Recommendation for a COUNCIL DECISION abrogating Decision 2009/591/EC on the existence of an excessive deficit in Latvia
Date: 2013-05-29
Institutions: European Commission
Subjects: Latvia, budget deficit, budgetary equilibrium, economic situation, medium-term forecast, stability pact

EUROPEAN 
COMMISSION 

Brussels, 29.5.2013  
COM(2013) 386 final 

Recommendation for a 

COUNCIL DECISION 

abrogating Decision 2009/591/EC on the existence of an excessive deficit in Latvia 

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Recommendation for a 

COUNCIL DECISION 

abrogating Decision 2009/591/EC on the existence of an excessive deficit in Latvia 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 126(12) thereof, 

Having regard to the recommendation from the Commission, 

Whereas:  

(1) 

(2) 

(3) 

By Council Decision 2009/591/EC of 7 July 20091, following a recommendation from 
the Commission in accordance with  Article 104(6) of the Treaty, it was decided that 
an excessive deficit existed in Latvia. The Council noted that the general government 
deficit reached 4.0% of GDP in 2008, above the 3% of GDP Treaty reference value, 
while the general government gross debt stood at 19.5% of GDP in 2008, well below 
the 60% of GDP Treaty reference value2.  

On  7  July  2009,  in  accordance  with  Article 104(7)  of  the  Treaty  and  Article  3(4)  of 
Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the 
implementation  of  the  excessive  deficit  procedure3,  the  Council,  based  on  a 
recommendation from the Commission, addressed a recommendation to Latvia with a 
view  to  bringing  the  excessive  deficit  situation  to  an  end  by  2012  at  the  latest.  The 
recommendation was made public. 

In  accordance  with  Article  4  of  the  Protocol  on  the  excessive  deficit  procedure 
annexed to the Treaties, the Commission provides the data for the implementation of 
the procedure. As part of the application of this Protocol, Member States are to notify 
data  on  government  deficits  and  debt  and  other  associated  variables  twice  a  year, 
namely before 1 April and before 1 October, in accordance with Article 3 of Council 
Regulation (EC) No 479/2009 of 25 May 2009 on the application of the Protocol on 
the  excessive  deficit  procedure  annexed  to  the  Treaty  establishing  the  European 
Community4.  

(4)  When considering whether a decision on the existence of an excessive deficit should 
be  abrogated,  the  Council  should  take  a  decision  on  the  basis  of  notified  data. 
Moreover, a decision on the existence of an excessive deficit should be abrogated only 

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4 

OJ L 202, 4.8.2009, p. 50. 
The general government deficit and debt for 2008 were subsequently revised to currently 4.2% of GDP 
and 19.8% of GDP respectively. 
OJ L 209, 2.8.1997, p. 6.  
OJ L 145, 10.6.2009, p. 1.  

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if  the  Commission  forecasts  indicate  that the  deficit  will  not  exceed  the  3%  of  GDP 
threshold over the forecast horizon5. 

(5) 

Based on data provided by the Commission (Eurostat) in accordance with Article 14 
of  Regulation  (EC)  No  479/2009  following  the  notification  by  Latvia  before  1 April 
2013 and on the Commission services’ 2013 spring forecast, the following conclusions 
are warranted: 

– 

– 

– 

Following high general government deficits in 2009 and 2010 (respectively at 
9.8%  and  8.1%  of  GDP),  which  partly  reflected  measures  to  stabilise  the 
financial  sector,  the  deficit  started  rapidly  declining  in  2011,  when  it  reached 
3.6%  of  GDP.  This  improvement  reflected  sizeable  and  broad-based  fiscal 
consolidation implemented over the period of 2009-2011 in the context of the 
economic  adjustment  programme  supported  by  the  balance-of-payments 
assistance, as well as improving cyclical conditions; the adjustment programme 
was successfully completed in January 2012. In 2012, the general government 
deficit declined further to 1.2% of GDP, thus overachieving the deficit target of 
2.1% of GDP set in the 2012 convergence programme and well below the 3% 
of  GDP  Treaty  reference  value.  On  the revenue  side  this  reflected  favourable 
cyclical  conditions  and  improving  tax  efficiency,  while  expenditure  growth 
remained substantially below the nominal GDP growth. As a result, the share 
of  government  revenue  in  GDP  increased  by  ¼  percentage  points,  while  the 
share of government expenditure declined by 2 percentage points in 2012. 

The  2013  convergence  programme  envisages  that  the  headline  deficit  will  be 
1.1% of GDP in 2013, stabilising thereafter at the level of 0.9% of GDP until 
2016. The Commission services' 2013 spring forecast projects that the general 
government  deficit  will  remain  broadly  unchanged  in  2013  at  1.2%  of  GDP 
and  will  decrease  to  0.9%  of  GDP  in  2014,  thus  staying  well  below  the 
reference value of 3% of GDP.  

The  general  government  debt  stood  at  40.7%  of  GDP  in  2012.  The 
Commission  services'  2013  spring  forecast  projects  the  general  government 
gross  debt  to  increase  to  43.2%  of  GDP  in  2013,  as  the  government 
accumulates  assets  for  large  debt  repayments  scheduled  for  2014-2015.  The 
debt  is  expected  to  decline  again  to  around  40%  of  GDP  in  2014,  as  these 
repayments take effect. 

The Council recalls that, starting from 2013, which is the year following the correction 
of the excessive deficit, Latvia should ensure compliance with the requirements of the 
preventive arm of the Stability and Growth Pact, including respecting the expenditure 
benchmark. 

In accordance with Article 126(12) of the Treaty, a Council Decision on the existence 
of  an  excessive  deficit  is  to  be  abrogated  when  the  excessive  deficit  in  the  Member 
State concerned has, in the view of the Council, been corrected.  

In line with the “Specifications on the implementation of the Stability and Growth Pact and Guidelines 
on the format and content of Stability and Convergence Programmes”, of 3 September 2012. See:   
http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/coc/code_of_conduct_en.pdf 

(6) 

(7) 

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(8) 

In  the  view  of  the  Council,  the  excessive  deficit  in  Latvia  has  been  corrected  and 
Decision 2009/591/EC should therefore be abrogated, 

HAS ADOPTED THIS DECISION: 

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

Article 1 

Decision 2009/591/EU is hereby abrogated. 

Article 2 

Article 3 

This Decision is addressed to the Republic of Latvia. 

Done at Brussels,  

For the Council 
The President 

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