COMMISSION STAFF WORKING DOCUMENT Analysis by the Commission services of the budgetary situation in France following the adoption of the COUNCIL RECOMMENDATION to France of 2 December 2009 with a view to bringing an end to the situation of an excessive government deficit Accompanying the document Recommendation for a COUNCIL RECOMMENDATION with a view to bringing an end to the situation of an excessive government deficit in France
Date: 2013-05-29
Institutions: European Commission
Subjects: France, administrative reform, budget deficit, budgetary equilibrium, economic statistics, gross domestic product, stability pact

EUROPEAN 
COMMISSION 

Brussels, 29.5.2013  
SWD(2013) 384 final 

COMMISSION STAFF WORKING DOCUMENT 

Analysis by the Commission services of the budgetary situation in France   
following the adoption of the COUNCIL RECOMMENDATION to France of 2 
December 2009 with a view to bringing an end to the situation of an excessive 
government deficit 

Accompanying the document 

Recommendation for a 

COUNCIL RECOMMENDATION 

with a view to bringing an end to the situation of an excessive government deficit in 
France 

{COM(2013) 384 final} 

EN 

   EN 

 
 
 
 
  
 
 
 
 
 
1. 

INTRODUCTION  

On 2 December 2009, the Council decided, in accordance with Article 126(6) of the Treaty on 
the  Functioning  of  the  European  Union  (TFEU),  that  an  excessive  deficit  existed  in  France 
and  issued  a  recommendation  to  correct  the  excessive  deficit  by  2013  at  the  latest,  in 
accordance with Article 126(7) TFEU and Article 3 of Council Regulation (EC) No 1467/97 
of  7  July  1997  on  speeding  up  and  clarifying  the  implementation  of  the  excessive  deficit 
procedure. In order to bring the general government deficit below 3% of GDP in a credible 
and  sustainable  manner,  the  French  authorities  were  recommended  (a)  to  implement  the 
consolidation  measures  in  2010  as  planned  and  strengthen  the  fiscal  effort  from  2011 
onwards; (b) to ensure an average annual fiscal effort of above 1% of GDP over the period 
2010-13;  (c)  to  specify  the  measures  that  were  necessary  to  achieve  the  correction  of  the 
excessive deficit by 2013, cyclical conditions permitting, and accelerate the reduction of the 
deficit if economic or budgetary conditions turned out better than expected at the time of the 
recommendation. 

On  15  June  2010,  the  Commission  concluded  that  based  on  the  Commission  services'  2010 
Spring  Forecast,  France  had  taken  effective  action  in  compliance  with  the  Council 
recommendation of 2 December 2009 to bring its government deficit below the 3% of GDP 
reference value and considered that no additional step in the excessive deficit procedure was 
therefore necessary.  

This  document  provides  an  assessment  of  whether  France  has  undertaken  effective  action 
towards  correcting  its  excessive  deficit  and  suggests  a  new  adjustment  path  that  would 
durably bring the general government deficit below the 3% of GDP threshold. In particular, 
the document examines the budgetary developments since the Commission communication to 
the Council on action taken as of 15 June 2010. 

2. 

RECENT  MACRO-ECONOMIC  AND  BUDGETARY  DEVELOPMENTS  AND  OUTLOOK  FOR 
2014 

The  French  economy  weathered  the  2008-09  global  economic  crisis  better  than  most  other 
euro  area  countries.  GDP  contracted  by  0.1%  and  3.1%1  in  those  two  years,  respectively, 
compared with a 0.4% growth in 2008 and a 4.4% contraction in 2009 in the euro area as a 
whole.  Resilience  of  both  public  and  private  consumption  helped  alleviate  the  impact  of 
strongly  contracting  international  demand.  In  2010-11,  annual  growth  rebounded  to  1.7%. 
However,  the  continued  lack  of  confidence  among  both  companies  and  households,  in  a 
context  where  room  for  fiscal  stimulus  dwindled,  led  to  a  gradual  erosion  in  growth  which 
came  to  a  standstill  in  the  last  quarter  of  2011.  As  a  consequence,  unemployment  started 
rising again in the course of the year.  

In  2012,  GDP  remained  flat  on  the  back  of  rising  unemployment,  an  only  slow  return  of 
confidence  and  continued  fiscal  consolidation,  which  weighed  on  domestic  demand.  The 
quarterly growth pattern showed a downward trend, with GDP contracting by 0.3% in the last 
quarter. The unemployment rate rose to 10.5% in the last quarter of 2012 from 9.8% a year 
earlier and the number of registered unemployed exceeded 3 million people. Driven by rising 
energy  prices,  inflation  remained  almost  unchanged  at  2.2%  despite  sluggish  economic 

1  Unless  stated  otherwise,  all  historical  data  are  based  on  the  information  available  at  the  cut-off  date  of  the 
Commission services' 2013 Spring Forecast. 

2 

 
 
                                                            
growth.  All  in  all,  households'  real  disposable  income  fell  slightly  last  year  and  households 
reduced savings to maintain consumption levels. 

In their 2013 Spring Forecast, the Commission services expect GDP to decrease by 0.1% this 
year.  The  weakness  of  households'  real  disposable  income  linked  in  particular  to  rising 
unemployment and tax increases will be only partly offset by inflation slowing down, while 
low  business  confidence  is  expected  to  lead  to  a  continued  fall  in  investment.  A  slight 
rebound of the external sector is forecast to translate into a modest pick-up in activity during 
the  second  half  of  the  year.  Gradually  improving confidence and recovering real disposable 
income  –  assuming  no  further  consolidation  measures  –  are  set  to  translate  into  positive 
growth in  2014 (1.1%).  Despite efforts to support employment through  subsidised schemes, 
the unemployment rate is forecast to further increase, reaching 10.6% and 10.9% this year and 
next, respectively. Inflation is set to fall to 1.2% in 2013 on the back of lower energy prices 
before accelerating again next year on the back of planned VAT rises. 

