REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the quality of fiscal data reported by Member States in 2014
Date: 2015-03-03
Institutions: European Commission
Subjects: EU Member State, Eurostat, budget deficit, disclosure of information, economic statistics, public administration, public debt, publication of accounts, tax system













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52015DC0088

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the quality of fiscal data reported by Member States in 2014 /* COM/2015/088 final */









REPORT FROM THE COMMISSION TO THE EUROPEAN
PARLIAMENT AND THE COUNCIL
on
the quality of fiscal data reported by Member States in 2014
TABLE
OF CONTENTS
1.    Background. 3
2.    Main findings on the 2014
reporting of government deficit and debt levels.... 3
2.1.     Timeliness, reliability
and completeness. 3
2.1.1.      Timeliness. 3
2.1.2.      Reliability. 4
2.1.3.      Completeness of
tables and supporting information. 5
2.1.4.      Supplementary
tables relating to the financial crisis. 6
2.1.5.      Questionnaire on
intergovernmental lending. 6
2.2.     Compliance with
accounting rules and consistency of statistical data. 7
2.2.1.      Exchange of
information and clarifications. 7
2.2.2.      Dialogue and
methodological visits. 7
2.2.3.      Specific advice
by Eurostat 8
2.2.4.      Launching of an
investigation as referred to in Regulation (EU) No 1173/2011 of the European
Parliament and of the Council on the effective enforcement of budgetary
surveillance in the euro area  8
2.2.5.      Recent
methodological issues. 8
2.2.6.      Consistency with
underlying government accounts. 9
2.3.     Publication. 9
2.3.1.      Publication of
headline figures and detailed reporting tables. 9
2.3.2.      Reservations on
the quality of data. 10
2.3.3.      Amendments to
the reported data. 10
2.3.4.      Publication of
metadata (inventories) 10
3.    Conclusions. 11
1.                      
Background
Article 8(3) of
Council Regulation (EC) No 479/2009 on the application of the Protocol on the
excessive deficit procedure (EDP) annexed to the Treaty establishing the
European Community[1],
as amended, requires the Commission (Eurostat) (hereinafter referred to as
“Eurostat”) to report regularly to the European Parliament and to the Council
on the quality of the actual data reported by Member States. This annual report
provides an overall assessment of timeliness, reliability, completeness,
compliance with accounting rules and consistency of the data. The previous
report (on the 2013 notifications) was adopted by the Commission on 7 March
2014[2].
Eurostat
regularly assesses the quality of the actual data reported by Member States and
of the underlying general government sector accounts which were compiled for
the first time in October 2014 in accordance with Council Regulation (EC) No
549/2013 of 21 May 2013 on the European system of national and regional
accounts in the European Union (ESA 2010)[3]. This work
concentrates on the factors that explain the general government deficit/surplus
and the change in the general government debt. Member States send this
information to Eurostat twice per year as part of the “EDP notification tables”
and of the supplementary information included in the “Questionnaire related to
the EDP notification tables”, in the “Supplementary table for the financial
crisis” and also via bilateral clarifications provided by Member States.
Eurostat also maintains a permanent dialogue with Member States by undertaking
regular EDP dialogue visits.
This report is
based on the main findings and results of the EDP reporting in 2014, focusing
on the latest exercise of October 2014. Where appropriate, comparisons are made
with the April 2014 reporting, as well as with the reporting in 2013.
2.                      
Main findings on the 2014 reporting of government
deficit and debt levels

2.1.                
Timeliness,
reliability and completeness
2.1.1.          
Timeliness

Member States
are required to report their actual and planned EDP data to Eurostat twice per
year, before 1 April and 1 October[4].
During 2014, the EDP reporting covered the years 2010 to 2014. The figures for
2014 are those planned by the national authorities, while the 2010 to 2013
figures are actual data[5].
In accordance with Article 8(1) of Regulation (EC) No 479/2009, Eurostat
assesses the actual data reported by Member States, but not the planned data. 
Compliance with
the reporting deadlines is very good. In 2014, all Member States reported their
actual data respecting the legal deadline in both EDP notifications.  As
concerns planned data, some countries delivered planned data for the year 2014
later than the actual data.

