CELEX: 52018PC0433
Language: en
Date: 2018-05-23 00:00:00
Title: Recommendation for a COUNCIL DECISION abrogating Decision 2009/414/EC on the existence of an excessive deficit in France

EUROPEAN
                         COMMISSION
                                                Brussels, 23.5.2018
                                                COM(2018) 433 final
                                                Limited to Cabinets -
                                                Embargo until adoption
                                Recommendation for a
                               COUNCIL DECISION
   abrogating Decision 2009/414/EC on the existence of an excessive deficit in France
EN                                                                                    EN
 ---pagebreak---                                               Recommendation for a
                                            COUNCIL DECISION
       abrogating Decision 2009/414/EC on the existence of an excessive deficit in France
   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)     On 27 April 2009, following a recommendation from the Commission, the Council
           decided, by Decision 2009/414/EC1, in accordance with Article 126(6) of the Treaty,
           that an excessive deficit existed in France. The Council noted that the general
           government deficit notified for 2008 was 3.2% of GDP, thus above the 3%-of-GDP
           Treaty reference value. The general government gross debt (which had been above the
           60%-of-GDP Treaty reference value since 2003) was planned to reach 66.7% of GDP
           in 2008.
   (2)     On the same date, in accordance with Article 126(7) of the Treaty and Article 3(4) of
           Regulation (EC) No 1467/972, the Council, based on a recommendation from the
           Commission, issued a recommendation to France with a view to bringing the
           excessive deficit situation to an end by 2012 at the latest3. The Council also set a
           deadline of 27 October 2009 for effective action to be taken.
   (3)     Thereafter the Council addressed a new recommendation to France on 2 December
           2009 on the basis of Article 126(7) of the Treaty, which extended the deadline for
           correcting the excessive deficit to 2013. The Council considered that France had taken
           effective action, but unexpected adverse economic events with major unfavourable
           consequences for government finances had occurred.
   (4)     On 21 June 2013, on the basis of Article 126(7) of the Treaty, the Council addressed a
           new recommendation to France, which extended the deadline for correcting the
           excessive deficit to 2015. The Council considered that the available evidence did not
           allow to conclude on no effective action, but unexpected adverse economic events
           with major unfavourable consequences for government finances had occurred.
   1
           Council Decision 2009/414/EC of 27 April 2009 on the existence of an excessive deficit in France (OJ
           L 135, 30.5.2009, p. 19).
   2
           Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation
           of the excessive deficit procedure (OJ L 209, 2.8.1997, p. 6).
   3
           All documents related to the excessive deficit procedure of France can be found at:
           https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu-
           economic-governance-monitoring-prevention-correction/stability-and-growth-pact/corrective-arm-
           excessive-deficit-procedure/ongoing-excessive-deficit-procedures/france_en#ongoing-procedure.
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 ---pagebreak---    (5) Thereafter, on 10 March 2015 the Council under Article 126(7) of the Treaty issued a
       new recommendation to France with a view to bringing an end to the excessive deficit
       situation by 2017. The Council established the deadline of 10 June 2015 for France to
       report in detail on action taken.
   (6) On 1 July 2015, the Commission concluded that the headline deficit targets for France
       were expected to be met both in 2015 and 2016, while the projected fiscal effort,
       according to all metrics, was projected to fall short of the recommended ones in 2015
       and 2016. Therefore, according to the methodology for assessing effective action, the
       Commission considered that the procedure was to be held in abeyance.
   (7) 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
       Regulation (EC) No 479/20094.
   (8) 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
       horizon5.
   (9) Based on data provided by the Commission (Eurostat) in accordance with Article 14
       of Regulation (EC) No 479/2009, following the April 2018 notification 6 by France,
       the 2018 Stability Programme and the Commission 2018 spring forecast, the following
       conclusions are warranted:
         –       After reaching 3.4% of GDP in 2016, the general government deficit was
                 reduced to 2.6% of GDP in 2017. As compared to the 2017 budget targets, the
                 deficit reduction in that year was mainly driven by the buoyancy of tax
                 revenues (0.7% of GDP), especially VAT and corporate taxes.
         –       The Stability Programme for 2018-2022, submitted by the French government
                 on 25 April 2018, plans the general government deficit to decline to 2.3% of
                 GDP in 2018 and to slightly increase to 2.4% of GDP in 2019. The
                 Commission 2018 spring forecast projects a deficit of 2.3% of GDP in 2018
                 and 2.8% of GDP in 2019, thus remaining 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
   4
       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).
   5
       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”, adopted by the Economic and
       Financial Committee on 15 May 2017, available at:
       http://data.consilium.europa.eu/doc/document/ST-9344-2017-INIT/en/pdf
   6
       Eurostat has expressed a reservation on the quality of the data reported by France. Firstly, Eurostat
       considers that the Agence Française de Développement should be classified inside the general
       government sector, which would result in an increase in government debt. Secondly, Eurostat considers
       that the capital injection by the State into AREVA (0.1% of GDP) in 2017 should be treated as a capital
       transfer, with an impact on the deficit.
EN                                                     2                                                       EN
 ---pagebreak---                   by 0.5% of GDP in 2017. The accumulated improvement in the structural
                  balance since 2015 amounted to 0.7% of GDP.
            –     The gross government debt-to-GDP increased to 97.0% in 2017, from 96.6% in
                  2016, mainly due to the debt-increasing stock-flow adjustments as the primary
                  deficit and interest payments were broadly offset by the debt-reducing impact
                  of real growth and inflation. The Commission 2018 spring forecast projects the
                  debt ratio to decrease to 96.4% in 2018 and 96.0% in 2019 mainly due to high
                  nominal growth that outweighs the primary deficits and interest payments.
   (10)   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.
   (11)   In the view of the Council, the excessive deficit in France has been corrected and
          Decision 2009/414/EC should therefore be abrogated.
   (12)   As from 2018, the year following the correction of the excessive deficit, France is
          subject to the preventive arm of the Stability and Growth Pact and should progress
          towards its medium-term budgetary objective at an appropriate pace, including
          respecting the expenditure benchmark, and comply with the debt criterion in
          accordance with Article 2(1a) of Regulation (EC) No 1467/97,
   HAS ADOPTED THIS DECISION:
                                               Article 1
   From an overall assessment it follows that the excessive deficit situation in France has been
   corrected.
                                               Article 2
   Decision 2009/414/EC is hereby abrogated.
                                               Article 3
   This Decision is addressed to the French Republic.
   Done at Brussels,
                                                For the Council
                                                The President
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