Table 1 – Comparison of macroeconomic developments and forecasts 

Real GDP (% change)
Contributions to real GDP growth

Domestic demand
Changes in inventories
Net exports

Employment (% change)
GDP deflator (% change)
Output gap (% of potential GDP)
Potential output growth

2009

2010

2011

2012

COM 
2009 AF
-2.2

-0.6
-1.4
-0.1
-1.8
1.9
-2.5
1.2

outturn

-3.1

-1.5
-1.2
-0.5
-1.7
0.7
-2.7
1.0

COM 
2009 AF
1.2

0.4
0.8
0.1
-0.9
1.2
-2.5
1.2

outturn

1.7

1.6
0.1
0.0
1.0
1.1
-2.0
1.0

COM 
2009 AF
1.5

1.2
0.4
-0.1
0.4
1.7
-2.4
1.4

outturn

1.7

0.9
0.8
0.0
0.5
1.3
-1.4
1.0

COM 
2009 AF
n.a.

n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.

outturn

0.0

0.3
-1.1
0.8
-0.2
1.6
-2.4
1.0

COM 
2009 AF
n.a.

2013
COM 
2013 SF
-0.1

n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.

-0.2
-0.1
0.2
0.0
1.4
-3.4
0.9

SP 2013

0.1

0.2
-0.4
0.3
-0.2
1.5
-3.3
1.4

Source: COM 2009 AF – Commission services' 2009 Autumn Forecast; COM 2013 SF – Commission services' 2013 Spring Forecast; SP 2013 – Stability 
Programme 2013.

The economic crisis has also had a significant impact on the general government balance. The 
deficit rose to an unprecedented 7.5% of GDP in 2009 from an already elevated 3.3% in 2008 
due to the play of automatic stabilisers and the discretionary fiscal stimulus implemented by 
the authorities as part of the European Economic Recovery Plan (EERP). At 7.1% of GDP the 
outcome for 2010 was slightly better, with the partial phasing-out of the recovery plan more 
than  offsetting  the  negative  budgetary  impact  of  the  local  business  tax  reform  and  that  of 
reducing VAT on restaurant services. Fiscal consolidation started in earnest in 2011, in line 
with  the  Council  recommendation  of  2  December  2009.  Strengthened  fiscal efforts together 
with  the  complete  phasing-out  of  the  stimulus  measures  and  still  relatively  robust  GDP 
growth helped reduce the deficit to 5.3% of GDP (revised up from 5.2%). 

According  to  the  national  statistics  office,  the  general  government  deficit  reached  4.8%  of 
GDP in 2012, thus falling short of the 4.5% official target. Overall, the state budget execution 
showed  relatively  limited  tax  revenue  shortfalls  and  spending  was  kept  under  control; 
healthcare expenditure was also below target while spending by local governments increased 
at a somewhat higher pace than targeted. 

Based  on  the  Commission  services'  2013  Spring  Forecast,  the  headline  deficit  is  set  to 
decrease further in 2013 on the back of the measures adopted notably as part of the budget. 
The  overall  amount  of  revenue  measures  is  estimated  at  1.4%  of  GDP.  Current  expenditure 
rules (central government and healthcare) are renewed and this will contribute to maintaining 
spending  restraint.  Lower  than  previously  projected  inflation  and  the  partial  suspension  of 
indexation for second-pillar pensions in agreement with social partners will also help contain 
expenditure. However, GDP growth, which is projected well below potential, will negatively 
affect the headline balance. Overall, the deficit is expected to reach 3.9% of GDP. Under the 
3 

 
 
 
customary no-policy-change assumption, the deficit is forecast to slightly deteriorate in 2014. 
Indeed,  part  of  the  measures  aimed  at  funding  the  recent  corporate  tax  credit  for 
competitiveness  and  employment  (compétitivité-emploi)  are  yet  to  be  specified  in  sufficient 
detail and a number of one-off tax payments will expire at end-2013. 

Regarding  risks  to  this  year's  budgetary  outlook,  while  no  major  expenditure  slippages  are 
expected at this stage, an even lower than currently forecast tax content of economic activity 
cannot be discarded. The tax revenue elasticity with respect to GDP underpinning the spring 
forecast is 0.9 and 1.0 for 2013 and 2014, respectively. However, historical data covering the 
years 1990 to 2010 show that protracted periods of low growth are often associated with low 
(below standard) elasticity.  

The debt ratio, which exceeded 90% of GDP last year, will continue to rise over the forecast 
horizon on the back of still relatively high general government deficits and subdued nominal 
GDP  growth.  Stock-flow  adjustments  including  contributions  to  the  European  Stability 
Mechanism  and  direct  loans  to  euro  area  programme  counties  will  also  contribute  to 
increasing public debt.  

3. 

EFFECTIVE ACTION 

3.1. 

Background information 

The current assessment of effective action is based on the Commission services' 2013 Spring 
Forecast.  It  takes  into  account  the  economic  and  budgetary  developments  since  the  last 
Council  recommendation  under  Article  126(7)  TFEU  was  issued  in  December  2009.  The 
the  Council 
assessment  starts  by  comparing 
recommendation,  the  apparent  fiscal  effort,  measured  by  the  change  in  structural  budget 
balance,  and  the  adjusted  fiscal  effort.  The  adjustment  of  the  structural  balance  takes  into 
account  (i)  the  impact  of  revisions  in  potential  output  growth  compared  with  the  growth 
scenario  underpinning  the  Council  recommendation  and  (ii)  the  impact  of  revenue 
windfalls/shortfalls  relative  to  the  standard  assumptions.  This  top-down  approach  in  the 
assessment is complemented by a careful  analysis,  including a bottom-up  assessment of the 
consolidation measures undertaken by the French authorities over the reference period.  

recommended 

fiscal  effort 

the 

in 

3.2. 

Assessment of effective action in 2010-13 – overview 

Based on the Commission services' 2013 spring forecast, the structural deficit is estimated to 
fall to 2.2% of GDP this year from 6.1% in 2009. This implies an (apparent) average annual 
fiscal  effort  of  1.0%  of  GDP  over  the  2010-13  reference  period.  When  correcting  for 
downward revisions in potential output growth (+0.1% of GDP) and revenue windfalls (-0.2% 
of GDP) compared with the time the Council recommendation was issued, the average annual 
fiscal effort comes at 0.9% of GDP, thus falling slightly short of the recommended effort of 
above 1% of GDP (see Table 2).  

Table 2 – Change in the structural balance corrected for revisions in potential output growth and 
revenue windfalls/shortfalls 

Uncorrected average 
annual fiscal effort 
over 2010-13

Corrected average 
annual fiscal effort 
over 2010-13

1.0

0.9

Required average 
annual fiscal effort
(2009 Council 
recommendation)
above 1.0

Deadline for correction

2013

Source: Commission services' 2013 Spring Forecast and Commission services' calculations.

