Proposal for a COUNCIL OPINION on the Economic Partnership Programme of Spain
Date: 2013-11-15
Institutions: European Commission
Subjects: Spain, budget deficit, budgetary equilibrium, retirement conditions, stability pact, tax reform, underground economy, youth unemployment













EUR-Lex - 52013PC0902 - EN











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52013PC0902

Proposal for a COUNCIL OPINION on the Economic Partnership Programme of Spain /* COM/2013/0902 final - 2013/0393 (NLE) */









2013/0393 (NLE)
Proposal for a
COUNCIL OPINION
on the Economic Partnership Programme of Spain 

THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the
Treaty on the Functioning of the European Union,
Having regard to
Regulation (EU) No 473/2013 of the European Parliament and of the Council of 21
May 2013[1] on common provisions for monitoring and
assessing draft budgetary plans and ensuring the correction of excessive
deficit of the Member States in the euro area, and in particular Article 9(4)
thereof,
Having regard to the
proposal of the European Commission,
Whereas: 
(1)       The Stability and Growth
Pact (SGP) aims at securing budgetary discipline across the Union and sets out
the framework for preventing and correcting excessive government deficits. It
is based on the objective of sound government finances as a means of
strengthening the conditions for price stability and for strong sustainable
growth underpinned by financial stability, thereby supporting the achievement
of the Union's objectives for sustainable growth and jobs. 
(2)       Regulation (EU) No
473/2013 of the European Parliament and of the Council of 21 May 2013 on common
provisions for monitoring and assessing draft budgetary plans and ensuring the
correction of excessive deficit of the Member States in the euro area sets out
provisions for enhanced monitoring of budgetary policies in the euro area and
for ensuring that national budgets are consistent with the economic policy
guidance issued in the context of the SGP and the European Semester. Since
purely budgetary measures might be insufficient to ensure a lasting correction
of the excessive deficit, additional policy measures and structural reforms may
be required.  
(3)       Article 9 of Regulation
(EU) No 473/2013 sets out the modalities for Economic Partnership Programmes,
to be submitted by euro area Member States under an Excessive Deficit
Procedure. Setting out a roadmap of measures to contribute to an effective and
durable correction of the excessive deficit, the Economic
Partnership Programme should detail in particular the
main fiscal-structural reforms, notably those referring to taxation, pension
and health systems and budgetary frameworks, which will be instrumental to
correct the excessive deficit in a lasting manner. 
(4)       On 27 April 2009, the
Council adopted a decision according to Article 104(6) of the Treaty, whereby Spain is placed in an excessive deficit procedure. On 21 June 2013 the Council adopted a
revised recommendation under Article 126(7) in the context of an excessive
deficit which was opened before the entry into force of Regulation (EU) No 473/2013.