2.1.2.          
Reliability

Revisions
between the April 2014 and the October 2014 notifications were mainly due to
the introduction of the new ESA 2010 and other statistical changes. Contrary to
past years, the debt ratio was revised more than the deficit ratio, notably due
to reclassifications of public units into the general government sector and due
to significant increases in GDP. 
The new ESA 2010
introduced three main methodological changes:
·        
A change in the criteria used to
determine the scope of the general government sector, which may lead to the
reclassification of entities into or outside the general government sector.
·        
A
change in the recording of lump sums paid to government in relation to transfer
of pension funds.
·        
The
removal of an adjustment made for net interest flows associated with swaps and
forward rate agreements.
A detailed table
was provided accompanying the October press release with information on the
main changes by Member State and year[6].
The largest
positive revisions[7]
in the 2013 deficit as percentage of GDP took place in Ireland (+1.5 pp),
Luxembourg (+0.6 pp), Cyprus (+0.5 pp) and Greece (+0.5 pp). The largest
negative revision[8]
in the deficit took place in Lithuania (-0.5 pp) and for five Member States it
was -0.3 pp. Usually revisions to GDP do not impact government deficit ratios
significantly but, as a result of ESA 2010 and other (in some cases benchmark)
changes, several Member States have significantly revised their GDP (generally
upwards). The upward revisions of GDP have significantly improved the 2013
deficit ratios of Cyprus (+0.5 pp), Ireland (by +0.4 pp), Slovenia (+0.4 pp)
and the UK (+0.3 pp). 
As regards the
revisions to the 2013 deficit due to introduction of ESA 2010, the largest
positive revision is noted in Ireland (+0.9 pp) and Greece (+0.3 pp) while the
largest negative revisions were recorded in Lithuania (-0.5 pp) and the United
Kingdom (-0.4 pp).
Other large
revisions to the 2013 deficit (not related to the introduction of ESA 2010 in
government accounts or changes in GDP) were observed for Luxembourg (+0.5 pp),
Slovakia (+0.3 pp), Estonia (-0.3 pp) and Belgium (-0.4 pp).
A number of
Member States have revised their 2013 debt ratios significantly. The
denominator effect of revisions to GDP is usually larger on government debt
ratios than on government deficit ratios. An upward revision of GDP has a
significant debt ratio lowering effect (in particular when the debt level is
high).
Nine Member
States revised their 2013 debt ratios by 2 percentage points of GDP or more:
Cyprus (-9.5 pp), the Netherlands (-4.9 pp), Italy (-4.8 pp), the UK (-3.3 pp),
Malta (-3.2 pp), Sweden (-2.0 pp), Belgium (+3.0 pp), Austria (+6.7 pp) and
Croatia (+8.6 pp).
The impact of
changes to GDP on the debt ratio was particularly noticeable in Ireland and
Cyprus, though in Ireland this was largely offset by the impact of ESA 2010
(this was also the case in Portugal). 
The revision to
the debt (numerator) due the introduction of ESA 2010 was clearly more
prominent than the revisions related to other reasons for all EU countries
except for Denmark. Nevertheless these other revisions had a relatively large
impact in Belgium (+1.7 pp), Denmark (+1.1 pp) and France (+0.9 pp).

