Recommendation for a COUNCIL DECISION abrogating Decision 2014/56/EU on the existence of an excessive deficit in Croatia
Date: 2017-05-22
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Croatia, budget deficit, budget estimate, budget policy, gross domestic product, public debt, public expenditure

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   EUROPEAN COMMISSION  Brussels, 22.5.2017  COM(2017) 529 final   Recommendation for a COUNCIL DECISION abrogating Decision 2014/56/EU on the existence of an excessive deficit in Croatia  
 
 
Recommendation for a 

COUNCIL DECISION 

abrogating Decision 2014/56/EU on the existence of an excessive deficit in Croatia 

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) 

(4) 

(5) 

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On 28 January 2014, following a recommendation from the Commission, the Council 
decided,  by  Decision  2014/56/EU1,  in  accordance  with  Article  126(6)  of  the  Treaty, 
that  an  excessive  deficit  existed  in  Croatia.  The  Council  noted  that  the  general 
government  deficit  planned  for  2014  was  5.5%,  thus  above  the  3%-of-GDP  Treaty 
reference value. The general government gross debt was planned to reach 62% of GDP 
in 2014, thus above the 60%-of-GDP Treaty reference value. 

On the same date, in accordance with Article 126(7) of the Treaty and Article 3(4) of 
Council Regulation (EC) No 1467/97, the Council, based on a recommendation from 
the Commission, addressed a recommendation to Croatia with a view to bringing the 
excessive deficit situation to an end by 2016 at the latest.  

On 2 July 2014, the Commission concluded that Croatia had taken effective action in 
compliance  with  Council  Recommendation  of  28  January  2014  under  Article  126(7) 
of the Treaty. 

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 that 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 479/20092.  

The  Council  should  take  a  decision  to  abrogate  a  decision  on  the  existence  of  an 
excessive deficit on the basis of notified data. Moreover, a decision on the existence of 
an excessive deficit should be abrogated only if the Commission forecasts indicate that 
the  deficit  will  not  exceed  the  3%-of-GDP  Treaty  reference  value  over  the  forecast 

Council  Decision  2014/56/EU  of  28  January  2014  on  the  existence  of  an  excessive  deficit  in  Croatia 
(OJ L 36, 6.2.2014, p. 13). 
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  Community  (OJ  L  145, 
10.6.2009, p. 1). 

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horizon  and  the  debt  ratio  fulfils  the  forward  looking  element  of  the  debt  reduction 
benchmark3. 

(6) 

Based on data provided by the Commission (Eurostat) in accordance with Article  14 
of Regulation (EC) No 479/2009, following the April 2016 notification by Croatia, the 
2017  convergence  programme  and  the  Commission  2017  spring  forecast,  the 
following conclusions are warranted: 

– 

– 

– 

– 

In  2016,  the  general  government  deficit  reached  0.8%  of  GDP,  from  3.4%  in 
2015. That improvement was mainly driven by (i) rising revenue on the back of 
strong  GDP  growth,  and  (ii)  a  restraint  on  the  expenditure  side.  Thus,  the 
deficit  was  brought  below  the  3%-of-GDP  Treaty  reference  value  within  the 
deadline set by the Council.  

The  convergence  programme  for  2017-2020,  submitted  by  the  Croatian 
government on 27 April 2017, plans the general government deficit to rise to 
1.3%  of  GDP  in  2017  and  decline  back  to  0.8%  of  GDP  in  2018.  The 
Commission  2017  spring  forecast  projects  a  deficit  of  1.1%  of  GDP  in  2017 
and 0.9% of GDP in 2018. Thus, the deficit is set to remain below the 3%-of-
GDP Treaty reference value over the forecast horizon. 

The  structural  balance,  which  is  the  general  government  balance  adjusted  for 
the economic cycle and net of one-off and other temporary measures, improved 
by 3.0% of GDP over the period 2014-2016.  

The  gross  government  debt-to-GDP  ratio  peaked  at  86.7%  in  2015  and 
decreased  to  84.2%  in  2016,  on  account  of  strengthening  GDP  and  debt-
reducing  stock-flow  adjustments.  The  Commission  2017  spring  forecast 
projects the debt ratio to decrease further to 79.4% in 2018, backed by strong 
nominal  GDP  growth.  On  that  basis,  the  2016  debt  ratio  fulfils  the  forward-
looking element of the debt reduction benchmark. 

(7) 

(8) 

(9) 

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  the  view  of  the  Council,  the  excessive  deficit  in  Croatia  has  been  corrected  and 
Decision 2014/56/EU should therefore be abrogated. 

As  from  2017,  the  year  following  the  correction  of  the  excessive  deficit,  Croatia  is 
subject  to  the  preventive  arm  of  the  Stability  and  Growth  Pact.  Having  reached  its 
medium-term  objective  already  in  2016,  Croatia  should  avoid  deviating  from  it  and 
comply  with  the  debt  criterion,  in  accordance  with  Article  2(1a)  of  Regulation  (EC) 
No 1467/97, 

HAS ADOPTED THIS DECISION:  

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

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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, available at:  
http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/coc/code_of_conduct_en.pdf. 

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Decision 2014/56/EU is hereby abrogated. 

Article 2 

This Decision is addressed to the Republic of Croatia. 

Done at Brussels, 

Article 3 

For the Council 
The President 

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