(5)       On 1 October 2013, and
thereby within the time frame established by Article 9(3), and 17(2) of
Regulation (EU) No 473/2013, Spain presented to the Commission and to the
Council an Economic Partnership Programme, setting out in
particular fiscal-structural reforms that aim at ensuring an effective
and lasting correction of the excessive deficit. The Economic Partnership
Programme includes measures aimed at implementing the Country Specific
Recommendations (CSRs) addressed to Spain by the Council on 9 July. These are
grouped under the following objectives: i) differentiated and growth-enhancing
fiscal repair (CSR#1 and 2); ii) restoring lending to the economy (CSR #3);
iii) fight against unemployment and the social consequences of the crisis (CSR
# 4, 5 and 6); iv) fostering competitiveness and growth (CSR # 7 and 8) and v)
modernising public administration (CSR # 9).
(6)       The fiscal structural
measures that Spain plans to implement are the following: i) strict monitoring
of budgetary developments at regional and local levels; ii) the creation of an
independent fiscal institution; iii) the reduction in healthcare and public
administration spending; iv) the elimination of commercial arrears in the
public sector; v) the reduction of price inertia in public expenditures and
revenues; vi) pension sustainability; vii) the simplification and strengthening
of the efficiency of Spain's tax system; viii) the fight against the informal
economy and ix) the increase in the efficiency of public administration. If
effectively implemented, these measures can be expected to contribute to the
lasting correction of Spain's excessive deficit situation. 
(7)       Spain's Economic
Partnership Programme also takes stock of the progress made in improving the
monitoring of regional finances in accordance with the Budgetary Stability Organic
Law (BSOL), the Region's Liquidity Fund and the Suppliers' Payment Scheme.
However, it does not consider additional steps to strengthen the strict and
transparent enforcement of the preventive and corrective measures provided for
in the BSOL, including e.g. through timely publication of the quarterly
assessment reports of region's economic and financial plans (EFP) and the reasons
for the activation or not of sanctions to non-compliant entities.
(8)       The creation of an
independent fiscal institution in accordance with the requirements of
Regulation (EU) No 473/2013 should contribute to an enhanced monitoring of Spain's public finances and to an early detection of deviations from budgetary targets. The
independent fiscal institution will also advice on the activation of the
preventive, corrective and enforcement measures provided for in the BSOL as
well as on the definition of regions' fiscal targets. However, some
institutional provisions to secure the functional and operational independence
of the council should be made stronger in the existing draft, notably as
regards the relatively short term of office of the president.
(9)       Even though the Economic Partnership
Programme stops short of presenting plans for a comprehensive systematic review
of major spending items, as recommended in the CSRs by March 2014, measures to
rationalise spending on health, employment policy (see also recital 14 on
fighting tax fraud) and on public administration give information on some key
expenditure items. Regarding health expenditure, the revision of the basket of
benefits and of reference prices of pharmaceutical products and the
introduction of a centralised purchasing platform for health supplies, could
result in a more efficient use of public resources. Regarding public
administration, reforms are expected to generate savings over a three-year
period from increasing overall efficiency, notably by eliminating duplicated
administrative structures, streamlining overheads, rationalising the so-called
"institutional" administration, as well as reforming local entities.
Strict monitoring and enforcement of all these measures will be required to
realise expected savings. Regional ownership of the public administration
reform is also critical to securing efficiency gains over the medium term. 
(10)     The on-going revision of
the BSOL aims at strengthening the Ministry of Finance's monitoring powers over
the cash and arrears situation of the various general government levels. The
goal is to eliminate public sector arrears in commercial debt, and to avoid the
accumulation of commercial debt from creating risks to the financial
sustainability of any given public administration. As such, the draft law
strengthens fiscal discipline on all general government sub-sectors.   
(11)     The dis-indexation draft
law aims at discontinuing indexation schemes in administered prices and fees.
Existing mechanisms on collective bargaining, financial sector instruments and
on pensions are excluded from its scope, schemes on pensions being the object
of a separate reform (see below). Following its entry into force, the law is
likely to generate some fiscal savings, while at the same time, contribute to reducing
second round effects on prices while supporting purchasing power and
competitiveness.  
(12)     Recent and planned changes
in the pension system are significant. The proposed regulation of the
sustainability factor and the new pension indexation formula – together with
the early retirement reform adopted in March – are important steps to improve
the sustainability of public finances and to rein in fast-rising pension
expenditure. 
(13)     Regarding the systematic
review of the tax system (CSR 2), the Economic Partnership Programme refers to
the conclusions of a group of experts to be presented in February 2014, which
will be evaluated by the government at a later stage. The document also
presents measures (such as the new tax on fluoride gas) in response to the
recommendation to take additional steps on environmental taxation.  
(14)     The Economic Partnership
Programme also refers to measures to fight tax fraud and undeclared work,
including among others, an annual plan on tax and customs controls to be
adopted at the beginning of 2014, as well as the continued implementation of
the plan against fraud in employment and in social security). These efforts are
expected to yield additional revenues, thus contributing to the fiscal consolidation
effort.   
(15)     Significant attention is
devoted in the Economic Partnership Programme to labour market issues,
including the evaluation of the 2012 labour market reform, the on-going reform
of active labour market policies, the implementation of the Youth
Entrepreneurship and Employment Strategy and the introduction of public-private
partnerships in placement services. However, there are no concrete plans for
the further modernisation of public employment services, beyond the
co-operation with private employment agencies. Moreover, following the
evaluation of the 2012 labour market reform, the Economic Partnership Programme
does not foresee measures for a further strengthening of the reform. That said,
the reform seems to have fostered firms' internal flexibility and wage
moderation, hence limiting, ceteris paribus, employment losses. 
(16)     Reforms on product and
services markets are also going in the right direction. The Economic Partnership
Programme gives information on measures such as the draft law on the guarantee
of market unity, the draft professional services law and the entrepreneurship
law. In addition, the Economic Partnership Programme underlines the measures to
reduce the electricity tariff deficit. The reform, which is still to be
completed, could help contain the accumulation of an electricity tariff debt
and the associated contingent liability for public finances,
HAS ADOPTED THIS OPINION: 
The Economic Partnership
Programme of Spain presented to the Commission and to the Council on 1 October
2013 includes a broadly adequate set of fiscal-structural reforms, which would
be supportive of an effective and lasting correction of the excessive deficit. The Economic
Partnership Programme confirms the reform agenda and timetable for fiscal and other
structural reforms included in the 2013 National Reform Programme and the
Stability Programme and gives in some cases more detail on the content of
measures and their expected timeline. Some recommendations by the Council,
however, are so far only partly backed by concrete measures. This is the case,
for example, of the systematic review of major spending items with a view to
improving the efficiency of public expenditure (under CSR 1). Moreover,
regarding the review of the tax system (CSR 2), the Economic Partnership
Programme mainly refers to the conclusions of a group of tax experts scheduled
for February 2014. In most cases, the reforms still remain to be adopted and /
or fully implemented, swift and full implementation being key for the success
of the Economic Partnership Programme. The Commission and the
Council will monitor the execution of the reforms in the context of the
European Semester. 
Done at Brussels, 
                                                                       For
the Council
                                                                       The
President
[1]       OJ L 140, 27.5.2013 p. 11.