  the  Ministry  of  Finance,  GPEARI38  is  responsible  for  macroeconomic 
forecasts.  Its  duties  include  analysing  the  impact  of  the  evolution  of  the  relevant 
macroeconomic  aggregates  on  the  management  and  control  of  fiscal  policy  and  preparing 
projections  of  key  macro-economic  variables  for  medium-term  budgetary  planning. 
Forecasting  methodologies  are  not  yet  available.  The  new  Fiscal  Council  (Conselho  das 
Finanças Publicas, CFB) created in 2011 (Article 12(i) BFL), has been tasked with assessing 
forecasts.  It  has  a  consultative  role  and  communicates  its  analyses  to  the  President,  the 
government,  the  parliament,  the  Court  of  Auditors  and  the  central  bank.  The  Portuguese 
Parliamentary Budget Office (UTAO) delivers its own assessment. 

3. Fiscal rules 

Article  12(c)  BFL  provides  that  the  general  government  budget  balance,  in  ESA  terms  and 
adjusted  for  cyclical  effects  and  temporary  measures,  cannot  be  less  than  the  medium-term 
objective. The same Article states that any deviation has to be corrected in subsequent years. 
Law No 64/2011 of 30 December 2011 sets the target at -0.5 % of GDP. Article 10(a) BFL 

36 
37 

38 

www.dgo.pt. 
Sub-sectors: Central State, Autonomous Funds and Services, Social Security, Healthcare system, Local 
and Regional Administration. Monthly data are given for Central State. Cumulative data are available 
for other sub-sectors. 
Gabinete de planeamento, estratégia, avaliação e relações internacionais (unit in charge of planning, 
strategy, evaluation and international relations). 

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stipulates that the budgets of the administrative public sector, its entities and agencies must be 
in balance or positive, while Article 10(b) further specifies that each of the sub-sectors should 
contribute ‘proportionally’ to achieving this budget balance target. 

In  addition,  expenditure  ceilings  are  introduced  in  the  multi-annual  budget  programme, 
covering the next four fiscal years, for each budget programme (Article 12(d) BFL). 

Finally, Article 87  BFL  introduces annual indebtedness ceilings for  the central  government, 
autonomous regions39 and local government — the levels of the ceilings are established in the 
annual Budget Law. Article 12(a) BFL requires autonomous regions and local government to 
constrain their borrowing in accordance with their respective financing laws without prejudice 
to  Article  87  BFL.  In  the  event  of  deviations,  transfers  received  from  the  state  budget  are 
reduced.  Article  12(i)  BFL  calls  on  the  CFP  issue  opinions  on  compliance  with  the  budget 
balance rule defined in Article 12(d) BFL, the expenditure rule introduced in Article 12(c) and 
the borrowing ceilings for autonomous regions and local governments. 

4. Medium-Term Budgetary Framework 

The Portuguese authorities state that budgetary strategy document (Documento de Estratégia 
Orçamental)  released  every  year  includes  budget  projections  for  the  main  items  of 
government expenditure and revenue for the following four years as well as a description of 
the medium-term policies envisaged and their long-term impact on public finances. However, 
the presentation of a budgetary strategy document is not required by law. 

Additionally,  the  government  presents  a  draft  state  budget  law  to  parliament  every  year 
together with a multi-annual budgetary programme, updated annually for the next four years 
(Article 12(d) BFL). The multi-annual budgetary programme was prepared and published for 
the first time in April 2012 in the 2012-2016 fiscal strategy document. It is updated annually 
for the next four years, in the State Budget Law, in line with the objectives of the Stability and 
Growth  Programme.  It  establishes  the  limits  for  expenditure  funded  by  general  revenue  for 
central  government  as  a  whole  and  for  each  of  its  programme  budgets  provided  for  in  the 
BFL. The expenditure limits are binding for each of the individual programmes for the year 
2013 and serve as indicators for subsequent years. The expenditure limits are binding for the 
programme groups for the years 2013 and 2014, and then for the consolidated amount of the 
programmes in 2015 and 2016. 

5. Mechanisms of coordination across sub-sectors of general government 

The Portuguese authorities claim that coordination is achieved through informal procedures. 

39 

Azores and Madeira. 

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1.22. 

Implementation of the main provisions of the Directive in ROMANIA 

1. Accounting and statistics 

The  Romanian  authorities  state  that  its  accounting  system  covers  all  sub-sectors  of  general 
government  and  has  included  the  information  needed  to  generate  data  reports  based  on  the 
ESA 95 standard since 200640. 

Monthly cash-based budget outcomes are published on the website of the Ministry of Public 
Finances  (MoPF)  every  month41.  A  breakdown  by  sub-sector  (central  government,  local 
government,  social  security,  etc.)  is  available.  The  Romanian  authorities  state  that  accrual 
data are also available on a quarterly basis. 

Regarding contingent liabilities, the Fiscal Responsibility Law No 60/2010 (FBRL) stipulates 
that most are included as a rule in the fiscal forecasts. A separate fiscal risk statement lists the 
contingent  liabilities  that  are  not  included,  together  with  information  on  losses  and 
outstanding payments of state-owned enterprises (Article 20 FBRL). An upgrade of the data 
reports of local companies included in public administration is on-going. 

The Romanian authorities state that the FBRL is to be amended in order to publish monthly 
data on general government debt and the level of guarantees on the website of the MoPF. 

2. Forecasts 

The  National  Commission  for  Prognosis  is  responsible  for  providing  macroeconomic 
forecasts  for  the  current  budgetary  year  and  the  following  three  years  (Article 31,  Public 
Finance  Law  No  500/2002),  with  yearly  updates.  The  forecasts  are  reviewed  by  the  Fiscal 
Council,  published,  and  considered  by  the  government  and  parliament  for  the  approval  of 
budgetary  plans  (Article 40  FBRL).  Eventually,  they  feed  into  the  Fiscal  and  Budgetary 
Strategy  document,  which  is  approved  by  the  government  and  published  on  the  MoPF’s 
website. 

Assumptions  underpinning  the  forecasts  and  a  statement  justifying  potential  discrepancies 
with the European Commission’s forecasts are included in the Fiscal and Budgetary Strategy 
document (Article 19 FBRL). The document also contains an analysis of the sensitivity of the 
fiscal targets to macroeconomic variables (growth, interest rate, exchange rate), together with 
an  analysis  of  fiscal  risks  (Article 20  FBRL).  Additional  sensitivity  analyses  on  debt  and 
interest payments are presented during the fiscal process. 

Furthermore, Romania is preparing the adoption of several amendments to the FBRL in order 
to  strengthen  existing  rules  and  procedures  regarding  forecasts.  In  particular,  the  need  for 
prudent  macroeconomic  forecasts  is  to  be  introduced,  together  with  an  obligation  for  the 
Fiscal  Council  to  assess  macroeconomic  forecasts  ex  post  and  an  obligation  for  the 

40 

41 

However, the Romanian authorities report that, currently, ‘accrual modified’ accountability  is applied 
within the public sector, although some data are missing: the obligations for pensions are not registered, 
not  all  tangible  fixed  assets  are  depreciated,  and  the  registration  of  depreciation  for  fixed  assets  and 
provisions is voluntary. 
www.mfinante.ro/execbug.html. 

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government/parliament to adopt and publish measures whenever a ‘relevant subjective trend’ 
affecting the forecasts for at least four consecutive years is identified. Additional reviews of 
the  main  fiscal  aggregates  based  on  additional  assumptions  regarding  growth  and  interest 
rates are expected. 

3. Fiscal rules 

Romania has introduced 8 fiscal rules (Article 6 FBRL) to strengthen fiscal discipline. These 
rules  target:  the  overall  and  primary  budget  balance,  personnel  expenditure,  expenditure 
excluding EU funds and personnel aggregated for all sub-sectors, and use of surplus. 