4 

 
 
 
  
Average  potential  output  growth  was  estimated  at  1.3%  at  the  time  of  the  Council 
recommendation,  vs.  1.1%  according  to  the  spring  forecast.  The  main  reason  behind  is  a 
downward revision in the contribution of total factor productivity, which has been negatively 
affected by the economic crisis. 
Revenue2, net of discretionary measures, is forecast to have increased in 2010-13 at a slightly 
higher pace than nominal GDP, implying an apparent aggregate revenue elasticity of 1.1 over 
that period. This compares with the 0.9 benchmark elasticity  used for  the  calculation of the 
cyclically-adjusted balance3. The difference mainly stems from corporate income tax receipts 
and, to a lesser extent, social contributions, which are set to have increased more than what 
standard elasticities of individual revenue categories would have implied. 

3.3. 

Assessment of effective action 2010-13 – detailed analysis of measures 

The  cumulated  impact  of  the  discretionary  measures  implemented  by  the  French  authorities 
over 2010-13 is currently estimated at some 5¼% of GDP using a purely bottom-up approach 
(see Table 4).  

The  overall  tax  burden  increased  from  42.1%  of  GDP  in  2009  to  44.9%  in  2012  and  is 
expected  to  reach  46.3%  this  year.  Discretionary  revenue  measures  are  estimated  to  have 
yielded  a  cumulated  3¾%  of  GDP  over  2010-13,  with  windfalls  and  one-offs  (in  2013) 
explaining the rest of that increase. This compares with total revenue measures of some -3% 
of GDP in 2000-09. 

General government expenditure is forecast to grow by an average 0.7% over 2010-13 in real 
terms  when  deflated  by  the  national  consumer  price  index  (CPI).  This  compares  with  an 
average annual increase of 2.3% in 2000-09. While the latter increase cannot be necessarily 
taken  as  a  counterfactual,  it  clearly  points  to  strengthened  efforts  at  reining  in  spending 
growth in recent years.  

A  recent  report  from  the  Inspection  générale  des  finances  concluded  that  the  average  trend 
increase in general government expenditure (i.e. without any discretionary measures) for the 
period 2012-16 is 1.5% in real terms. When correcting the actual increase over 2010-13 for 
the measures identified hereafter, we come out at something very close to this estimate, which 
also confirms that efforts have been strengthened over the past few years (see Graph). 

2 Total current revenue of general government.  
3  See  The  cyclically-adjusted  budget  balance  used  in  the  EU  fiscal  framework:  an  update,  European 
Commission, Economic Papers 478, March 2013. 

5 

 
 
                                                            
Graph – General government expenditure growth corrected for discretionary measures over 2010-
13 (counterfactual scenario) 

4.5%

4.0%

3.5%

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%

-0.5%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Observed

Trend at 1.5%

Counterfactual

Based on a bottom-up approach identifying only discretionary measures known in sufficient 
detail  or  that  have  been  subject  to  an  independent  assessment4  and  which  come  on  top  of 
'customary'  efforts  already  observed  in  the  past  and  thus  considered  as  part  of  the 
counterfactual, expenditure savings over 2010-13 are estimated at some 1½% of GDP. These 
include  savings  at  central  government  and  social  security  level.  Freeze  in  transfers  from 
central  government  as  well  as  relatively  constrained  financing  conditions  have  probably 
contributed to the subdued growth of local spending but this is difficult to substantiate. 

Regarding central government, savings were achieved through the General Review of Public 
Policies  (révision  générale  des  politiques  publiques  or  RGPP)  which  was  launched  by  the 
authorities in July 2007. The initial aim was to reduce public spending while increasing the 
efficiency  and  quality  of  public  action  by  reviewing  underlying  government  policies, 
coverage  of  activities  by  the  public  sector  and  delivery  modes  of  public  services.  However, 
actual  measures  were  confined  to  merging  ministerial  departments,  rationalising  the  central 
government's administration in local territories and sharing support services that cut across all 
ministries (HR policy, procurement, etc.) without truly reviewing major social and economic 
policies.  One  symbolic  measure  of  the  RGPP  was  the  non-replacement  of  half  of  retiring 
central government civil servants. Overall, the underlying savings have contributed to meeting 
the double spending norm at central government level over the last few years5. The RGPP has 
now been replaced by the MAP (modernisation de l'action publique), whose aim is to achieve 
further savings through a genuine review of all public policies, including in the areas of social 
security and local government. While a number of programmes are currently being reviewed, 
no measures have up to date been officially announced. 

Public sector wages have been frozen in nominal terms since July 2010, and no indexation is 
foreseen before next year. This measure affects all sub-sectors of general government. 

4 For example by the Court of Auditors, the Inspection générale des finances and the Inspection générale des 
affaires sociales. 
5  Central  government  expenditure  excluding  interest  payments  and  civil  servants'  pensions  has  been  frozen  in 
nominal terms since 2011. This rule comes on top of the zero volume rule introduced in 2004, which applies to 
all central government expenditure. 

6 

 
 
 
 
 
                                                            
Concerning pensions, the 2010 reform included a gradual increase in the minimum retirement 
age from 60 to 62 and in the full-pension age from 65 to 67. The age of 60 was restored for 
certain categories of workers as from November 2012.   

Finally, healthcare expenditure is subject to a nominal target fixed on an annual basis (objectif 
national de dépenses d'assurance maladie or ONDAM). This rule was strengthened in 2010, 
notably  through  (i)  an  improved  governance  (establishment  of  a  steering  committee  and  a 
statistical committee within the administration, in charge of following healthcare expenditure 
on a monthly basis); (ii) an increased role for the independent committee in charge of alerting 
the  authorities  in  case  of  substantial  slippages;  (iii)  setting  aside  funds  at  the  beginning  of 
each  year,  which  are  released  in  the  course  of  the  year  depending  on  whether  the  target  is 
(expected  to  be)  met.  Overall,  annual  targets  have  since  been  more  ambitious  and,  most 
importantly, fully achieved. 

Overall,  while  a  purely  top-down  approach  provides  a  mixed  picture  when  it  comes  to 
assessing  effective  action,  a  comprehensive  analysis  suggests  that  the  cumulated  impact  of 
discretionary  measures  exceeds  the  recommended  fiscal  effort.  Furthermore,  looking  at 
individual measures yields a more positive picture regarding expenditure savings, with these 
estimated  to  account  for  one-third  of  the  total  budgetary  impact,  against  an  exclusively 
revenue-based fiscal consolidation according to the structural balance approach6. 

COM 
2009 AF
n.a.

