Source: EURLEX
Language: en
Format: md

EUROPEAN

COMMISSION

Brussels, 13.5.2015
COM(2015) 257 final

Recommendation for a

**COUNCIL RECOMMENDATION**

**on the 2015 National Reform Programme of Estonia**

**and delivering a Council opinion on the 2015 Stability Programme of Estonia**

# **EN EN**

Recommendation for a

**COUNCIL RECOMMENDATION**

**on the 2015 National Reform Programme of Estonia**

**and delivering a Council opinion on the 2015 Stability Programme of Estonia**

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular
Articles 121(2) and 148(4) thereof,

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of
the surveillance of budgetary positions and the surveillance and coordination of economic
policies [1], and in particular Article 5(2) thereof,

Having regard to the recommendation of the European Commission [2],

Having regard to the resolutions of the European Parliament [3],

Having regard to the conclusions of the European Council,

Having regard to the opinion of the Employment Committee,

Having regard to the opinion of the Economic and Financial Committee,

Having regard to the opinion of the Social Protection Committee,

Having regard to the opinion of the Economic Policy Committee,

Whereas:

(1) On 26 March 2010, the European Council agreed to the Commission’s proposal to
launch a new strategy for growth and jobs, _Europe 2020_, based on enhanced
coordination of economic policies. The strategy focuses on the key areas where
action is needed to boost Europe’s potential for sustainable growth and
competitiveness.

(2) On 13 July 2010, the Council, on the basis of the Commission’s proposals, adopted a
recommendation on the broad guidelines for the economic policies of the Member
States and the Union (2010 to 2014), and on 21 October 2010 it adopted a decision
on guidelines for the employment policies of the Member States. Together these
form the ‘integrated guidelines’ which Member States were invited to take into
account in their national economic and employment policies.

(3) On 8 July 2014, the Council adopted a Recommendation on Estonia’s National
Reform Programme for 2014 and delivered its opinion on Estonia’s updated Stability

1 OJ L 209, 2.8.1997, p. 1.
2 COM(2015) 257.
3 P8_TA(2015)0067, P8_TA(2015)0068, P8_TA(2015)0069.

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Programme for 2014. On 28 November 2014, in line with Regulation (EU)
No 473/2013 [4], the Commission presented its opinion on Estonia’s draft budgetary
plan for 2015 [5] .

(4) On 28 November 2014, the Commission adopted the Annual Growth Survey [6],
marking the start of the 2015 European Semester of economic policy coordination.
On the same day, on the basis of Regulation (EU) No 1176/2011, the Commission
adopted the Alert Mechanism Report [7], in which it did not identify Estonia as one of
the Member States for which an in-depth review would be carried out.

(5) On 18 December 2014, the European Council endorsed the priorities for boosting
investment, accelerating structural reforms and pursuing responsible growth-friendly
fiscal consolidation.

(6) On 26 February 2015, the Commission published its 2015 country report for
Estonia [8] . This assessed Estonia’s progress in addressing the country-specific
recommendations adopted on 8 July 2014.

(7) Estonia did not submit a National Reform Programme by the deadline.

(8) Estonia is currently in the preventive arm of the Stability and Growth Pact. The
incoming government did not submit a Stability Programme by the deadline. Based
on the Commission's 2015 spring forecast the headline surplus recorded in 2014 is
projected to turn into a deficit of 0.2% of GDP in 2015 and 0.1% of GDP in 2016.
The government debt ratio is forecast to gradually decline from 10.6% of GDP in
2014 to below 10% of GDP in 2016. Based on the Commission's 2015 spring
forecast, there is a risk of some deviation from the medium-term objective in 2015
since the structural balance is projected to deviate from the medium-term objective
by 0.4% of GDP. The deviation is set to become significant in 2016 when an
improvement by 0.4% of GDP is required but the structural balance is projected to
worsen by 0.3% of GDP. Therefore, further measures will be needed in 2015 and
2016. Based on its assessment and taking to account the Commission's 2015 spring
forecast, the Council is of the opinion that there is a risk that Estonia will not comply
with the provisions of the Stability and Growth Pact.

(9) Estonia’s employment rate reached 74.5 % of the working-age population in the third
quarter of 2014 and the unemployment rate dropped to 7.6 %, the lowest level since
2009. The proportion of long-term unemployed is well below the EU average.
However, the shrinking labour force, combined with low labour productivity, is
becoming a medium-to-long-term challenge. Implementation of the ambitious Work
Capacity Reform has started only recently. While a number of tax-related measures
have been adopted to increase labour market participation, they do not specifically
target low-income earners. The gender pay gap is one of the widest in the EU. A lack
of childcare facilities makes it more difficult for young parents, in particular mothers,
to return to the labour market. The proportion of students in work-based
apprenticeships is also low. There is a shortage of graduates in technology and
science subjects. The quality of local authority labour and social services is uneven.

4 OJ L 140, 27.5.2013, p. 11.
5 C(2014) 8802 final.
6 COM(2014) 902.
7 COM(2014) 904.
8 SWD(2015) 26 final.

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(10) The Estonian government adopted a lifelong learning strategy in early 2014 and
programmes to implement it were presented in March 2015. A reform of curricula in
the vocational education and training system is ongoing and participation in lifelong
learning has increased. An Adult Education Act and a Professions Act were adopted
by parliament in early 2015. The attractiveness of vocational education and training
and apprenticeships remains a challenge. Research and innovation systems and
cooperation between business, higher education and research institutions have
improved. However, public support for research and innovation, under the RDI
Strategy and the Entrepreneurship Growth Strategy, seems to lack coordination and
should focus more on a limited number of smart specialisation areas. The higher
education system, in particular as regards science and technology, still needs to be
better aligned with the needs of business and research institutions. Investment in
intellectual property is low and few companies work together with research
institutions.

(11) In the context of the European Semester, the Commission has carried out a
comprehensive analysis of Estonia’s economic policy and published it in the 2015
country report. It has also assessed the follow-up given to the recommendations
addressed to Estonia in previous years. It has taken into account not only their
relevance for sustainable fiscal and socioeconomic policy in Estonia but also their
compliance with EU rules and guidance, given the need to strengthen the overall
economic governance of the European Union by providing EU-level input into future
national decisions. The recommendations under the European Semester are reflected
in recommendations 1 to 3 below.

(12) In the light of this assessment, the Council has examined Estonia’s Stability
Programme and its opinion [9] is reflected in particular in recommendation 1 below.

(13) In the context of the European Semester the Commission has also carried out an
analysis of the economic policy of the euro area as a whole. On the basis of this
analysis, the Council has issued specific recommendations for the Member States
whose currency is the euro. Estonia should also ensure the full and timely
implementation of these recommendations,

HEREBY RECOMMENDS that Estonia take action in 2015 and 2016 to:

1. Avoid deviating from the fiscal medium-term objective in 2015 and 2016.

2. Improve labour market participation, including by implementing the Work Ability
Reform. Improve incentives to work through measures targeting low-income earners.
Take action to narrow the gender pay gap. Ensure high-quality social and childcare
services at local level.

3. Increase participation in vocational education and training, and its labour market
relevance, in particular by improving the availability of apprenticeships. Focus
public support for research and innovation on a limited number of smart
specialisation areas.

9 Under Article 5(2) of Council Regulation (EC) No 1466/97.

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Done at Brussels,

_For the Council_

_The President_

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