Compliance  with  these  rules  is  monitored  by  the  Fiscal  Council  (Article 40  FBRL).  In  the 
event of deviations from the fiscal rules, the government is expected to provide explanations 
and propose timely correction measures to parliament (Article 21 FBRL). Sanctions for non-
compliance include joint and individual political responsibility of members of the government 
(Article 52 FBRL) and potential financial penalties (Article 56 FBRL). 

The FBRL’s scope is expected to be further expanded to ensure the compliance of numerical 
fiscal  rules  with  medium-term  targets  contained  in  the  MTBF.  Further  amendments  taking 
into account new EU regulations and the TSCG are also expected, for instance in relation to 
escape clauses and debt reduction. 

4. Medium-Term Budgetary Framework 

Romania has adopted three-year multi-annual budgetary planning with targets for deficit and 
expenditure, reimbursable financing and a ceiling for guarantees (Articles 18-20 FBRL). The 
Fiscal  and  Budgetary  Strategy  is  the  public  policy  document  that  establishes  the  fiscal  and 
budgetary  objectives  and  priorities  and  sets  the  spending  and  revenue  for  the  consolidated 
budget (Article 3 FBRL). It includes projections of major expenditure and revenue items, as 
well as a description of the main policies impacting fiscal targets. 

The draft annual budget presented to parliament complies with the fiscal rules and with the 
Fiscal  and  Budgetary  Strategy  (Articles 21  and  24  FBRL).  The  Romanian  authorities  state 
that any discrepancies between the annual budget and the MTBF, together with a commitment 
from the Prime Minister and the Minister of Finance to address them by a specified deadline, 
will be made public. In addition, Article 25(3) FBRL provides that ‘the fiscal and budgetary 
strategy  should  contain  a  section  detailing  and  explaining  differences  from  the  version 
previously approved by Parliament.’ 

The  conditions  for  revision  of  the  Fiscal  and  Budgetary  Strategy  are  defined  in  the  FBRL 
(Chapter VIII). In particular, Article 23 FBRL states that the fiscal and budgetary framework 
of the fiscal and budgetary strategy can be reviewed in case of a change of government. At the 
start of a mandate, a new Executive will make public if its governance programme complies 
with the last fiscal and budgetary strategy approved by the Parliament. If not, the Ministry of 
Public Finance will prepare the draft of a new fiscal and budgetary strategy. The revision of 
any  major  budget  document,  including  the  annual  budget  and  the  Fiscal  and  Budgetary 
Strategy, is subject to review by the Fiscal Council (Article 25 FBRL). 

Romania  intends  to  establish  a  multi-annual  objective  for  general  government  debt  and  to 
amend the FBRL consequently. 

5. Mechanisms of coordination across sub-sectors of general government 

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The  Romanian  authorities  report  that  the  provisions  of  the  FBRL  (including  multi-annual 
planning,  compliance  with  fiscal  rules)  apply  to  all  entities  contributing  to  the  general 
consolidated  budget  (Article 2  FBRL),  in  particular  central  government  (including  social 
insurance), local government and subordinated bodies). 

The  MoPF  is  responsible  for  the  coordination  of  budgetary  planning  for  all  sub-sectors.  In 
particular,  under  Articles  37-39  of  Law  No 273/2006  on  local  public  finance,  it  issues 
instructions  in  a  framework  letter  for  the  drafting  of  local  budgets,  the  macroeconomic 
framework,  and  ceilings  concerning  fiscal  transfers  from  the  state  budget.  For  monitoring 
purposes, local authorities submit their draft budgets to the MoPF, followed by their approved 
budgets at a later stage. 

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1.23. 

Implementation of the main provisions of the Directive in SLOVENIA 

The Slovenian authorities state that budget planning procedures in Slovenia are defined in the 
Public  Finance  Act  (2000)  and  the  decree  on  development  planning  documents  and 
procedures for the preparation of the national budget (2010). They both need to be amended 
to implement the Directive and meet improved budgeting standards. 

1. Accounting and statistics 

The  Slovenian  authorities  report  that  their  public  accounting  systems  comprehensively  and 
consistently cover all sub-sectors of general government and contain the information needed 
to generate accrual data in order to prepare data based on the ESA 95 standard. The data are 
regularly  published  in  a  monthly  review.  All  historical  annual  data  in  consolidated  balance 
sheets as well as separate data for social security funds are also available on the website of the 
Ministry of Finance42. 

Accounting  systems  are  subject  to  internal  control  by  the  Budget  Supervision  Office  of  the 
Republic of Slovenia. As the central body of the public internal financial control system, it is 
responsible for the development, harmonisation and supervision of the financial management 
and internal control system and for the internal audit of direct and indirect budget spending 
centres at central and local level43. 

Accounting systems and budgeting have also been regularly revised by the Court of Audit of 
the Republic  of Slovenia. This  is the supreme body  for supervising state accounts, the state 
budget and all public spending in Slovenia44. 

All  Slovenian  treasury  reports  concerning  the  state  budget,  municipality  budgets,  state  and 
municipal entities are on a cash basis. Other providers of public services are reported on an 
accrual basis. The consolidation of reports for the public sector and all public-sector providers 
of public services are based on cash-basis reports  (all  other  providers of public services are 
obliged  to  keep  books  on  both  an  accrual  and  cash  basis).  A  reconciliation  table  is  not 
published. 

The Ministry of Finance publishes data on government guarantees, with a lag of one quarter. 

Data  on  the  participation  of  general  government  in  the  capital  of  private  and  public 
corporations is published on the website of the Assets Management Agency of the Republic 
of Slovenia45 as well as the MoF’s website. 

2. Forecasts 

Macroeconomic forecasts used for fiscal planning are prepared by an independent government 
office — the Institute of Macroeconomic Analysis and Development (IMAD)46. 

42 
43 
44 
45 

http://www.mf.gov.si/en/areas_of_work/public_finances/bulletin_of_government_finance/#c172. 
http://www.unp.gov.si/en/about_the_office. 
http://www.rs-rs.si/rsrs/rsrseng.nsf/uvod?openForm. 
http://www.auknrs.si/en/PORTFOLIO. 

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IMAD performs the following tasks: (i) monitoring and analysing current developments and 
the  economic,  social  and  environmental  dimensions  of  development,  based  on  the  national 
development orientations; (ii) producing macroeconomic forecasts as the official basis for the 
budget;  (iii) preparing  analyses  for  the  formulation  of  economic  policy  orientations  and 
measures; and (iv) research work. 

The Slovenian authorities report that IMAD is required by a government decision regulating 
its  organisation  and  responsibilities  to  make  professional  and  unbiased  forecasts.  It  takes 
responsibility for its forecasts and also for disseminating background information. Under the 
Decree  on  Development  Planning  Documents  and  Procedures  for  the  Preparation  of  the 
National Budget and Budgets of Self-Governing Local Communities (Official Gazette RS, No 
54/2010),  IMAD  prepares  forecasts  twice  a  year  (spring  and  autumn  forecasts).  These 
forecasts  include  projections  of  macroeconomic  aggregates  for  the  current  and  the  next  two 
years  and  a  scenario  for  the  upcoming  three  years.  The  forecasts  and  the  scenario  are 
supplemented by an assessment of the main risks. 

A  short  explanation  accompanying  the  published  forecasts  provides  the  assumptions  behind 
the  forecasts,  the  differences  relative  to  the  preceding  forecasts,  possible  implications  for 
economic policy, and occasionally a brief description of divergent opinions given by external 
experts  in  the  process  of  testing  the  forecasts  (part  of  the  preparation  phase).  Further 
transparency  is  provided  by  analytical  explanations  and  a  statistical  appendix  in  the  Spring 
and Autumn Reports, which IMAD presents to the public. 