2013
COM 
2013 SF
53.3

Table 3 – Composition of budgetary adjustment 

2009

2010

2011

2012

% of GDP

Revenue
of which:
- Taxes on production and imports
- Current taxes on imcome, wealth, etc.
- Social contributions
- Other (residual)
Expenditure
of which:
- Primary expenditure
      of which:
     - Compensation of employees
     - Intermediate consumption
     - Social payments
     - Subsidies
     - Gross fixed capital formation
     - Other (residual)
- Interest expenditure
General government balance (GGB)
Primary balance
One-off and other temporary measures
Structural balance
Change in structural balance
Real GDP growth
GDP deflator growth
Nominal GDP growth

COM 
2009 AF
47.0

14.4
9.9
17.4
5.3
55.3

outturn

49.2

15.1
9.9
18.8
5.4
56.8

COM 
2009 AF
46.8

14.5
10.1
17.0
5.2
55.1

outturn

49.5

14.9
10.6
18.6
5.4
56.6

COM 
2009 AF
47.1

14.4
10.7
16.8
5.2
54.8

outturn

50.6

15.3
11.2
18.8
5.4
55.9

52.5

54.3

52.2

54.1

51.8

53.3

13.1
5.3
24.6
1.5
3.5
4.5
2.8
-8.3
-5.5
0.0
-7.0
-3.1
-2.2
1.9
-0.3

13.5
5.6
25.5
1.7
3.4
4.7
2.4
-7.5
-5.1
0.0
-6.1
1.9
-3.1
0.7
-2.5

13.0
5.2
24.8
1.4
3.3
4.4
2.9
-8.2
-5.4
-0.4
-6.6
0.4
1.2
1.2
2.5

13.4
5.8
25.6
1.7
3.1
4.5
2.4
-7.1
-4.7
-0.2
-5.8
0.3
1.7
1.1
2.7

12.9
5.1
24.6
1.4
3.3
4.4
3.0
-7.7
-4.7
0.0
-6.5
0.1
1.5
1.7
3.3

13.1
5.5
25.5
1.5
3.1
4.6
2.6
-5.3
-2.7
0.1
-4.7
1.2
1.7
1.3
3.1

COM 
2009 AF
n.a.

n.a.
n.a.
n.a.
n.a.
n.a.

n.a.

n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.

outturn

51.7

15.4
12.0
19.0
5.3
56.6

54.0

13.2
5.6
26.0
1.5
3.1
4.6
2.6
-4.8
-2.3
0.0
-3.6
1.1
0.0
1.6
1.6

n.a.
n.a.
n.a.
n.a.
n.a.

n.a.

n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.

SP 2013

53.1

15.6
12.8
19.3
5.4
56.8

15.5
13.0
19.2
5.5
57.2

54.7

54.4

13.2
5.6
26.6
1.5
3.2
4.5
2.5
-3.9
-1.4
0.1
-2.2
1.3
-0.1
1.4
1.3

13.2
5.6
26.4
1.5
3.2
4.5
2.4
-3.7
-1.3
-0.1
-1.8
1.6
0.1
1.5
1.7

Source: COM 2009 AF – Commission services' 2009 Autumn Forecast; COM 2013 SF – Commission services' 2013 Spring Forecast; SP 2013 – Stability 
Programme 2013.

6  Following  a  top-down  approach  suggests  that  fiscal  consolidation  has  been  revenue-driven:  based  on  the 
Commission  services'  2013  Spring  Forecast,  the  cyclically-adjusted  ratio  of  revenue  to  GDP  net  of  one-off 
measures  is  estimated  to  increase  from  47¾%  in  2009  to  51¼%,  while  the  expenditure  ratio  is  set  to  remain 
broadly flat in structural terms.  

7 

 
 
 
                                                            
3.4. 

Budgetary implementation in 2010 

After peaking at 7.5% of GDP in 2009, the general government deficit decreased to 7.1% in 
2010,  reflecting  both  cyclical  effects7  and  an  improvement  in  the  structural  balance  (partly 
offset by deficit-increasing one-offs). The stimulus package implemented as part of the EERP, 
which included both revenue and expenditure measures, was partly withdrawn. Savings also 
came  from  the  RGPP  review  exercise  conducted  at  central  government  level  and  the 
healthcare spending norm that was fully achieved for the first time since more than a decade. 
On  the  other  hand,  the  local  business  tax  reform8  and  the  VAT  rate  decrease  restaurant 
services weighed on tax receipts. Another significant development was the strong decline in 
investment  by  local  authorities,  which  accounts  for  some  70%  of  total  general  government 
gross  fixed  capital  formation,  which  clearly  contributed  to  the  subdued  increase  in  public 
expenditure. 

Overall,  the  cumulated  impact  of  discretionary  measures  excluding  one-offs  is  estimated  at 
¾% of GDP in 2010. However, this is only partly reflected in the structural balance, which 
improved by 0.3% of GDP, reflecting different baseline scenarios. Indeed, the benchmark for 
measuring the fiscal effort as per the structural balance is potential output growth, whereas the 
benchmark for assessing the budgetary impact of measures as per bottom up is often different 
across  revenue/expenditure  items  and  often  diverges  from  potential  output  growth.  When 
correcting for downward revisions in potential output growth (estimated impact of +0.1% of 
GDP) and revenue windfalls (estimated impact of -0.2% of GDP in 2010, mainly due to the 
strong  rebound  in  corporate  income  tax  receipts)  compared  with  the  time  the  Council 
recommendation  was  issued,  the  fiscal  effort  as  measured  by  the  change  in  the  structural 
balance comes at 0.2% of GDP.  

7 GDP growth was 1.7% vs. potential output growth estimated at 1.0%. 
8 The local business tax was paid by companies and essentially based on the rental value of fixed assets. It was 
abolished  in  2010  and  replaced  by  a  new  economic  contribution  for  businesses  (contribution  économique 
territoriale  or  CET)  and  a  flat-rate  tax  on  network  businesses;  additional  tax  revenue  was  also  transferred  to 
local governments.   