2.1.3.          
Completeness of tables and supporting
information

Completion of
the reporting tables is a legal obligation and is essential for a proper assessment
by Eurostat of the quality of the data. Article 8(2) of Regulation (EC)
No 479/2009 as amended, specifies that Member States must provide Eurostat
with the relevant statistical information, which“(…) in particular (…)
means: 
(a)     data
from national accounts;
(b)     inventories;
(c)      EDP
notification tables;
(d)     additional
questionnaires and clarification related to the notifications.”
There are four
main EDP notification tables. Table 1 covers the reporting of government
deficit/surplus and debt levels, tables 2A to 2D provides the data which
explain the transition between the national definitions of government balance
and the deficit/surplus of each government sub-sector, tables 3A to 3D provides
the data which explains the contributions of the government deficit/surplus and
the other relevant factors to the variation in the government debt level and
the consolidation of debt. Table 4 includes data mainly on Trade credits and
advances[9].
The completion of EDP tables 1 to 3 is a legal obligation. Tables 1 and 2A
(central government) cover the years 2010 to 2014, whilst the other tables
cover the years 2010 to 2013[10].
Most Member
States completed all EDP notification tables[11]. In the
October 2014 reporting, for EDP tables 2, all Member States provided details on
the link between the working balance and the EDP surplus/deficit for all the
sub-sectors. In the United Kingdom, the working balance is judged to be on an
ESA 2010 basis. Accordingly, very few adjustments to transform the working
balance into the deficit/surplus according to the ESA are reported. Some other
countries also report only a limited number of transition items.
For EDP table 3,
not all Member States provided all the breakdowns. In particular, the details
requested for the items 'loans' and 'equity' were not always reported.
Despite
improvements achieved in some Member States, the overall coverage of the EDP
table 4 remains inadequate in many cases. In particular, several countries are
not providing complete data for the stock of liabilities of trade credits and
advances which contributes to give a more complete picture of government
liabilities.
The completeness
of EDP tables can still be improved. However, the remaining issues are expected
to have little impact on data quality.
All Member
States submitted replies to the “Questionnaire relating to the notification
tables”[12].
Although the coverage and quality of answers continued to improve compared to
past years, progress is still necessary, as some countries did not report all
the details requested in the questionnaire. This applies notably to data on
central government claims and debt cancellations, the breakdown of other
accounts receivable/payable, the recording of government guarantees (mainly the
coverage of the local government subsector) and the data on capital injections.

2.1.4.          
Supplementary tables relating to the financial
crisis

Eurostat has
been collecting a set of data on the financial crisis in a supplementary table
since 15 July 2009. The data collected in 2014 referred to the period 2007 to
2013. All but eight Member States (Bulgaria, the Czech Republic, Estonia,
Croatia, Malta, Poland, Romania and Slovakia) reported various interventions
undertaken by government in the context of the financial crisis during the
2007-2013 period. Eurostat published a note alongside its EDP Press Releases
analysing these data[13].


2.1.5.          
Questionnaire on intergovernmental lending

Member States
also provide data on bilateral intergovernmental lending, which usually takes
place in the context of financial assistance programmes. The EDP News Release
includes this information as well as information on intergovernmental lending
in the context of the European Financial Stability Facility (EFSF). For 2013
the data mainly relate to lending to Greece, Ireland and Portugal. 
Such bilateral
intergovernmental lending and intergovernmental lending in the context of the
EFSF increased substantially in the context of the financial crisis. It is
subtracted when calculating the EU28 and euro area aggregates for the
Maastricht government debt[14],
since both are shown on a consolidated basis. Due to this consolidation, the
EU28 and euro area aggregates are not equal to the arithmetical sum of Member
States’ debt (i.e. the above mentioned intergovernmental lending between
governments is not included, to avoid double-counting).
The figures
reported for the years 2011, 2012 and 2013 for Member States thus include the
amounts in relation to the EFSF.

2.2.                
Compliance with accounting rules and consistency
of statistical data
2.2.1.          
Exchange of information and clarifications

During the
notification period between the reporting deadline of 1 October and the
publication of the data on 21 October 2014, Eurostat contacted the national
statistical authorities in every Member State to request further information
and to clarify the application of the accounting rules on specific
transactions. This process involved several rounds of correspondence between
Eurostat and the national authorities. A first round of requests for
clarification was sent to all countries before 4 October. A second round of
requests was sent to 21 countries and a third round to five countries. A fourth
and a fifth round of clarification was sent to one Member State. For some
countries, Eurostat asked for revised notification tables. 