The  outcome  of  the  forecasts  is  monitored  through  regular  analyses  of  current  economic 
developments, which are carried out to validate the forecasts and to detect any new risks. The 
results of this monitoring are published in the Slovenian Economic Mirror, IMAD’s monthly 
publication. IMAD regularly communicates with experts and the media and, if there are any 
major  discrepancies  between  forecasts  and  actual  trends,  IMAD  gives  reasons  and  explains 
the extent of these differences. 

Since  2002,  IMAD  has  also  regularly  prepared  an  assessment  of  forecasting  performance 
based on a number of objective statistical criteria47 for the quality of forecasts and for various 
time  horizons.  The  results  are  published  in  IMAD’s  spring  and  autumn  forecasts  and  are 
verifiable48. The assessment also provides comparisons between IMAD’s forecasts and those 
of the European Commission and other institutions in Slovenia and abroad. The accuracy of 
the forecasts for macroeconomic indicators is measured against a number of statistical criteria 
for the quality of the forecasts and for various time horizons. 

46 

47 

48 

of 

of 

the 

30/01, 

Gazette 

The acts establishing IMAD and regulating its field of work are: (1) Resolution on the Organisation and 
Work  of  the  Institute  of  Macroeconomic  Analysis  and  Development  of  the  Republic  of  Slovenia 
12/2000) 
Republic 
(Official 
No 
[http://zakonodaja.gov.si/rpsi/r08/predpis_SKLE2008.html];  (2)  Government  of 
the  Republic  of 
Slovenia  Act  (Official  Gazette  of  the  Republic  of  Slovenia,  Nos.  4/93,  71/94,  23/96,  47/97,  23/99, 
119/00, 
1) 
[http://zakonodaja.gov.si/rpsi/r02/predpis_ZAKO242.html];  (3)  Decree  on  Development  Planning 
Documents and Procedures for the Preparation of the National Budget (Official Gazette of the Republic 
of Slovenia, No 54/2010) [http://zakonodaja.gov.si/rpsi/r03/predpis_URED4053.html]. 
Mean  error,  mean  absolute  error,  root  mean  square  error,  standardised  mean  absolute  error  and 
standardised root mean square error. 
http://www.umar.gov.si/fileadmin/user_upload/publikacije/aanaliza/ 
aspomlad2012/a_PNNG_2012.pdf). 

Slovenia, 

123/04, 

52/02, 

24/05 

upb 

— 

EN 

74 

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3. Fiscal rules 

The  Slovenian  authorities  report  that  a  proposal for  a  new  fiscal  rule  (described  below)  has 
not yet been agreed at political level. This proposed budget balance rule is similar to the Swiss 
debt brake formula: 

In  any  period  (t),  the  maximum  level  of  expenditures  (G)  must  equal  the  level  of  revenues 
(R), adjusted by a business cycle factor (k). This business cycle adjustment factor is aimed at 
stabilising expenditures around the level of cyclically adjusted revenues, and consists of the 
ratio  between  the  trend  (real)  output  (Y*)  and  the  actual  (real)  output  (Y).  Therefore,  if  the 
factor k is larger than one, a deficit is allowed (cyclical deficit), but if the factor k is smaller 
than  one,  a  (cyclical)  budgetary  surplus  is  required.  The  rule  would  apply  to  general 
government revenues and expenditures in ESA terms. It would include unemployment benefit 
spending49. 

4. Medium-Term Budgetary Framework 

Slovenia  prepares  and  enacts  annual  budgets  for  two  consecutive  years  on  a  rolling  basis. 
Article 13(a) of the Public Finance Act requires the government to submit a complete budget 
for  the  subsequent  year  together  with  the  budget  for  the  budget  year.  The  budget  for  the 
subsequent year includes the Budget Memorandum, the proposed central government budget 
with explanations, proposed sales of assets, proposed changes in law, and proposed financial 
plans  for  the  social  security  funds  and  for  public  funds  and  agencies  funded  by  central 
government. 

The  Budget  Memorandum  is  submitted  to  the  National  Assembly  together  with  a  proposed 
two-year  rolling  budget  for  central  government  and  an  overall  expenditure  framework  for 
general  government  for  n+3  years. It  is  adjusted  from  year  to  year  on  a  rolling  basis  in  the 
light  of  economic  circumstances  and  new  developments.  The  timing  and  time  horizon  of 
budget constraints are set within a framework of medium-term objectives for public finances 
taking  into  account  the  real  budget  deficit.  Under  the  Public  Balance  Act,  the  Budget 
Memorandum includes guidelines for economic and fiscal policies and structural reforms and 
measures on both the expenditure and revenue side. It also includes estimates of the long-term 
sustainability  of  public  finances.  The  timeframe  for  revision  of  the  Budget  Memorandum 
follows  the  first  steps  in  the  update  of  the  Slovenian  Stability  Programme.  Projections  of 
fiscal targets are made using the medium-term scenario for economic trends, which is based 
on  the  Spring  Forecast  of  Economic  Trends  and  IMAD’s  March  international  environment 
assumptions.  The  medium-term  objectives  adopted  form  the  basis  for  the  draft  Budget 
Memorandum,  which  is  presented  to  the  Cabinet  in  April.  The  Cabinet  decides  on  overall 
nominal expenditure ceilings, the target debt and the deficit or surplus for a 4-year period, the 
priorities  for  the  budget  period  and  the  expenditure  framework  at  policy  level  (programme 
classification) for the central government budget. In September, IMAD prepares the Autumn 
Forecast  of  Economic  Trends,  which  can  (if  necessary)  amend  the  Budget  Memorandum 
(prepared by MoF) and the budget proposal within the medium-term objectives. 

49 

According  to  the  Slovenian  authorities,  unemployment  benefit  spending  —which  fluctuates  with 
economic cycles— is excluded from the rule in Switzerland. Unemployment insurance has a separate 
account with its own budgetary requirements. 

EN 

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5. Mechanisms of coordination across sub-sectors of general government 

The  Slovenian  authorities  report  that  budgetary  planning  includes  consultations  between  all 
four  units  of  general  government  —  state  budget,  local  communities,  health  insurance  and 
pension insurance — as well as the public funds and agencies whose financial plans are to be 
submitted to the National Assembly, which adopts the budgets. Planning is facilitated by the 
fact  that  local  governments  need  the  approval  of  the  MoF  for  borrowing.  In  practice,  state 
budget  coordination  is  led  by  the  MoF  via  bilateral  consultation  and  negotiation  with  line 
ministries. Mechanisms for coordination across ministries of general government are defined 
in  a  decree  on  development  planning  documents  and  procedures  for  the  preparation  of  the 
national budget (2010), but are being revised. 

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76 

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1.24. 

Implementation of the main provisions of the Directive in SLOVAKIA 

The  main  building  block  of  the  Slovak  fiscal  framework  is  a  detailed  three-yearly  general 
government budget, the State Budget Act, prepared and approved by the government. While 
the  first  year  is  binding,  the  remaining  years  of  the  multi-annual  budget  are  not  and  are 
updated annually. Since 2002, the State Budget Act has contained a cash-based expenditure 
rule  for  the  state  budget  (covering  the  majority  of  central  government  entities).  Local 
governments are constrained by several interrelated debt-based rules. 

On  8  December  2011,  the  Slovak  parliament  adopted  a  constitutional  law  on  fiscal 
responsibility.  Amongst  other  things,  it  establishes  an  independent  Fiscal  Council  and 
introduces a system of early sanctions related to the level of public debt. 

1. Accounting and statistics 

The  Slovak  authorities  report  that  accounting  units  within  general  government  prepare 
accounts in cash-based terms, which are used in turn to build ESA 95 data50. Accounting units 
also produce IPSAS accounts, which may be used in future for the preparation of ESA95 data. 
The public accounting system is subject to internal control and independent audit. 