8 

 
 
 
                                                            
Table 4: Main budgetary measures over 2010-13 (excluding one-offs) 

Revenue 

Expenditure 

2010 
Phasing-out of the recovery plan (+0.6% of GDP) 

Reduced VAT on restaurant services (-0.1% of GDP) 

Local business tax reform (-0.2% of GDP) 

2011 
Application  of  the  standard  VAT  rate  to  triple-play 
services (+0.1% of GDP) 

Other increases in indirect taxation (+0.1% of GDP) 

Complete phasing-out of the recovery plan (+0.1% of 
GDP) 

Increase  in  income  taxation/reduction  in  income  tax 
expentitures (+0.3% of GDP) 

Increase  in  social  contributions/reduction  in  social 
security exemptions (+0.2% of GDP) 

2012 
New intermediate VAT rate (+0.1% of GDP) 

Other increases in indirect taxation (+0.2% of GDP) 

Increase  in  income  taxation/reduction  in  income  tax 
expentitures (+0.6% of GDP) 

No indexation of tax brackets of personal income tax 
and tax on wealth (+0.1 of GDP) 

Higher  social  levies  on  capital  income  and  gains 
(+0.1% of GDP) 

Local business tax reform (-0.1% of GDP) 

Increase  in  social  contributions/reduction  in  social 
security exemptions (+0.1% of GDP) 

2013 
Increase in indirect taxation (+0.2% of GDP) 

Increase  in  income  taxation/reduction  in  income  tax 
expentitures (+0.5% of GDP) 

No indexation of tax brackets of personal income tax 
and tax on wealth (+0.1 of GDP) 

Higher social levies on capital income and gains and 
on employee savings schemes (+0.2% of GDP) 

Increase  in  social  contributions/reduction  in  social 
security exemptions (+0.3% of GDP) 

Phasing-out  of  the  recovery  plan  (-0.1%  of 
GDP) 

Savings  stemming  from  the  RGPP  spending 
review  at  central  government  level  (-0.1%  of 
GDP) 

Savings  in  healthcare  expenditure  (-0.1%  of 
GDP) 

Phasing-out  of  the  recovery  plan  (-0.1%  of 
GDP) 

Freeze in base wages of civil servants (-0.1% 
of GDP) 

Savings  stemming  from  the  RGPP  spending 
review  at  central  government  level  (-0.2%  of 
GDP) 

2010 pension reform (-0.1% of GDP) 

Savings  in  healthcare  expenditure  (-0.1%  of 
GDP) 

Other measures (-0.1% of GDP) 

Freeze in base wages of civil servants (-0.1% 
of GDP) 

Savings  stemming  from  the  RGPP  spending 
review  at  central  government  level  (-0.1%  of 
GDP) 

Additional  savings  at  central  government 
level (-0.1% of GDP) 

2010 pension reform (-0.2% of GDP) 

Savings  in  healthcare  expenditure  (-0.1%  of 
GDP) 

Investissements  d'avenir  programme  (+0.1% 
of GDP) 

Other measures (+0.1% of GDP) 

Freeze in base wages of civil servants (-0.1% 
of GDP) 

Savings  stemming  from  the  RGPP  spending 
review  at  central  government  level  (-0.1%  of 
GDP) 

2010 pension reform (-0.1% of GDP) 

Savings  in  healthcare  expenditure  (-0.1%  of 
GDP) 

Investissements  d'avenir  programme  (+0.1% 
of GDP) 

9 

 
 
 
 
 
 
 
 
 
 
 
 
Note: A positive sign implies that revenue / expenditure increases as a consequence of this measure. 
Annual budgetary impacts are estimated by the Commission services. Measures with a budget impact 
of at least 0.1% of GDP are listed.  

Other measures (+0.1% of GDP) 

10 

 
 
 
 
3.5. 

Budgetary implementation in 2011 

In  2011,  the  deficit  decreased  significantly  to  reach  5.3%  of  GDP.  While  GDP  growth 
remained  unchanged  at  1.7%,  the  improvement  mainly  stemmed  from  strengthened 
consolidation efforts. 

Beyond  the  phasing-out  of  the  remaining  stimulus  measures,  the  2011  budget  contained  a 
significant set of tax increases. These included a cut in tax expenditures, an increase in the top 
rate of personal income tax from 40% to 41%, an advance payment of social contributions on 
life insurance policies, higher taxation of supplementary health insurance schemes, standard 
VAT  rate  being  applied  to  triple-play  services  and  a  new  tax  on  banks.  Additional  revenue 
measures were announced in August 2011 but most implied a significant budgetary impact in 
2012 only. Overall, the tax burden increased to 43.7% of GDP from 42.5% in 2010, also on 
the  back  of  one-offs  and  somewhat  higher  increase  in  tax  revenue  (net  of  discretionary 
measures) than nominal GDP growth. 

On the expenditure side, the RGPP programme review process yielded additional savings at 
central government level. The healthcare spending norm was again (over)achieved along with 
substantial  savings  from  the  2010  pension  reform.  Compensation  of  employees  grew  much 
less  compared  with  historical  trends  as  base  wages  across  all  government  sub-sectors  were 
frozen  in  nominal  terms  (on  top  of  replacing  only  half  of  retiring  central  government  civil 
servants decided as part of the RGPP). On the whole, public expenditure remained flat in real 
terms (when deflated by national CPI) against an annual increase of 2.3% on average between 
1999 and 2009. However, part of this was due to exceptional factors such as the counter-effect 
of unusually high military equipment deliveries in 2010 (which alone contributed to lowering 
expenditure growth by 0.4 pp.).   

The  overall  budgetary  impact  of  discretionary  measures  excluding  one-offs  is  estimated  at 
1½% of GDP in 2011. The fiscal effort as measured by the change in the structural balance 
was 1.2% of GDP. Correcting for downward revisions in potential output growth (impact of 
+0.1% of GDP) brings it to 1.3% of GDP. However, large revenue windfalls (impact of -0.4% 
of  GDP)  reflected  personal  and  income  income  tax  receipts  but  also  social  contributions 
growing above what standard elasticities woud have implied. Based on this, the fiscal effort 
comes at 0.9% of GDP in 2011. 

3.6. 

Budgetary implementation in 2012 

According to the national statistical office, the headline deficit came out at 4.8% of GDP last 
year, thus falling short of the 4.5% targeted until recently by the authorities (although part of 
the  difference  stemmed  from  the  cost  of  bailing  out  Dexia,  which  Eurostat  consided  as  a 
capital  transfer  in  late  March).  GDP  growth  well  below  potential  affected  negatively  the 
headline numbers and partly offset the budgetary impact of fiscal consolidation.  