2.2.2.          
Dialogue and methodological visits

Regulation (EC)
No 479/2009, as amended, makes provision for dialogue and methodological
visits. Dialogue visits to Member States are conducted regularly with the aim
of reviewing reported data, examining methodological issues, discussing
statistical sources and assessing compliance with the relevant accounting
rules, for example on the delimitation of general government, the time of
recording and the classification of government transactions and liabilities.
The frequency of the regular EDP dialogue visits has increased in the last
years and is decided on the basis of a country risk assessment procedure
developed by Eurostat.
In case a
specific important issue is raised with the Member State, which cannot be
resolved otherwise than by a physical meeting with the concerned authorities,
an ad-hoc visit in the Member State is organized in a shortened procedure.
Until November
of the year 2014, Eurostat carried out the following EDP dialogue visits:
Bulgaria (22-23 January), Belgium (3-5 February), Germany (26-27 February),
Greece (20-21 March), Malta (20-21 May), Hungary (10-11 June), France (25-26
June), Austria (7-8 July), Greece (22-23 September), Cyprus (24-25 September),
Denmark (24-25 September), Portugal (10-11 November), Czech Republic (19-20
November) and Ireland (26-28 November). Furthermore, ad-hoc visits were
undertaken to Belgium (13-14 February), Poland (2 September), Romania (8
September) and Luxembourg (18 September). Eurostat carried out a technical
visit to Croatia on 2-4 June, a pre-euro accession visit to Lithuania on 5-6
March and a training visit to Croatia (8-9 September).
The final
findings of each dialogue visit, including a description of the action points
agreed, and its state of play, are sent to the Economic and Financial Committee
and published on the website of Eurostat. The implementation of these action
points leads to improvements in data quality over time.
Methodological
visits are undertaken only where Eurostat has identified significant risks or
problems with respect to the quality of the data, especially relating to the
methods, concepts or classifications used. No methodological visits were
carried out during 2014.

2.2.3.          
Specific advice by Eurostat

Member States
regularly consult Eurostat to clarify various national accounting issues in
relation to future or past operations. Eurostat provides advice in accordance
with the existing guidelines. To comply with the transparency provision in
Regulation (EC) No 479/2009, as amended, Eurostat publishes its advice[15],
unless the Member State concerned raises an objection. Eurostat published
sixteen ex-ante advices in 2014. 

2.2.4.          
Launching of an investigation as referred to in
Regulation (EU) No 1173/2011 of the European Parliament and of the Council on
the effective enforcement of budgetary surveillance in the euro area 

Regulation (EU)
No 1173/2011 of the European Parliament and of the Council empowers the
Commission to launch an investigation if there are suspicions of manipulation
of statistics due to "deliberate misreporting" or "serious
negligence". Regulation (EU) No 1173/2011 puts in place investigation
procedures and allows financial sanctions (up to 0.2% of GDP) in the case of
manipulation of statistics. 
On 11 July 2014,
the European Commission decided to launch a formal investigation into the
possible manipulation of statistics in the region of Valencia (Comunidad
Valenciana), Spain[16].

The
investigation will examine whether deliberate or seriously negligent
misreporting of expenditure in the region caused Spain's national debt and
deficit data to be misrepresented during the period 1988-2011. 
This is the
first time that the Commission draws on its new powers under the "Six
Pack" economic governance legislation to investigate suspected
manipulation of a Member State's debt and deficit data. If the Commission
considers that the investigation confirms the existence of a misrepresentation,
it may recommend that the Council imposes a fine on the Member State. The
investigation is still on-going. The Commission is not calling into question
the current accuracy of EDP statistics in Spain.

2.2.5.          
Recent methodological issues

As usual,
Eurostat assessed the proper application of the ESA2010 rules, in particular in
view of its latest decisions in accordance with Article 10(2) of Regulation (EC)
No 479/2009. These decisions are included in the Manual on Government Deficit
and Debt (MGDD), the latest version of which was published in August 2014[17].
The new version consists of eight parts but only some chapters needed to be
updated to be brought in line with ESA 2010. 
Eurostat
provides additional methodological guidance documentation on the accounting
rules for EDP and GFS complementing the general rules of ESA 2010. Guidance
notes are released under the responsibility of Eurostat, after consulting
Member States. In 2014 Eurostat published three guidance notes:
- The
classification of Central Stockholding Entities (CSEs) in ESA 2010
- Deferred Tax
Assets (DTAs) and recording of tax credits related to DTAs in ESA 2010.
- Treatment of
Claw-back clauses in the sales of assets by government in national accounts. 
Since January
2013, Eurostat has posted on its website the “Inventory of EDP processes”.
The aim of the document is to describe the procedures and principles applied in
the process of verification of the EDP data by Eurostat.