Slovakia publishes cash-based fiscal data for the state budget (i.e. central government except 
for state funds and minor central agencies) on a daily basis. The data are available on the MoF 
website  and  come  from  the  State  Treasury.  The  Slovakian  authorities  acknowledge  that 
further efforts would be necessary to release monthly data for the whole central government 
sector and social security funds. The local authorities do not release quarterly fiscal data. The 
methodology explaining the transition between cash-based fiscal data and ESA 95 data is also 
lacking. 

Regarding  the  implementation  of  Article 14,  new  elements  specified  in  the  constitutional 
Fiscal  Responsibility  Law  have  been  incorporated  into  the  2013-2015  general  government 
budget  documentation  for  the  first  time:  (i) tax  expenditures;  (ii) contingent  liabilities 
(including  government  guarantees);  (iii) implicit  liabilities;  (iv) participation  of  general 
government in the capital of private and public corporations. 

2. Forecasts 

To ensure the transparency and objectiveness of macroeconomic and budgetary forecasts, the 
MoF  regularly  consults  two  committees:  the  Macroeconomic  Forecasts  Committee  and  the 
Tax  Revenue  Forecasts  Committee.  These  advisory  committees  were  established  by  the 
constitutional  Fiscal  Responsibility  Law.  Their  members  come  from  the  Central  Bank  of 
Slovakia,  the  financial  sector,  academia  and  the  Fiscal  Council  (with  observer  status).  The 
committees evaluate the forecasts provided by the MoF. If a majority of committee members 
consider the forecasts to be realistic or conservative, they become official forecasts to be used 
for budget preparation. If a majority of members disagree with this, the MoF has to provide 
another forecast. 

50 

http://www.finance.gov.sk/Default.aspx?CatID=3569. 

EN 

77 

   EN 

 
 
                                                 
The  Tax  Revenue  Forecasts  Committee  has  to  prepare,  at  least  twice  a  year  and  by 
15 February and 30 June, revenue forecasts from taxes and social security contributions. The 
Macroeconomic Forecasting Committee has to prepare, at least twice a year, macroeconomic 
forecasts  by  15  February  and  30  June  of  the  current  fiscal  year.  The  opinions  of  the  two 
committees are public. There is no ex post evaluation of forecasts. 

3. Fiscal rules 

Since  2002,  the  State  Budget  Act  has  contained  a  cash-based  expenditure  rule  for  the  state 
budget  (covering  the  majority  of  central  government  entities).  Local  governments  are 
constrained by several interrelated debt-based rules. 

Debt ceiling for general government 

The new Fiscal Responsibility Law that entered into force in March 2012 sets a ceiling in the 
constitution  for  general  government  gross  debt,  which  may  not  exceed  60 %  of  GDP. 
Automatic sanctions, also established in  the constitution, are triggered at the following debt 
bracket levels: 

From  50  to  53 %  of  GDP,  the  Ministry  of  Finance  sends  to  the  parliament  a  written 

- 
explanation including debt-reducing measures. 

From  53  to  55 %  of  GDP,  the  government  submits  to  parliament  debt-reducing 
- 
measures.  The  salaries  of  Cabinet  members  are  reduced  to  the  levels  for  the  previous  fiscal 
year. 

- 
From  55  to  57 %  of  GDP,  the  Ministry  of  Finance  sets  aside  3 %  of  state  budget 
expenditures  (excluding  government  debt  service,  EU  funds,  contributions  paid  to  the  EU, 
transfers  to  the  Social  Insurance  Company).  At  the  same  time,  the  government  may  not 
propose to parliament a draft state budget with any nominal year-on-year increase in general 
government  expenditure.  Local  governments  are  required  to  approve  budgets  with 
expenditures not exceeding those of the previous year’s budgets. 

From 57 to 60 % of GDP, the government may not submit to parliament a draft budget 
- 
of the general government in deficit. Local governments are required to approve a budget that 
is balanced or in surplus for the next fiscal year. 

- 

Above 60 % of GDP, the government must ask parliament for a vote of confidence. 

The Fiscal Responsibility Law provides for escape clauses to suspend sanctions for a period 
of  three  years.  They  apply  in  the  event  of  a  major  recession,  a  banking  system  bailout,  a 
natural disaster, and international guarantee schemes. 

As from 2018, the debt ceiling, together with the intermediate alert thresholds, will be reduced 
annually by one percentage point down to 50 % of GDP (in 2027). 

Public expenditure ceilings 

Although  public  expenditure  ceilings  are  referred  to  in  the  Fiscal  Responsibility  Law,  the 
precise  procedure  for  fixing  them  is  to  be  specified  by  a  law  under  preparation.  It  is  to  be 

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based on a sustainability indicator (GAP)51 calculated by the Fiscal Council established by the 
Fiscal  Responsibility  Law.  After  the  GAP  value  is  published,  the  government  will  have  to 
define  a  path  compliant  with  Stability  and  Growth  Pact  requirements  with  a  view  to 
improving this indicator over its 4-year term. Based on these targets, the expenditure ceilings 
for general government less local governments will be set accordingly. 

Debt rule for local governments 

Local governments (municipalities and self-governing regions) are allowed to borrow (from 
outside the general government sector) only if a) the total sum of the debt of the municipality 
or  self-governing  region  does  not  exceed  60 %  of  final  current  revenues  for  the  preceding 
budget year and b) the sum of the annual instalments of the loans does not exceed 25 % of the 
final current revenues for the preceding budget year. Sanctions applicable from 2015 would 
amount  to  5 %  of  the  difference  between  the  final  current  revenues  of  the  preceding  budget 
year and the amount corresponding to the 60 % threshold. 

Balanced budget rule for local governments 

According to the rule, the current budgets of local government have to be adopted as balanced 
or in surplus. The law governing the budgetary rules of local governments lists the possible 
cases  where  the  current  budget  could  be  in  deficit:  when  budgeted  expenditures  contain 
earmarked funds from the state budget or from the budget of the European Union and unspent 
funds  transferred  from  previous  years.  The  capital  budget  can  be  in  deficit  (according  to 
golden  rule  principles)  if  this  deficit  is  financed  by  unspent  funds  of  local  governments 
transferred from previous years, loans or the surplus of the current budget in the fiscal year 
concerned. 

The implementation of all fiscal rules is to be monitored by the newly created Fiscal Council. 

4. Medium-Term Budgetary Framework 

The  main  building  block  of  the  Slovak  fiscal  framework  is  a  detailed  three-yearly  general 
government budget, the State Budget Act, prepared and approved by the government. While 
the  first  year  is  binding,  the  remaining  years  of  the  multi-annual  budget  are  not  and  are 
updated annually. It includes: (i) general government deficit targets; (ii) general government 
gross debt forecasts; and (iii) summary indicators for revenues and expenditures for all sub-
sectors  of  general  government.  The  current  general  government  budget  (covering  the  years 
2013-2015)  includes  a  chapter  on  implicit  liabilities  and  on  the  long-term  sustainability  of 
public finances. 

The Slovak authorities note that a no-policy change (NPC) scenario, with projections for each 
major  expenditure  and  revenue  item  for  the  budget  year  and  beyond,  is  published  in  the 
annual Stability Programme. The envisaged medium-term policies with an impact on general 
government  finances  (including  the  adjustment  path  towards  the  medium-term  budgetary 
objectives  compared  to  the  NPC)  are  also  described  in  the  Stability  Programme,  but  not 

51 

GAP  is  the  difference  between  the  current  value  and  the  sustainable  value  of  the  structural  primary 
balance  expressed  as  a  percentage  of  GDP.  Long-term  sustainability  means  a  national  economic 
performance ensuring that the general government balance and general government debt are such that 
any expected change in the general government’s revenues and expenditures under the baseline scenario 
does not bring the general government debt above the upper debt ceiling in the next 50 years. 