On the revenue side, measures included a further cut in tax expenditures, no indexation of tax 
brackets  of  personal  income  tax  and  tax  on  wealth  in  2012-13,  limiting  the  possibilities  for 
carrying over losses in the calculation of corporate income tax, an additional temporary tax on 
top  incomes  and  large  companies,  higher  taxation  on  capital  income  and  gains,  a  new 
intermediate  VAT  rate  (implying  an  increase  from  5.5%  to  7%  for  a  number  of  goods  and 
services) and a rise in excise duties on tobacco and alcohol. An additional fiscal package was 
decided  in  the  course  of  the  year  to  compensate  for  lower  than  previously  expected  GDP 
growth.  Measures  included  a  new  cut  in  tax  expenditures,  a  one-off  contribution  on  wealth 
(which has since been partly replaced by higher statutory rates of tax on wealth), doubling the 

11 

 
 
 
financial  transaction  tax  adopted  earlier  that  same  year  and  some  advance  tax  payments. 
Overall, the tax burden increased by another 1.2 pp. to 44.9% of GDP. 

Regarding  expenditure,  savings  at  central  government  level  came  again  from  the  on-going 
programme  review  process.  Budgetary  appropriations  were  also  cancelled  as  part  of  the 
successive fiscal packages. The ONDAM spending norm was overachieved for the third year 
in a row, thus adding savings compared with the trend increase in healthcare expenditure. The 
2010  pension  reform  yielded  additional  savings  and  the  gradual  increase  in  retirement  ages 
was accelerated. In addition, the indexation of housing and family allowances on inflation was 
partly  suspended.  The  freeze  in  base  wages  across  all  sectors  of  general  government  was 
maintained thus contributing to an only subdued increase in the public sector's wage bill. On 
the  other  hand,  the  back-to-school  allowance  was  raised  by  25%  and  the  investissements 
d'avenir  programme  (notably  consisting 
to  first 
disbursements of funds. Overall, the increase in general government expenditure was 0.9% in 
real terms, thus remaining well below historical trends. The impact of one-off measures (e.g. 
recapitalisation  of  Dexia,  sale  of  mobile  phone  licenses  recorded  in  national  accounts  as 
negative expenditure) appeared broadly balanced. 

investments)  gave  rise 

in  public 

The total budgetary impact of discretionary measures excluding one-offs is estimated at 1½% 
of GDP while the structural balance improved by 1.1% of GDP. Taking revisions in potential 
output  growth  into  account  (impact  of  +0.1%  of  GDP)  brings  the  latter  to  1.2%  of  GDP. 
However, revenue net of discretionary measures grew again above what standard elasticities 
would have implied (impact of -0.1% of GDP), driven by indirect taxes, personal income tax 
receipts and social contributions. Altogether, this brings the fiscal effort to 1.1% of GDP in 
2012. 

3.7. 

Budgetary developments in 2013 

According to the Commission services' 2013 Spring Forecast, this year's deficit is expected to 
reach 3.9% of GDP. This is slightly higher than projected in the winter forecast and mainly 
due to lower growth prospects and the base effect stemming from 2012. Cyclical effects will 
again impact negatively on the headline figures.9. 

On top of the measures included in last summer's fiscal package, which will now yield their 
full-year  effects,  the  2013  budget  contained  a  significant  set  of  new  tax  hikes  and  tax 
expenditure cuts. Additional revenues compared with 2012 will come mainly from increasing 
personal income tax on high incomes – the top rate has been increased from 41% to 45% –, 
reducing corporate income tax  credits, increasing donation and inheritance taxes, abolishing 
tax and social security exemptions on overtime, increasing social contributions on employee 
savings schemes as well as on capital income and gains. However, a number of measures have 
only a one-off budgetary impact meaning that next year's revenue will actually fall assuming 
no further policy action is taken. On the whole, the tax burden is expected to increase by some 
1.4  pp.  to  46.3%  of  GDP,  implying  that  it  will  have  risen  by  4.2  pp.  over  the  2010-13 
reference period. 

Although the RGPP programme review process has since mid-2012 been officially replaced 
by  the  modernisation  de  l'action  publique  or  MAP,  it  is  set  to  continue  yielding  savings  at 
central government level this year as well. Although several programme reviews have already 
been  launched  as  part  of  the  MAP,  no  measures  have  been  specified  so  far  and  the  target 
amount  of  savings  remains  unclear.  The  freeze  in  public  sector  wages  has  been  maintained 
with compensation of employees again set to increase below historical levels. In the area of 

9 GDP is set to decrease by 0.1% vs. potential output growth estimated at 1.0%. 

12 

 
 
                                                            
social  security,  the  healthcare  spending  norm  is  forecast  to  be  met  as  it  was  in  the  period 
2010-12.  While  the  2010  pension  reform  will  provide  additional  savings  along  with  the 
gradual  increase  in  the  minimum  retirement  age,  these  will  be  partly  offset  by  the  partial 
rollback of the reform. Indeed, people who started work before the age of 20 and achieved a 
full  contribution  career  have  since  November  2012  been  allowed  again  to  retire  at  60. 
However,  the  budgetary  impact  of  this  measure  has  been  compensated  by  an  increase  in 
employers' and employees' social contributions. On the pension front as well, social partners 
reached a historical agreement in March allowing for pensions from supplementary schemes 
to be only partly adjusted for annual inflation over 2013-15. While the agreement has already 
been  applied,  substantial  savings  will  be  made  from  2014  onwards.  On  the  other  hand,  an 
additional  set  of  disbursements  under  the  investissements  d'avenir  programme  will  affect 
negatively the general government balance. Recent measures such as subsidised employment 
schemes  (emplois  d'avenir,  contrats  de  generation)  are  planned  to  be  funded  through 
additional savings. On the whole, general government expenditure is set to increase by around 
1% in real terms this year. However, the ratio of public expenditure to GDP is set to increase 
again on the back of low nominal GDP growth projected. 

Overall,  the  budgetary  impact  of  discretionary  measures  excluding  one-offs  is  estimated  at 
1½% of GDP in 2013. According to the spring forecast, the structural balance is projected to 
improve  by  another  1.3%  of  GDP.  Adjusting  for  revisions  in  potential  output  growth 
compared with the time the Council recommendation was issued (impact of +0.1% of GDP) 
brings the fiscal effort at 1.5% of GDP. Also taking into account expected windfall revenues 
compared with standard elasticities (impact of -0.2% of GDP) brings it back to 1.3% of GDP 
(factors do not add up due to rounding effects).  

The average  annual  fiscal effort over  the entire 2010-13 period is estimated at 1% of GDP. 
Adjusting for revisions in potential output growth and revenue windfalls brings it to 0.9% of 
GDP. The cumulated impact of discretionary measures over that period is estimated at 5¼% 
of GDP.  

4. 