2.2.6.          
Consistency with underlying government accounts

The notification
deadlines of 1 April and 1 October set by Regulation (EC) No 479/2009, as
amended, were introduced in order to ensure consistency with the underlying
annual and quarterly government sector accounts, as reported to Eurostat in
various ESA transmission tables. Eurostat systematically analyses the
consistency of the EDP notifications with the underlying government sector
accounts. For example, total government expenditure and revenue should be
consistent with the reported deficit figure. However, for quarterly financial
accounts of general government, the deadline for euro area countries to report
provisional data is set before the EDP notification at t+85 days.
The overall
consistency of EDP data with the reported ESA2010 government accounts has
improved in recent years and is generally better for non-financial than for
financial data. In the October 2014 reporting, consistency between EDP figures
and annual and quarterly main aggregates of general government (ESA tables 2
and 25) was complete for the non-financial data and quarterly government debt.
However, efforts by Member States are still needed in order to ensure the
consistency between EDP and ESA tables as regards financial data. Noticeable
discrepancies between the EDP data and the quarterly financial accounts
appeared in the October 2014 reporting for five Member States (Belgium,
Germany, Greece, Luxembourg and Austria). Smaller differences were observed for
four countries. 

2.3.                
Publication
2.3.1.          
Publication of headline figures and detailed
reporting tables

Article 14(1) of
Regulation (EC) No 479/2009 as amended, states: “The Commission (Eurostat)
shall provide the actual government deficit and debt data for the application
of the Protocol on the excessive deficit procedure, within three weeks after
the reporting deadlines […]. That provision of data shall be effected through
publication.”
The government
deficit and debt data were published on 23 April[18]
and 21 October[19]
2014 together with all the reporting tables, as notified by the Member States.
Since February 2012, Eurostat regularly publishes a press release on quarterly
Maastricht debt, at approximately T+115 days. Since February 2014, Eurostat
also publishes a press release on quarterly general government deficit.
In accordance
with Regulation (EC) No 479/2009 as amended, Member States shall make
public their actual data on deficit and debt. All Member States publish deficit
and debt figures at national level. Most Member States have reported to
Eurostat a practice of publishing all their EDP tables. Six Member States
(Bulgaria, Italy, Luxembourg, Malta, Poland and Slovakia) publish only some of
the reporting tables and one Member State, France, does not publish any of the
EDP tables at national level.

2.3.2.          
Reservations on the quality of data

Eurostat
expressed a reservation on the data reported in the April 2014 EDP notification
by the Netherlands due to uncertainties on the statistical impact of the
government interventions relating to the nationalisation and restructuring of
SNS Reaal in 2013. The issue was clarified with the Dutch statistical
authorities and Eurostat withdrew the reservation in the October 2014 EDP
notification.
Eurostat also
withdrew in April 2014 a reservation on the data reported by Austria in the
October 2013 EDP notification due to uncertainties on the statistical impact of
the conclusions of the Federal Audit Office’s report on the Land Salzburg.
Following investigations by the Austrian statistical authorities, the necessary
revisions were introduced in the reported deficit and debt figures.

2.3.3.          
Amendments to the reported data 

Eurostat did not
amend the data reported by Member States in the April and October 2014 EDP
notifications.

2.3.4.          
Publication of metadata (inventories[20])

Regulation (EC)
No 479/2009, as amended, specifies that the EDP inventories are among the
statistical information to be provided by Member States to allow Eurostat to
check compliance with ESA rules. Furthermore, it stipulates that national
publication of these inventories is mandatory. Eurostat has introduced an
updated format for the EDP inventories which involved structural changes and
required more detailed information. The updated EDP inventories were published
on 12 December 2013[21].

