Nieuwe evaluatie Frans Stabiliteitsprogramma 2003-2007 (en)
The European Commission today adopted a recommendation to the Council on the updated stability programme of France, which was presented on 11 December 2003 and covers the period 2003-2007. In the baseline scenario, the 2003 update of France's stability programme projects output growth to accelerate from 0.5% in 2003 to 1.7% in 2004 and to reach 2.5% as from 2005. These assumptions are plausible. The general government deficit is projected to decline from an estimated 4.0% of GDP in 2003 to 3.6% of GDP in 2004. The excessive deficit situation would be brought to an end in 2005, the deficit being reduced to 2.9% of GDP in that year. According to the Commission, several risks surround the realisation of this objective. Budgetary consolidation is projected to continue in the subsequent years, the deficit being reduced only to 1.5% of GDP by 2007. According to Commission calculations, a close to balance budgetary position in cyclically-adjusted terms would not be reached in the time span of the programme. In addition, the debt-to-GDP ratio is projected to remain above 60% throughout the period covered by the programme, and to start its decline only in 2006. Concerning long term sustainability, the comprehensive reform of the pension system implemented in 2003 is clearly to be welcomed, as it puts France in a considerably better position to meet the budgetary costs of an ageing population. The Council is expected to adopt a formal opinion on the updated French stability programme on [10 February 2004].
The Commission recommendation is adopted on the initiative of Pedro Solbes, EU Commissioner for economic and monetary affairs.
On 3 June 2003, on the basis of a Commission Recommendation, the Council decided in accordance with Article 104 (6) EC that an excessive deficit existed in France and issued a recommendation based on Article 104 (7) EC requesting France to bring this situation to an end by 2004 at the latest. On 8 and 21 October 2003 respectively, the Commission adopted two recommendations on the basis of Articles 104 (8) and 104 (9) respectively for the Council to decide (1) that no effective action had been taken by France in response to the recommendation of 3 June and (2) to give notice to France to take necessary measures to bring the government deficit below 3% of GDP in 2005. On 25 November 2003, the Council did not adopt the two Commission recommendations but adopted instead a set of conclusions endorsing, among other things, the commitments made by France to reduce the cyclically-adjusted deficit by 0.8 per cent of GDP in 2004, and by 0.6 per cent of GDP or a larger amount in 2005 so as to ensure that the general government deficit is brought below 3 per cent of GDP in 2005.
The Commission's main conclusions on the updated French programme are:
- The macroeconomic scenario of the programme assumes annual real GDP growth to gain momentum from 0.5% in 2003 to 1.7% in 2004. For the period 2005-2007, the budgetary projections are based on two macroeconomic scenarios: a cautious scenario, with real GDP growing at 2.5% a year, and a favourable scenario where real GDP growth reaches 3% per year. While the estimate of the 2003 real GDP growth appears outdated, the projection for 2004 and those of the cautious scenario for the years 2005 to 2007 appear plausible.
- The 2003 general government deficit is estimated by the French authorities at 4.0% of GDP. According to the Commission, the risk for the 2003 deficit, i.e. the starting point for the medium term budgetary projections, to be worse than currently estimated is significant. Under the assumption of real GDP increasing by 0.1% in 2003, the Commission expects the 2003 deficit at 4.2% of GDP.
- The medium-term budgetary strategy based on the setting of multi-annual targets for the increase in real government expenditures is appropriate. Such a strategy supports a transparent budgetary adjustment. However, recent experience feeds some concerns on the achievement of the objectives, because targets set in previous updates of the stability programme were missed by a large margin. In order to secure the attainment of objectives, it would be appropriate to ensure compensation across years of eventual overspending in the general government sector.
- The government deficit is projected in the reference scenario of the update to decline from 3.6% of GDP in 2004 to 2.9% of GDP in 2005, 2.2% in 2006 and 1.5% in 2007. According to Commission calculations, based on the projections of the French programme, the cyclically-adjusted balance would improve by about 0.6 percentage point per year, and would reach -1.3% of GDP in 2007. The average yearly reduction in the cyclically-adjusted deficit would be larger in the favourable scenario.
- Given the seriousness of the French budgetary situation, the medium-term budgetary plans lack ambition. It would be appropriate to seek a larger reduction in the cyclically-adjusted deficit, especially in the early years of the time span of the programme.
- This would in particular reduce the risk for the deficit to remain above 3% of GDP in 2005. According to the Commission, this risk is significant. Indeed, because the deficit is planned to be reduced only marginally below 3% of GDP in 2005 (2.9% of GDP), any unfavourable development on the macroeconomic or on the budgetary side would compromise the achievement of this objective. For instance, should the 2003 deficit reach 4.2%, as currently expected by the Commission, the cumulated reduction in the deficit planned in 2004 and 2005 would be insufficient to correct the excessive deficit situation in 2005.