PROPOSED NEW ADJUSTMENT PATH 

According  to  the  Commission  services'  2013  Spring  Forecast,  France  is  not  expected  to 
correct its excessive deficit by the deadline established in the Council recommendation of 2 
December 2009 despite an average annual fiscal effort over 2010-13 very close to the level 
recommended  by  the  Council  and  an  even  higher  cumulated  budgetary  impact  of 
discretionary  measures.  At  the  same  time,  while  the  macroeconomic  scenario  underpinning 
the  recommendation  assumed  that  the  output  gap  would  gradually  narrow,  GDP  is  actually 
expected to grow below potential over that period. This has clearly had a negative impact on 
the  headline  budget  balance.  It  therefore  appears  justified  to  issue  a  revised  EDP 
recommendation and to extend the deadline for correction of the excessive deficit. 

Based on the spring forecast, the deficit is set to reach 4.2% of GDP next year under the usual 
no policy change assumption which implies that only measures specified in sufficient detail 
have  been  taken  into  account.  In  particular,  it  remains  unclear  whether  the  MAP  spending 
review will translate into sizeable (and easy to quantify) savings and current plans to reform 
the  pension  system  need  to  be  further  detailed.  In  addition,  maintaining  the  freeze  in  base 
wages  beyond  2013  has  not  been  explicitly  confirmed.  Specifics  are  also  lacking  on  the 
projected slowdown in local government spending. On the revenue side, a number of one-off 
tax payments will expire at end-2013 and no specific measures to compensate for these have 
been announced so far. In addition, the recent tax credit for competitiveness and employment 

13 

 
 
appears insufficiently backed by clearly specified expenditure savings even though these are 
planned to account for half of its funding. 

Building on this, different scenarios have been considered in order to assess the delay needed 
for France to realistically correct its excessive deficit. In particular, an extension by one year 
of  the  deadline  would  require  a  fiscal  effort  in  2013-14  well  above  the  level  currently 
recommended,  on  top  of  what  is  already  contained  in  the  spring  forecast,  when  also  taking 
into  account  second-round  effects  of  fiscal  consolidation  on  growth.  Given  the  size  of  the 
fiscal  effort  required,  the  negative  impact  on  GDP  growth  would  be  significant  and  a 
recession  in  2014  could  not  be  discarded.  Such  a  scenario  would  also  probably  imply 
additional measures already this year, on top of those already implemented by the authorities. 

On the other hand, a two-year extension would allow bringing the headline deficit below 3% 
in  2015  and  growth  would  remain  positive  in  both  years,  even  after  taking  into  account 
second-round effects on growth. Given that 2015 is not covered by the spring forecast, it has 
been  assumed  in  the  baseline  scenario  that  at  unchanged  policies  (i)  the  output  gap  would 
close  in  five  years'  time  with  this  leading  to  GDP  growth  in  2015  at  1.9%  (vs.  potential 
growth  at  1.1%  based  on  the  spring  forecast)  and  (ii)  the  structural  balance  would  remain 
unchanged  in  2015.  Together,  these  two  assumptions  imply  a  slight  improvement  in  the 
headline deficit in 2015 (3.9% of GDP vs. 4.2% in 2014). 

On the basis of the considerations above, granting France two additional years for correcting 
its  excessive  deficit  appears  warranted.  This  would  be  consistent  with  a  fiscal  adjustment 
conducted  in  the  context  of  well-specified  medium-term  plans,  at  a  steady  underlying  pace 
that  would  ensure  the  reduction  in  the  deficit  without  undermining  the  recovery.  Such  an 
extension would be based on a strict implementation of this year's budget and a fiscal effort of 
0.8%  of  GDP  in  both  201410  and  2015,  which  is  below  the  pace  of  fiscal  adjustment  since 
2010. This would be consistent with headline deficit targets of 3.9% of GDP for 2013, 3.6% 
for 2014 and 2.8% for 201511. The targets for annual improvement in the structural balance 
take  into  account  the  need  to  compensate  for  negative  second-round  effects  of  fiscal 
consolidation on growth and thus on public finances. 

The  Commission  services'  2013  Spring  Forecast  incorporates  only  measures  adopted  or 
known  in  sufficient  detail.  Therefore  expenditure  savings  and/or  revenue  measures  would 
need to be specified, adopted and rapidly implemented in order to achieve the correction of 
the excessive deficit by 2015 at the latest while at the same time fulfilling the proposed fiscal 
effort  in  both  2014  and  2015.  The  situation  will  have  to  be  monitored  closely  and  the 
authorities should stand ready to take corrective action in the event of expenditure slippages 
or revenue shortfalls. 

Furthermore, the consolidation of public finances and their sustainability would be supported 
by (i) proceeding as currently planned with a thorough review of spending categories across 
all sub-sectors of general government, including at social security and local government level, 
which  could 
into  a  more  expenditure-based  fiscal  consolidation  and  (ii) 
strengthening the medium- and long-term sustainability of the pension and healthcare systems 
by further adjusting all relevant parameters. 

translate 

10 Does not equal difference 2013/14 in Table 6 due to rounding effects. 
11 The headline targets take into account one-off measures whose impact on the general government balance is 
currently estimated at 0.1% of GDP in 2013 and -0.1% in both 2014 and 2015. 

14 

 
 
                                                            
Table 5 – Forecast of key macroeconomic and budgetary variables under the baseline scenario 

% of GDP
Revenues 
Current revenues
Discretionary measures with impact on current revenue (1)
Expenditure
Real GDP growth (%) 
Nominal GDP growth (%) 
Potential GDP growth (%) 
Structural balance
General government balance
p.m CAB methodology revenue elasticity
p.m Apparent revenue elasticity
p.m Output gap (% of potential output)

2012
51.7
51.4
1.1
56.6
0.0
1.6
1.0
-3.6
-4.8
0.9
1.0
-2.4

2013
53.3
52.9
1.3
57.2
-0.1
1.3
0.9
-2.2
-3.9
0.9
1.2
-3.4

2014
52.9
52.6
-0.4
57.2
1.1
2.8
1.0
-2.3
-4.2
0.9
1.0
-3.3

2015
52.6
52.2
-0.1
56.4
1.9
3.6
1.1
-2.3
-3.9
0.9
0.9
-2.6

(1) Measures clearly specified and committed to by governments ahead of the recommendation.