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explicitly in the Slovak MTBF. The annual budget legislation is ‘inherently’ consistent with 
the MTBF, as it is an integral part of the general government budget. 

5. Mechanisms of coordination across sub-sectors of general government 

The Slovak authorities consider that the general government budget includes assumptions for 
the  fiscal  development  of  all  general  government  entities.  However,  different  assumptions 
might be used by local governments, given their constitutional independence when preparing 
their own budgets. Still, these budgets have to be compliant with the existing fiscal rules as 
stipulated in the law governing the budgetary rules of local governments. 

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1.25. 

Implementation of the main provisions of the Directive in FINLAND 

The Finnish authorities report that measures to implement the Directive are to be published in 
October 2012. A draft proposal covering both the Fiscal Compact and the Directive will be 
submitted  to  parliament.  It  will  specify  the  process  for  adoption  of  a  fiscal  rule  by  the 
government and other issues related to fiscal councils. 

In  parallel,  the  Finnish  authorities  are  expected  to  receive  a  mandate  to  propose  secondary 
legislation  in  order  to  adopt  new  rules  or  procedures  to  implement  other  provisions  of  the 
Directive  on  budgetary  frameworks.  The  new  secondary  legislation  is  to  implement  several 
articles of the Directive. 

The Finnish authorities declare that the new legislation will be anchored within the existing 
framework, which promotes a medium-term orientation. 

1. Accounting and statistics 

Statistics 

The  Bank  of  Finland  issues  detailed  data  every  month  on  central  government  operations 
(revenues  and  expenditures)52.  Statistics  Finland  produces  quarterly  data  for 
local 
governments (broken down by municipalities). 

Auditing 

The National Audit Office is Finland’s supreme audit institution and operates in conjunction 
with parliament. It audits the state’s finances and asset management. 

Contingent liabilities 

Statistics Finland provides general government financial accounts describing in particular the 
financial  assets  and  liabilities  of  general  government.  Quarterly  statistics  on  the  finances  of 
municipalities  contain  data  describing  the  municipalities’  profit  and  loss  accounts  and 
investments,  as  well  as  their  liabilities.  Statistics  Finland  also  issues  a  table  on  central 
government guarantees53. 

2. Forecasts 

Up  to  now,  macroeconomic  and  budgetary  forecasts  have  been  the  responsibility  of  the 
Ministry of Finance. 

The Finnish authorities consider that the independence and objectivity of macroeconomic and 
budgetary forecasts will be ensured and strengthened by enhancing their transparency and by 
organising quality control on a regular basis. 

3. Fiscal rules and medium-Term Budgetary Framework 

52 
53 

http://www.netra.fi. 
http://www.stat.fi/til/jul_en.html. 

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81 

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According to the Commission database on fiscal frameworks, spending limits in 2012 prices 
have been set by a  political decision for the legislative term 2012-2015.  They  cover  around 
80 % of central government expenditure. Since 2011, an additional debt rule has been in force. 
Corrective  measures  at  the  level  of  central  government  expenditures  and  revenues  are  to  be 
taken if the debt-to-GDP ratio does not shrink. The debt rule is in force for the entire current 
legislature. The Ministry of Finance is responsible for monitoring and enforcing compliance 
with the rule. In the event of non-compliance, the Ministry of Finance will propose necessary 
corrective measures to the Cabinet. Exceptions are possible in specific situations. 

4. Mechanisms of coordination across sub-sectors of general government 

A  law  on  local  government  finances  is  under  preparation  and  will  take  into  account  the 
Directive’s requirements. 

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1.26. 

Implementation of the main provisions of the Directive in SWEDEN 

In  the  2011  Spring  Fiscal  Policy  Bill  (prop.  2010/11:100),  the  Swedish  government 
announced  that  it  would  continue  to  develop  and  strengthen  the  fiscal  policy  framework 
during its term. In particular, a Code of Conduct for fiscal policy in the form of a government 
communication  was  submitted  to  the  Swedish  parliament  (Riksdag)  in  2011.  The 
communication was based around a summary of statutory rules and practice. Its purpose is to 
enhance fiscal policy sustainability and transparency by institutionalising important principles 
used  by  the  government,  and  by  strengthening  the  credibility  of  Sweden’s  compliance  with 
the recent reforms to the EU framework. 

1. Accounting and statistics 

Obligation to provide data 

Data  on  central  government  operations  (revenues  and  expenditures)  are  published  on  a 
monthly  basis.  The  ‘monthly  outcome  of  the  Central  Government  Budget’  is  available 
monthly on the MoF website. 

The Official Statistics Act (2001:99) requires businesses, municipalities and organisations to 
provide information for official statistics. In March 2011 the government decided to appoint a 
special investigator to review the official statistics and the statistical system. The inquiry will 
include a review of the reporting obligations under the Official Statistics Act. The report on 
the inquiry will be issued in December 2012. 

Comparison Table 

The Swedish National Financial Management Authority is responsible for the table showing 
the structure of the ESA 95-based data (Table 2A in the EDP). 

Audit provisions 

The Swedish National Financial Management Authority audits the financial statements from 
central  government.  The  municipal  audit  is  performed  by  municipal  officials  under  the 
guidance  of  the  Swedish  Council  for  Municipal  Accounting,  which  is  a  non-profit 
organisation  established  by  the  state  and  the  Swedish  Association  of  Local  Authorities  and 
interprets  generally  accepted  auditing  standards  and  makes 
Regions.  The  Council 
recommendations  to  local  auditors.  It  also  makes  sure  that  its  recommendations  are 
communicated to local auditors and used in the external audits. If local auditors diverge from 
a Council recommendation, they should disclose their reasons for doing so in a note. 

Contingent liabilities 

The Central Government Annual Report includes data and analyses on contingent liabilities in 
the form of central government guarantees as well as government loans with credit risks. Both 
the  scale  of  outstanding  commitments  and  projections  of  expected  losses  are  reported.  As 
from  2012,  the  National  Debt  Office  is  to  publish  a  detailed,  publicly  available 
communication on state guarantees and credits every year. 

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As regards the municipalities, Statistics Sweden collects economic statistics every year from 
the municipal financial statements under the Official Statistics Act. In conjunction with their 
balance  sheets,  the  municipalities  submit  information  on  guarantees  and  other  contingent 
liabilities54 55. 

As regards  the counties, the Swedish Association of Local Authorities  and  Regions collects 
data  on  behalf  of  Statistics  Sweden  from  the  county  councils’  balance  sheets.  The  regions 
state  their  contingent  liability  for  pension  obligations  and  for  other  guarantees  and 
indemnities. 

Ownership in private and public companies 

Statistics Sweden annually surveys companies owned by the state, counties or municipalities. 
The survey covers companies where at least 50 per cent of the shares, units or equivalent, are 
government-owned.  The  variables  collected  include  the  number  of  firms,  number  of 
employees, legal form, sector and the financial records included in the income statement and 
balance sheet. 

The  income  statement  and  balance  sheet  reports  for  municipalities  and  counties  include 
companies  over  which  a  municipality  or  county  has  significant  influence.  The  accounts  are 
consolidated  to  provide  a  broad  picture  of  the  municipality  and  county  council’s  overall 
economy, including government-owned companies56. 

2. Forecasts 

The  presentation  of  forecasts  is  regulated  in  the  Budget  Act  (Chapter 9,  Article 3).  The 
government  submits  forecasts  of  government  revenues  and  expenditures,  government 
borrowing  and  spending  under  the  expenditure  ceiling  for  the  current  year  and  the  three 
following  years  to  the  Riksdag  in  the  Budget  Bill  and  the  Spring  Fiscal  Policy  Bill.  The 
published  forecasts  incorporate  the  proposals  included  in  the  bill  in  question.  Wherever 
possible,  the  impact  of  fiscal  proposals  on  public  finances,  GDP,  employment  and  income 
distribution is analysed and published. 

