CELEX: 52011SC0822
Language: en
Date: 2011-06-07 00:00:00
Title: Recommendation for a COUNCIL RECOMMENDATION on the National Reform Programme 2011 of Latviaand delivering a Council opinionon the updated Convergence Programme of Latvia, 2011-2014

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		52011SC0822
		
			Recommendation for a COUNCIL RECOMMENDATION on the National Reform Programme 2011 of Latviaand delivering a Council opinionon the updated Convergence Programme of Latvia, 2011-2014 /* SEC/2011/0822 final */
			
				
		
		
			
			   	Recommendation for a
COUNCIL RECOMMENDATION
on the National Reform Programme 2011 of
Latvia
and delivering a Council opinion
on the updated Convergence Programme of Latvia, 2011-2014
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 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, and in
particular Article 9(3) thereof,
Having regard to the recommendation of the
European Commission,
Having regard to the conclusions of the
European Council,
Having regard to the opinion of the
Employment Committee,
After consulting the Economic and Financial
Committee,
Whereas:
(1)              
On 20 January 2009, the Council of the European
Union (EU) adopted a Decision (2009/290) to make available to Latvia medium-term financial assistance for a
period of three years under the provisions of Article 143 of the Treaty. The
accompanying Memorandum of Understanding signed on 28 January 2009 and its
successive supplements lay down the economic policy conditions on the basis of
which the financial assistance is disbursed. The Council decision was amended
on 13 July 2009. The last supplement to the Memorandum of Understanding was
signed in June 2011.
(2)              
On 26 March 2010, the European Council agreed to
the European Commission's proposal to launch a new strategy for jobs and
growth, Europe 2020, based on enhanced coordination of economic policies, which
will focus on the key areas where action is needed to boost Europe’s potential
for sustainable growth and competitiveness.
(3)              
On 13 July 2010, the Council 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, adopted a decision
on Guidelines for the employment policies of the Member States[1],
which together form the “integrated guidelines”. Member States were invited to
take the integrated guidelines into account in their national economic and
employment policies.
(4)              
On 12 January 2011, the Commission adopted the
first Annual Growth Survey, marking the start of a new cycle of economic
governance in the EU and the first European semester of ex-ante and integrated
policy coordination, which is anchored in the Europe 2020 strategy. 
(5)              
On 25 March 2011, the European Council endorsed
the priorities for fiscal consolidation and structural reform (in line with the
Council’s conclusions of 15 February and 7 March 2011 and further to the
Commission’s Annual Growth Survey). It underscored the need to give priority to
restoring sound budgets and fiscal sustainability, reducing unemployment
through labour market reforms and making new efforts to enhance growth. It
requested Member States to translate these priorities into concrete measures to
be included in their Stability or Convergence Programmes and National Reform
Programmes.
(6)              
On 25 March 2011, the European Council also
invited the Member States participating in the Euro Plus Pact to present their
commitments to be included in their Stability or Convergence Programmes and
their National Reform Programmes. Specific commitments and actions for 2011 are
not explicitly communicated in the Latvian Convergence Programme and the
National Reform Programme but are expected to be submitted to the European
Council.
(7)              
On 29 April 2011, Latvia submitted its 2011
Convergence Programme update covering the period 2011-2014 and its 2011
National Reform Programme. In order to take account of the interlinkages, the
two programmes have been assessed at the same time.
(8)              
The Latvian economy grew faster than any other
EU Member State from 2000 to 2007, reflecting convergence prospects, foreign
financial inflows and very strong consumption demand. However, at least partly
as a result of an expansionary macroeconomic policy, the economy overheated.
Sizable imbalances accumulated, illustrated by a current account deficit of
22.3% of GDP in 2007 and 13.1% in 2008; consequently, during 2008-2009, the
economy experienced the steepest contraction in the EU. During this period real
GDP contracted by 25% from peak to trough as a collapse in domestic demand was
amplified by a slump in global trade. The Latvian employment rate, previously
amongst the highest in the EU (75.8% in 2008), fell by over 10 percentage
points and the unemployment rate of over 18% is now one of the highest in the
EU. The general government deficit was 9.7% in 2009 but as a result of fiscal
consolidation measures, decreased to 7.7% in 2010. This outcome includes
sizeable financial sector stabilisation measures that amounted to 1.1% of GDP in 2009 and 2.3% of GDP in 2010. 
(9)              
Based on the assessment of the updated
Convergence Programme pursuant to Council Regulation (EC) No 1466/97, the
Council is of the opinion that the macroeconomic scenario underpinning the
budgetary projections in the programme is plausible. The medium-term budgetary
strategy of the programme is to bring the headline general government deficit
below the 3% reference value by the deadline foreseen in the Council Recommendation
of 7 July 2009. Taking into account the measures implemented since the issuance
of the recommendation to correct the excessive deficit situation and additional
consolidation implied in the updated Convergence Programme, the planned fiscal
effort for 2011-2012 is in line with the required adjustment. In view of the
starting point, the programme does not foresee the achievement of the
medium-term objective (MTO) by the end of the programme period, while the
planned fiscal effort to reach the MTO after the correction of the excessive
deficit situation could be accelerated in particular in 2013. The fiscal
consolidation path envisaged in the programme is mostly expenditure based. The
budgetary targets are subject to downside risks, as the programme does not
provide full information on measures to underpin the achievement of the set
targets. These measures are expected to be spelled out in the forthcoming
budgets. Reducing the primary deficit over the medium term, as foreseen in the
programme, would help reduce the risks to the
sustainability of public finances. 
(10)          
The Commission has assessed the Convergence
Programme and National Reform Programme[2]. It has taken into
account not only their relevance for sustainable fiscal and socio-economic
policy in Latvia but also of their conformity 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. In this context, the
Commission stresses the urgency of implementing the planned measures to comply
with Council Decision (2009/290/EC).
HEREBY RECOMMENDS that Latvia should
:
Implement the measures as laid down in the
Council Decision 2009/290/EC, as amended by Council Decision 2009/592/EC, and further specified in the
Memorandum of Understanding of 20 January 2009 and its subsequent supplements
[in particular the last supplement of June 2011].
Done at Brussels,
                                                                       For
the Council
                                                                       The
President
[1]               Maintained for 2011 by Council Decision 2011/308/EU
of 19 May 2011.
[2]               See SEC(2011) 722.