- A larger budgetary adjustment would also allow the attainment of a budgetary position providing a sufficient safety margin to avoid in the future breaching the 3% of GDP Treaty reference value under normal macroeconomic fluctuations before 2007. It would also allow the more rapid convergence towards a close to balance budgetary position in cyclically-adjusted terms. According to Commission calculations, such a position is not reached over the period covered by the programme.
- Finally, speeding up the budgetary adjustment would ensure an earlier and larger decline in the government debt to GDP ratio. This ratio is projected to remain above 60% throughout the time span of the stability programme update, and to start declining only in 2006. Ensuring a significant decline in the debt to GDP ratio is a necessary complement to the comprehensive reform of the pension system implemented in 2003.
- After this reform, France is in a considerably better position to meet the budgetary costs of ageing population. The reform will indeed not only postpone the average retirement age and thus reduce pension expenditures but it will also probably lead to an increase in participation rates among older people with positive effects on potential growth.
- The economic policies as reflected in the 2003 update are not consistent with the recommendations in the Broad Economic Policy Guidelines, specifically those with budgetary implications. Indeed, even if the budgetary plans for 2004 and 2005 include an improvement in the cyclically-adjusted balance consistent with the minimum of 0.5 percentage point of GDP recommended by the Council, the cumulative improvement in the cyclically-adjusted balance under way may be insufficient to bring the nominal deficit below 3% of GDP even in 2005.
The Stability and Growth Pact, adopted by the Amsterdam European Council in June 1997, requires countries participating in the euro-zone to present stability programmes to the Council and the Commission. These programmes provide information on how countries intend to meet the objectives of the Pact and in particular the medium term goal of a budget close to balance or in surplus.
Full text of the Commission assessment available on :
http://europa.eu.int/comm/economy_finance/about/activities/sgp/year/year20032004_en.htm
Key figures of the updated stability programme of France
|
' | ' | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 |
| GDP
(percent change) | Commission forecast(1) | 1.2 | 0.1 | 1.7 | 2.3 | - | - |
| 2003 update(2) | 1.2 | 0.5 | 1.7 | 2.5 | 2.5 | 2.5 | |
| 2002 update(2) | 1.2 | 2.5 | 2.5 | 2.5 | 2.5 | - | |
| HICP inflation (percent change) | Commission forecast(1) | 1.9 | 2.1 | 1.8 | 1.5 | - | - |
| 2003 update(2) | 1.9 | 2.1 | 1.8 | 1.5 | 1.5 | 1.5 | |
| 2002 update(2) | 1.7 | 1.4 | 1.5 | 1.5 | 1.5 | - | |
| Budget balance
(% of GDP) | Commission forecast(1) | -3.1 | -4.2 | -3.8 | -3.6 | - | - |
| 2003 update(2) | -3.1 | -4.0 | -3.6 | -2.9 | -2.2 | -1.5 | |
| 2002 update(2) | -2.8 | -2.6 | -2.1 | -1.6 | -1.0 | - | |
| Budget balance, cyclically adjusted
(% of GDP) | Commission forecast(1) | -3.7 | -3.9 | -3.3 | -3.2 | - | - |
| 2003 update(2)(3) | -3.5 | -3.8 | -3.2 | -2.6 | -1.9 | -1.3 | |
| Total revenues
(% of GDP) | Commission forecast(1) | 50.4 | 50.5 | 50.5 | 50.5 | - | - |
| 2003 update(2) | 50.4 | 50.3 | 50.4 | 50.2 | 50.3 | 50.3 | |
| 2002 update(2) | 51.2 | 50.8 | 50.7 | 50.6 | 50.5 | - | |
| Total expenditures(% of GDP) | Commission forecast(1) | 53.5 | 54.7 | 54.3 | 54.1 | - | - |
| 2003 update(2) | 53.6 | 54.3 | 53.9 | 53.0 | 52.4 | 51.8 | |
| 2002 update(2) | 54.0 | 53.4 | 52.8 | 52.2 | 51.5 | - | |
| Gross debt
(% of GDP) | Commission forecast(1) | 59.0 | 62.6 | 64.3 | 65.6 | - | - |
| 2003 update(2) | 59.0 | 61.4 | 62.8 | 63.2 | 62.8 | 61.8 | |
| 2002 update(2) | 58.7 | 59.1 | 58.9 | 58.3 | 57.0 | - |
(2) Projections of the 'cautious' macroeconomic scenario.
(3) Commission calculations based on the application of the method agreed by the Council to the figures of the updated stability programme.
Full text of the Commission assessment available on :
http://europa.eu.int/comm/economy_finance/about/activities/sgp/year/year20032004_en.htm