The  Swedish  authorities  state  that  the  forecasting  methods  and  models  are  based  wherever 
possible on the latest developments in research. As far as possible, the government presents 
computing conventions to indicate how the forecasts and effect estimates are obtained. 

Alternative scenarios 

In addition to a main scenario, the government presents a number of alternative scenarios to 
illustrate downside and upside risks in economic developments. 

54 

55 

56 

This  includes:  (i)  guarantees  and  loss  responsibility  for  housing  and  single-family  homes;  (ii) 
guarantees  and  other  commitments  to  municipal  housing  companies;  (iii)  guarantees  and  other 
commitments to other housing companies/associations; (iv) guarantees and other commitments to other 
municipal businesses; (v) contingent liabilities, excluding housing enterprises and municipal businesses, 
and (vi) contingent liability for pension obligations. 
http://www.ssd.scb.se/databaser/makro/MainTable.asp?yp=tansss&xu=C9233001&omradekod 
=OE&omradetext=Public+finances&lang=2&langdb=2. 
http://www.ssd.scb.se/databaser/makro/MainTable.asp?yp=tansss&xu=C9233001&omradekod 
=OE&omradetext=Public+finances&lang=2&langdb=2. 

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Ex post assessment 

The  Swedish  authorities  report  that  the  government  has  instructed  the  National  Institute  of 
Economic  Research  (NIER)  to  produce  annual  comparisons  of  different  forecasters’ 
predictions and their accuracy57. Another institution, the Swedish Fiscal Policy Council, may 
review and assess the quality of the forecasts presented and the models on which the forecasts 
are  based.  The  comparisons  must  include  the  government’s  forecasts.  A  government 
assessment  of  economic  developments  in  Sweden  and  the  public  finances  is  normally 
presented twice a year: once with the Spring Fiscal Policy Bill and once with the Budget Bill. 
If economic developments so require, the government also presents its economic evaluation 
on other occasions, providing a comparison with the assessment in the most recent bill. 

3. Fiscal rules 

The surplus target 

The  government  is  required  under the  Budget  Act  (Chapter 2,  Article 1)  to  propose  a  target 
for  general  government  net  lending.  On  that  basis,  the Riksdag  has  decided  that  the  surplus 
target is to be equal to net lending amounting to 1 per cent of GDP on average over a business 
cycle. The present level of the surplus target is to be maintained as long as necessary for the 
sustainable  long-term  development  of  public  finances.  The  suspension  of  the  surplus  target 
can be proposed by the government but the final decision is taken by the Riksdag. 

The Swedish authorities monitor the surplus target with a set of indicators, since they consider 
that  the  economic  situation  and  the  business  cycle  cannot  be  measured  precisely.  The 
uncertainty in the assessment is also taken into account, along with the risk of deviations from 
the forecast and the possibility that the business cycle is asymmetric. The government applies 
a  number  of  principles  as  to  how  target  deviations  should  be  managed,  depending  on  their 
magnitude and the economic situation. 

The expenditure ceiling 

The Budget Act (Chapter 2, Article 2) requires the government to propose a nominal ceiling 
in the Budget Bill for all central government expenditure (except interest expenditure) and the 
expenditure  of  the  pension  system.  The  Riksdag  approves  the  expenditure  ceiling.  An 
important  function  of  the  expenditure  ceiling  is  to  provide  conditions  for  achieving  the 
surplus target. The ceiling’s level should also promote a desirable long-term development of 
central government expenditures. 

The established practice is for the ceiling to apply to expenditure areas 1–25 and 27 plus the 
off-budget  expenditures  for  the  old-age  pension  system.  The  ceiling  does  not  include 
expenditure  area 26  (mostly  interest  payments).  The  items  covered  by  the  ceiling  comprise 
almost  all  public  sector  expenditures,  with  the  exception  of  local  government  expenditure. 

57 

NIER performs analyses and forecasts of the Swedish and international economy and conducts related 
research.  It  is  a  government  agency  accountable  to  the  Ministry  of  Finance.  Like  other  Swedish 
government  agencies,  NIER  is  independent  and  is  responsible  for  the  analyses  and  forecasts  that  it 
publishes.  Its  mandate  is  set  out  in  a  regulation  (Regulation  2007:759).  NIER  monitors  the  current 
development of the economy. Four times a year, it publishes its latest analysis and forecasts in a series 
of reports entitled ‘the Swedish Economy’. The reports include detailed forecasts for two years ahead 
and a more overall assessment of economic development for four years ahead -   
http://www.konj.se/4.70c52033121865b1398800099246.html. 

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Within  the  overall  expenditure  ceiling,  a  certain  budget  margin  is  included.  The  budget 
margin is primarily intended to provide a buffer if economic developments cause expenditures 
to differ from initial estimates. 

Although there are no legal obstacles, it has become the practice not to amend the expenditure 
ceiling. The ceiling on central government expenditure is to remain unchanged from the time 
when  the  ceiling  is  fixed  for  a  given  year  until  that  year  has  passed.  The  ceiling  has  been 
altered  on  just  a  few  occasions,  due  to  changes  in  the  direction  of  budget  policy.  It  was 
lowered in every case. 

If there is a risk of exceeding the expenditure ceiling, the government has to take measures to 
prevent  this  from  happening.  If  the  government  does  not  have  the  authority  to  take  the 
required measures, it has an obligation to propose these measures to the Riksdag (Chapter 2, 
Article 4). 

Monitoring bodies 

The Fiscal Policy Council (FPC), in accordance with its mandate, monitors and evaluates the 
extent  to  which  the  fiscal  and  economic  policy  objectives  proposed  by  the  government  and 
decided by the Riksdag are being achieved, thus contributing to more transparency and clarity 
about  the  aims  and  effectiveness  of  economic  policy.  In  particular,  the  FPC,  based  on  the 
Spring Fiscal Policy Bill and the Budget Bill, assesses whether fiscal policy is consistent with 
long-term sustainable public finances and budgetary targets, particularly the surplus target and 
the expenditure ceiling. Its aim is to: (i) assess whether the fiscal policy stance is consistent 
with  cyclical  developments  in  the  economy;  (ii) assess  whether  fiscal  policy  is  in  line  with 
long-term  sustainable  growth  and  leads  to  long-term  sustainable  high  employment; 
(iii) examine  the  clarity  of  these  bills,  particularly  with  respect  to  the  specified  basis  of 
economic policy and the reasons for proposed measures, and (iv) analyse the effects of fiscal 
policy  on  the  distribution  of  welfare  in  the  short  and  the  long  run.  The  government’s 
comments on the FPC’s opinions are included in the Budget Bill. 

The  National  Audit  Office  is  an  authority  under  the  Riksdag  with  the  task  of  monitoring 
central  government  activities.  The  government  is  required,  not  later  than  four  months  after 
receiving an assessment from the Office, to submit a statement to the Riksdag concerning the 
measures it has taken or intends to take in the light of the assessment (Chapter 4, Article 18). 

Balanced budget requirement for local governments 

A  balanced  budget  requirement  for  local  governments  has  been  in  force  since  2000  (Local 
Government  Act,  Chapter 8,  Article 4).  The  requirement  states  that,  except  under  special 
circumstances,  every  municipality  and  county  council  must  compile  its  budget  so  that 
revenues  exceed  budgeted  expenditures.  Municipalities  and  county  councils  must  also 
practice  sound  economic  management.  If  a  local  government ends a year with a deficit, the 
main  rule  is  that  the  deviation  must  be  corrected  within  three  years  (Chapter 8,  Article 5a). 
The municipal or county council may decide not to correct a deficit if it was planned when the 
budget was decided, if unrealised losses have occurred on securities, or in the event of other 
special  circumstances  (Chapter 8,  Article 5b).  Normally,  the  financial  result  in  real  terms 
should at least consolidate the budget, including e.g. pension commitments and the need for 
reinvestment. As of 2005, local governments are required to decide the financial goals that are 
relevant  for  sound  economic  management.  A  widely  used  goal  for  sound  economic 
management  is  a  surplus  equivalent  to  2 per  cent  of  revenue  from  taxes  and  general  state 

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grants.  Local  governments’  annual  reports  have  to  include  a  statement  as  to  whether  the 
balanced budget requirement and the goals for sound economic management have been met. 