The new EDP
inventories for twenty Member States are available on Eurostat’s website. For
the remaining Member States: Belgium, Croatia, Ireland, Luxembourg, the
Netherlands, Austria and the United Kingdom, the work on the new inventories is
still in progress. Eurostat is in constant dialogue with Member States on their
implementation plans. The delays are explained by the priority given to the
implementation of ESA 2010. A new inventory template adapted to ESA 2010 has
been agreed and its publication is foreseen towards the end of 2015.
3.                      
Conclusions
Eurostat
acknowledges overall improvements in the consistency and completeness of the
reported data. Nevertheless, some issues persist, and Member States should step
up efforts in order to improve the coverage and quality of the trade credits
reported and reach the same quality levels obtained when calculating other
government liabilities. In particular, this is the case of Belgium, Denmark,
Germany, Ireland, Greece, France, Croatia, Italy, Cyprus, Malta, the Netherlands,
and the United Kingdom. 
In 2014,
Eurostat expressed a reservation on the data reported in the April 2014 EDP
notification for the Netherlands. The reservation was withdrawn in October
2014. There were no other reservations or amendments to the reported data in
the EDP press release of October 2014, which was the first EDP notification in
accordance to ESA 2010. The revisions to past data on deficit and debt were
fully justified by the implementation of ESA 2010. Overall, Eurostat concludes
that the progress on the quality of the reporting of fiscal data continued in
2014. In general, Member States have provided better information, both in EDP
notification tables and in other relevant statistical returns.
[1]               OJ L 145,
10.6.2009, p. 1.
[2]               COM(2014)122
final.
[3]               OJ L
174, 26.6.2013, p.1-727.
[4]               Articles
3(1) and (3) of Regulation (EC) No 479/2009, as amended.
[5]               Actual
data can be final, half-finalised or estimated figures.
[6]               See http://ec.europa.eu/eurostat/documents/1015035/2022675/Revisions-gov-deficit-debt-2010-2013.pdf/e1fb4083-c18a-4f69-9dbc-138fb73ad9a5
[7]                      Decrease in deficit.
[8]                      Increase in deficit.
[9]               See the
statements to the Council minutes of 22 November 1993: https://webgate.ec.europa.eu/fpfis/mwikis/gfs/images/e/e7/Statements_9817.en93.pdf  
[10]             Provision
of planned data in EDP tables other than table 1 and 2A is not explicitly
requested in Council Regulation (EC) No 479/2009, as amended.
[11]             The EDP
notification tables reported by Member States can be found on Eurostat’s
website. See: http://ec.europa.eu/eurostat/web/government-finance-statistics/excessive-deficit-procedure/edp-notification-tables
[12]             This
questionnaire comprises thirteen sections requesting quantitative and sometimes
qualitative information in several areas, such as transactions in taxes and
social contributions and with the EU, acquisition of military equipment,
government guarantees, debt cancellations, capital injections made by
government into public corporations, Public-Private Partnerships, etc.
[13]             See:  http://ec.europa.eu/eurostat/documents/1015035/2022675/Background-note-fin-crisis-Oct-2014-final.pdf
[14]             According
to the Protocol on the excessive deficit procedure annexed to the Treaties,
government debt is the consolidated gross debt of the whole general government
sector outstanding at the end of the year (at nominal value). According to
Regulation 479/2009, as amended by Commission Regulation (EU) No 220/2014, it
includes the following categories: currency and deposits (AF.2), debt
securities (AF.3) and loans (AF.4) as defined in ESA 2010.
[15]             See: http://ec.europa.eu/eurostat/web/government-finance-statistics/methodology/advice-to-member-states
[16]             C(2014)
4856 final.
[17]             See: http://ec.europa.eu/eurostat/web/products-manuals-and-guidelines/-/KS-GQ-14-010
[18]             See: http://ec.europa.eu/eurostat/documents/2995521/5178982/2-23042014-AP-EN.PDF/83e13609-68f7-4cac-9dd7-0ccf92663564?version=1.0
[19]             See: http://ec.europa.eu/eurostat/documents/2995521/5182258/2-21102014-AP-EN.PDF/497e3b55-dca0-482f-93e0-d82f81bc92d7?version=1.0
[20]             Inventories
of the methods, procedures and sources used to compile actual deficit and debt
data and the underlying government accounts.
[21]             http://ec.europa.eu/eurostat/web/government-finance-statistics/excessive-deficit-procedure/edp-inventories