Table 6 – Forecast of key macroeconomic and budgetary variables under the EDP scenario   

% of GDP
Real GDP growth (%)
Potential GDP growth (%)
Structural balance
General government balance
p.m Output gap (% of pot. output)

2012
0.0
1.1
-3.5
-4.8
-2.5

2013
-0.1
0.9
-2.2
-3.9
-3.4

2014
0.6
0.9
-1.5
-3.6
-3.7

2015
1.1
0.9
-0.7
-2.8
-3.5

15 

 
 
 
 
 
5. 

CONCLUSIONS 

On  current  information,  the  average  annual  fiscal  effort  after  correction  for  the  effects  of 
revisions in potential output growth and revenue windfalls is estimated to amount to 0.9% of 
GDP.  This  falls  slightly  short  of  the  average  annual  fiscal  effort  of  above  1%  of  GDP  over 
2010-13 recommended by the Council in December 2009.  

However,  the  bottom-up  approach  estimates  the  cumulated  size  of  individual  consolidation 
measures at some 5¼% of GDP over 2010-13. It confirms that fiscal consolidation has so far 
been more revenue-based but suggests that expenditure savings (beyond "customary" savings 
already  observed  in  the  past)  have  also  contributed  to  improving  the  general  government 
balance.  Thus,  the  bottom-up  calculation  of  the  discretionary  consolidation  measures 
implemented by the authorities over 2010-13 provides a more positive picture than does the 
purely top-down approach based on the structural balance. 

The deficit is expected to remain well above the 3% of GDP reference value this year. It is set 
to slightly deteriorate in 2014 under the usual no policy change assumption underpinning the 
Commission services' forecasts. 

The  substantial  cyclical  deterioration  in  the  budgetary  position  resulting  from  the  weaker 
overall position of the economy relative to the macroeconomic scenario underlying the 2009 
Council  recommendation  and  medium-term  growth  prospects  suggest  that  extending  the 
deadline for correction of the excessive deficit by 2015 at the latest is appropriate.  

Granting France two additional years appears commensurate with headline deficit targets of 
3.6%  of  GDP  for  2014  and  2.8%  for  2015.  The  underlying  improvement  in  the  structural 
budget balance would be 0.8% of GDP both in 2014 and 2015. 

16 

 
 
 
Table 7 – Comparison of key macroeconomic and budgetary projections 

Real GDP
(% change)

Output gap (1)
(% of potential GDP)

General government balance
(% of GDP)

Primary balance
(% of GDP)

COM AF 09
COM SF 13
SP 2013
COM AF 09
COM SF 13
SP 2013
COM AF 09
COM SF 13
SP 2013
COM AF 09
COM SF 13
SP 2013

(% of GDP)

Structural balance (2)
(% of GDP)

Cyclically-adjusted balance (1) COM AF 09
COM SF 13
SP 2013
COM AF 09
COM SF 13
SP 2013
COM AF 09
COM SF 13
SP 2013

Government gross debt
(% of GDP)

2009
-2.2
-3.1
-3.1
-2.5
-2.7
-2.7
-8.3
-7.5
-7.5
-5.5
-5.1
-5.1

-7.0
-6.1
-6.1
-7.0
-6.1
-6.1
76.1
79.2
79.2

2010
1.2
1.7
1.7
-2.5
-2.0
-2.1
-8.2
-7.1
-7.1
-5.4
-4.7
-4.7

-7.0
-6.0
-5.9
-6.6
-5.8
-5.8
82.5
82.4
82.4

2011
1.5
1.7
1.7
-2.4
-1.4
-1.5
-7.7
-5.3
-5.3
-4.7
-2.7
-2.7

-6.5
-4.5
-4.5
-6.5
-4.7
-4.6
87.6
85.8
85.8

2012
n.a.
0.0
0.0
n.a.
-2.4
-2.5
n.a.
-4.8
-4.8
n.a.
-2.3
-2.3

n.a.
-3.5
-3.5
n.a.
-3.6
-3.4
n.a.
90.2
90.2

2013
n.a.
-0.1
0.1
n.a.
-3.4
-3.3
n.a.
-3.9
-3.7
n.a.
-1.4
-1.3

n.a.
-2.1
-1.9
n.a.
-2.2
-1.8
n.a.
94.0
93.6

2014
n.a.
1.1
1.2
n.a.
-3.3
-3.2
n.a.
-4.2
-2.9
n.a.
-1.8
-0.4

n.a.
-2.5
-1.2
n.a.
-2.3
-1.1
n.a.
96.2
94.3

(1) Output gaps and cyclically-adjusted balances according to the Stability Programme as recalculated by 
Commission services on the basis of the information in the Stability Programme.
(2) Cyclically-adjusted balance excluding one-off and other temporary meaures.
Source: COM 2009 AF – Commission services' 2009 Autumn Forecast; COM 2013 SF – Commission services' 
2013 Spring Forecast; SP 2013 – Stability Programme 2013.

17 

 
 
 
  
ANNEX 

Table A1 – Adjustment of the apparent fiscal effort for revisions in potential output growth - 
details of calculation 

Average potential 
GDP growth 
underlying the 
Council 
Recommendation 
(%)

Average potential 
GDP growth at the 
time of assessment 
(%)

Forecast error (%)

Structural 

expenditure         

(% of potential 
GDP)

Correction 
coefficient (% of 
nominal potential 
GDP)

(1)

1.3

(2)

1.1

(3)=(1)-(2)

0.3

(4)

53.7

(5)=(3)*(4)/100

0.1

Source: Commission services' 2009 Autumn Forecast, 2013 Spring Forecast and calculations.

Table A2 – Adjustment of the apparent fiscal effort for revenue windfalls/shortfalls as compared to 
standard elasticities - details of calculation 

Change in 
current 
revenues (yoy) 
(billions of 
national 
currency)

Discretionary 
current revenue 
measures 
(billions of 
national 
currency)

Nominal GDP 
growth 
assumptions (%)

Current 
revenues  in 
year t-1 (billion 
of national 
currency)

Revenue gap 
(billion of 
national 
currency)

Correction 
coefficient (% of 
nominal 
potential GDP)

(1)

29.8
53.8
38.4
43.6

(2)

4.1
19.6
22.4
27.4

(3)

2.7
3.1
1.6
1.3

2010
2011
2012
2013
average

(4)

923.7
953.5
1007.3
1045.7

(5)=
(1)-(2)-ε*(3)*(4)
3.3
8.3
1.8
3.9

0.2
0.4
0.1
0.2
0.2

Source: Commission services' 2009 Autumn Forecast, 2013 Spring Forecast and calculations.

18