4. Medium-Term Budgetary Framework 

The  Swedish  authorities  report  that  the  surplus  target  and  the  expenditure  ceiling  both  help 
ensure that fiscal planning and the budget process have a strong medium-term perspective in 
Sweden. All major expenditure and revenue items are projected for at least three years, and in 
the budget bill the projections are on a detailed level. All new policy measures are included in 
the  projections  for  the  fiscal  years  beyond  the  budget  year.  The  Riksdag  also  endorses  the 
expenditure and revenue levels for the years after the upcoming budget year. 

5. Mechanisms of coordination across sub-sectors of general government 

The Swedish authorities report a number of elements under this chapter: (i) the surplus target 
is defined as a target for the general government net lending as a whole; (ii) the items covered 
by the ceilings comprise almost all public sector expenditures; (iii) the government includes 
an account of the development of the local government sector in the Spring Fiscal Policy Bill 
and the Budget Bill. 

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1.27. 

Implementation  of  the  main  provisions  of  the  Directive  in  the  UNITED 
KINGDOM 

1. Accounting and statistics 

The  monthly  statistical  release  on  Public  Sector  Finances  issued  by  the  Office  for  National 
Statistics (ONS) contains data for all the sub-sectors of the public sector on an ESA 95 basis 
and on a cash basis. It also contains a table providing a numerical reconciliation between the 
headline cash and accruals measures58. 

The  UK  authorities  report  that  all  bodies  in  the  general  government  sector  are  subject  to 
independent audit either by the National Audit Office (the UK’s supreme audit authority) or 
by private sector auditors. The statistics included in Public Sector Finances are consistent with 
the audited data. 

Regarding  Article  14  of  the  Directive,  the  UK  government  produces  the  Whole  of 
Government Accounts (WGA), which provides a consolidated set of financial statements for 
the UK public sector59. It consolidates the audited accounts of over 1500 organisations across 
the  public  sector,  including  central  government  departments,  local  authorities,  devolved 
administrations, the health service, academies and public corporations, in order to produce a 
comprehensive, accounts-based picture of the fiscal position in any one year. It includes: 

•  A consolidated Statement of Revenue and Expenditure; 
•  A  consolidated  Statement  of  Financial  Position,  showing  public  sector  assets  and 

liabilities; 

•  A consolidated Cash Flow Statement; and 
•  A Statement on Internal Control. 

WGA  brings  together  data  similar  to  those  produced  for  the  Budget  Report,  the  monthly 
Public  Sector  Finances  report,  the  Public  Expenditure  Survey  Analysis  (PESA)  and  the 
National  Accounts,  but  also  includes  data  on  public  service  pension  assets  and  liabilities, 
provisions,  Private  Finance  Initiatives,  future  contract  expenditure  and  contingent  liabilities 
that are not included in these other data sources. 

The UK authorities also report that information on tax expenditures is published60. 

2. Forecasts 

The UK authorities report that the Office for Budget Responsibility (OBR) was established in 
May 2010 on an interim basis. Since then the OBR has been placed on a permanent, statutory 
footing  through  the  Budget  Responsibility  and  National  Audit  Act  2011,  which  received 
Royal Assent on 22 March 2011. It is accountable to parliament and to the Chancellor for the 
analyses it produces and for the way it uses public funds61. 

58 
59 
60 
61 

http://www.ons.gov.uk/ons/taxonomy/index.html?nscl=Public+Sector+Finance. 
http://www.hm-treasury.gov.uk/psr_government_accounts.htm. 
http://www.hmrc.gov.uk/stats/tax_expenditures/menu.htm. 
http://budgetresponsibility.independent.gov.uk. 

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The OBR has a broad remit, set in law, to examine and report on the sustainability of public 
finances. Accordingly, its core responsibilities include: 

• 

the production of at least two fiscal and economic forecasts each financial year, including 
independent scrutiny of government costings and any resultant impact on the forecasts — 
this is set out in the OBR’s six-monthly economic and fiscal outlook publications; 

•  an  assessment  of  the  extent  to  which  the  fiscal  mandate  has  been,  and  is  likely  to  be, 

achieved alongside those forecasts; 

•  an assessment of the accuracy of previous fiscal and economic forecasts at least once each 

financial year; and 

•  an analysis of the sustainability of public finances at least once each financial year. 

Under section 1(1) of the Budget Responsibility & National Audit Act 2011, the government 
is required to prepare a document, the Charter for Budget Responsibility, which, among other 
things,  provides  guidance  to  the  Office  for  Budget  Responsibility  (OBR)  on  how  it  should 
perform  its  duty  as  part  of  the  fiscal  framework.  According  to  Section  6(2)  of  the  Act,  the 
Charter may not specify the methods by which the OBR is to perform its duty. Therefore, the 
OBR determines itself: 

• 
• 
• 

• 

the methodology it uses to produce its forecasts, assessments and analyses; 
the judgments made in developing these forecasts; 
the content of OBR publications (subject to meeting the minimum requirements of the Act 
and the Charter); and 
the work programme under which the OBR may initiate research and produce additional 
analysis. 

Forecast comparison 

The  UK  authorities  report  that,  in  its  March  2012  publication,  the  OBR  compared  its 
economic and fiscal forecasts with those of international forecasters (including the European 
Commission,  the  IMF  and  the  OECD)  and  domestic  forecasters/think-tanks  (including  the 
Bank of England, the Institute for Fiscal Studies and the National Institute of Economic and 
Social Research). 

Sensitivity analysis 

In their six-monthly economic and fiscal outlook publications, the OBR carries out sensitivity 
analysis to assess performance against the government’s fiscal targets. In particular, it looks at 
the lessons from past forecast errors, sees how its central forecast changes if some of the key 
judgments that underpinned it were changed; and looks at alternative economic scenarios. 

Ex post evaluation 

The  OBR’s  remit  explicitly  requires  ‘an  assessment  of  the  accuracy  of  previous  fiscal  and 
economic  forecasts  at  least  once  each  financial  year’.  To  meet  this  requirement,  the  OBR 
produce  an  annual  Forecast  Evaluation  Report,  which  examines  and  assesses  its  recent 
forecasting performance. 

3. Fiscal rules 

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The  UK  authorities  recall  that,  as  set  out  in  Article  8  of  Chapter  IV  on  Numerical  Fiscal 
Rules, ‘Articles 5 to 7 shall not apply to the United Kingdom’. 

4. Medium-Term Budgetary Framework 

The  UK  authorities  report  that  the  government  follows  a  forward-looking  fiscal  mandate  to 
achieve a cyclically adjusted current balance by the end of a rolling, five-year forecast period. 
The government’s mandate is supplemented by a target for public sector net debt to be falling 
as a percentage of GDP by 2015-16, in order to bring back public finances onto a sustainable 
path. Within this medium-term framework, the government sets out four-year spending plans 
through  spending  reviews.  The  spending  review  system  with  multi-year  budgets  for 
departmental expenditure has been in operation since 1998. Spending Review 2010 covers the 
four  years  from  2011-12  to  2014-15,  setting  out  expenditure  ceilings  for  each  government 
department. Maintaining adherence to the five-year rolling fiscal mandate and the expenditure 
limits  set  out  in  Spending  Review  2010  is  a  central  part  of  the  annual  budgetary  process. 
Additionally, occasional Comprehensive Spending Reviews (CSR) may be set up to reassess 
the baseline of department spending plans. 

The  OBR’s  remit  also  requires  it  to  provide  ‘an  analysis  of  the  sustainability  of  the  public 
finances at least once each financial year’. Its annual fiscal sustainability report sets out long-
term projections for different categories of spending and revenue, analyses the public sector’s 
balance sheet and reports different indicators of long-term sustainability. 

5. Mechanisms of coordination across sub-sectors of general government 

The  UK  authorities  report  that  the  OBR’s  fiscal  forecasts  cover  the  whole  public  sector, 
including  central  government,  local  government  and  public  corporations.  Furthermore,  the 
government’s  fiscal  mandate  and  the  medium-term  budgetary  framework  target  fiscal 
aggregates covering the whole of the public sector. 

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2. 

THE IMPLEMENTATION OF THE DIRECTIVE BY THE COMMISSION 

2.1. 

Information  on  the  steps  taken  by  the  Commission  for  the  implementation  of 
Article 3 and Article 14 of the Directive 

In order to assist Member States in the practical implementation of individual requirements of 
the Directive relating to the reporting of fiscal data, Eurostat has established a Task Force on 
the implications of the Directive for the collection and dissemination of fiscal data. The Task 
Force is run in cooperation with DG ECFIN. Three Task Force meetings have already been 
held (29 June, 5 September and 6 November 2012). 

The Task Force focuses on the requirements in Articles 3 and 14 of the Directive concerning 
the  timely  and  regular  public  availability  of  monthly  and  quarterly  fiscal  data  for  all  sub-
sectors of general government, as well as the availability of data on contingent liabilities and 
other indicators that may point to a potential impact on the general government deficit and/or 
debt. 

In  this  context,  a  conceptual  framework  for  the  national  publication  of  infra-annual  cash-
based fiscal data (or the equivalent figures from public accounting if cash-based data are not 
available) and a reconciliation table showing the methodology of transition between fiscal and 
ESA95-based data have been proposed and already informally agreed. In addition, there is on-
going  discussion  on  the  proposed  templates,  sector  coverage,  periodicity  and  timeliness  for 
publication  of  the  following  indicators  relating  to  the  concept  of  contingent  liabilities  and 
other  indicators  defined  in  the  Directive:  government  guarantees,  liabilities  of  public 
corporations, non-performing loans and government participation in the capital of public and 
private corporations. 

The  Task  Force  is  expected  to  produce  a  set  of  templates  and  related  notes  indicating  the 
methodology, scope of compulsory details, periodicity and timeliness for national publication 
of  individual  indicators.  For  transparency  purposes,  it  was  informally  agreed  that  all 
indicators required by the Directive would be published together by a national authority on a 
single  dedicated  national  webpage  or  website.  Eurostat  also  intends  to  collect  and  publish 
selected indicators, in particular data on contingent liabilities and non-performing loans. The 
Task  Force’s  results  will  be  incorporated  in  a  formal  note  to  the  Economic  and  Financial 
Committee.  The  changes  needed  to  Eurostat’s  collection  and  publication  systems  will  be 
formally  adopted  by  adding  a  supplement  to  the  EDP  questionnaire,  in  accordance  with 
Council Regulation 479/2009, as amended. 

2.2. 

Information  on  the  steps  taken  by  the  Commission  for  the  implementation  of 
Article 4(3) of the Directive 

In accordance with point 46 of the Inter-Institutional Agreement on budgetary discipline and 
sound  financial  management  of  17  May  200662,  the  European  Commission  submits  to  the 
Budget  Authority  twice  a  year  a  complete  financial  programming  covering  the  outstanding 
period of the multi-annual financial framework. 

62 

2006/C 139/01. 

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On 30 January 2012, the Commission transmitted to the Council and the European Parliament 
a revised financial programming for the years 2012 and 2013 following adoption of the 2012 
EU  budget.  The  report  included  total  expenditure  authorised  in  the  2012  EU  budget  and 
indicative programmed expenditure for the year 2013, with detailed information broken down 
by  expenditure  heading,  highlighting  changes  since  the  previous  update  in  the  financial 
programming. The Commission presented the report to the Budget Committee of the Council 
on 2 February 2012. 

On 25 April 2012, the Commission updated the financial programming for the year 2013 as 
part  of  the  EU  draft  budget  201363,  and  transmitted  it  to  the  Council  and  the  European 
Parliament.  The  reporting  was  presented  in  a  simplified  format,  given  that  2013  is  the  last 
year  of  the  current  multi-annual  financial  framework.  On  21  May  2012,  the  Commission 
presented the report to the Budget Committee of the Council. 

2.3. 

Information  on  the  steps  taken  by  the  Commission  for  the  implementation  of 
Article 4(7) of the Directive 

Chapter III, Article 4(7), stipulates the following: ‘Member States’ quarterly debt and deficit 
levels  shall  be  published  by  the  Commission  (Eurostat)  every  3  months.’  In  line  with 
Regulation  (EC)  No  1221/2002  of  the  European  Parliament  and  of  the  Council  of 
10 June 2002 on quarterly non-financial accounts for general government (ESA table 25) and 
Council  Regulation  (EC)  No 1222/2004  of  28 June 2004  concerning  the  compilation  and 
transmission  of  data  on  the  quarterly  government  debt  (ESA  table 28),  Eurostat  already 
collects quarterly data on the general government deficit/surplus and debt with a timeliness of 
t+3 months after the reference quarter. 

The data are published on Eurobase at around t+112 days for all countries together with the 
EU aggregates. One exception is that, up to now, the data for the current year for Germany 
and  France  for  ESA  table  25  are  transmitted  but  placed  under  embargo  by  the  respective 
national  statistical  institutes.  This  practice  would  have  to  be  discontinued  by  the  end  of  the 
transposition period. 

On 6 February 2012, Eurostat released for the first time a dedicated, regular press release on 
quarterly government debt. A similar initiative is planned for the quarterly deficit. 

In  the  new  transmission  programme,  ESA  table 25  is  set  to  disappear  and  to  be  partially 
replaced  by  extended  coverage  of  the  general  government  sector  in  table  0801,  quarterly 
sector accounts. The practical implications of this are still under discussion. 

2.4. 

Information  on  the  steps  taken  by  the  Commission  for  the  implementation  of 
Article 16(3) of the Directive 

Article 16(3) stipulates that ‘by 31 December 2012 the Commission shall assess the suitability 
of  the  International  Public  Sector  Accounting  Standards  (IPSAS)  for  the  Member  States’. 
IPSAS provides a set of detailed accrual accounting standards developed for use by the public 
sector.  In  preparing  this  assessment,  the  Commission  has  carried  out  a  public  consultation, 
open  from  February  to  May  2012,  offering  individuals  and  organisations  the  opportunity  to 
express  their  views  on  the  suitability  of  IPSAS  for  the  EU  Member  States.  Over  sixty 
contributions  have  been  received,  and  a  summary  of  the  results  is  to  be  published  by  the 

63 

See Annex IV to the general introduction accompanying the Draft Budget 2013, COM(2012) 300. 

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Commission. The Commission has also invited public accounting experts from Member State 
governments  to  participate  in  a  task  force  to  discuss  the  issues  involved  in  detail  and  to 
present their points of view based on their experience. The task force met three times between 
February and July 2012. Finally, the Commission has engaged consultants to survey current 
public accounting and auditing practices in the EU Member States. 

The  assessment  report  is  due  to  be  published  by  the  end  of  2012  and  will  cover  the 
importance  and  usefulness  of  accrual  accounting,  the  current  use  of  accrual  accounting  in 
Member States, a summary and assessment of the suitability of the IPSAS standards, the links 
and differences between IPSAS and statistical accounting, the potential cost of implementing 
new accounting standards, and governance-related issues. 

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