Solbes blijft zorgen houden over Portugees begrotingstekort (en)

Today the Commission evaluated the last group of stability programmes. For all four cases the Commission assessed the programmes against the criteria set out the code of conduct and in line with the rules set out in the Stability and Growth Pact and the Broad Economic Policy Guidelines. I am happy that we are back to normality with all member states, including Germany and France, as far as the budgetary surveillance procedures are concerned. Let me now make a few comments on our assessment for each country.

Belgium

The update projects general government accounts in balance from 2004 to 2006 and then again a small surplus of 0.3% of GDP in 2007. The cyclically adjusted balance will also remain close-to-balance until the end of the programme period. This positive scenario is still subject to uncertainty due to the pending Eurostat decision on the treatment of the Belgacom Fund transfer to the government. Eurostat is expected to make a decision following consultation of the Committee of Monetary, Financial and Balance of payments statistics before the end of this month.

Belgium still has a debt ratio above 100% of GDP but the stability programme envisages a rapid decline to 87% of GDP in 2007. This is an ambitious target on which a number of risks remain. The sustainability of Belgium's public finances depend therefore heavily on the maintenance of high primary surpluses in the short and over the medium-term.

Germany

The 2003 update of the stability programme projects a reduction in the deficit from 4.0 % of GDP in 2003 to 2½ % of GDP in 2005. This scenario is subject to two main risks. First growth can be lower than expected by the German authorities and expenditure targets may not be achieved. It is however reassuring that the German authorities confirm their commitment to implement additional measures if necessary in order to bring the deficit below 3 % in 2005. On the other hand, it is disappointing to see that the update no longer mentions a balanced budget as a medium term target.

As far as sustainability is concerned the debt to GDP ratio remain stable at around 65% of GDP throughout the programme period, around 8% higher than envisaged in last years stability programme. The recent reform package helps Germany to better meet the budgetary costs of an ageing population. But sustainability of government finances will remain a policy challenge that needs to be addressed in the longer term.

Spain

The new Spanish stability programme is based on an overall realistic macro-economic scenario. In both nominal and cyclically-adjusted terms, a small surplus is expected for the government accounts throughout the programme period.

The debt-to-GDP ratio is projected to decline steadily, from 54.5% in 2003 to slightly less than 44% in 2007. Since budget targets have been set prudently and the path for the GDP deflator can be considered optimistic, a faster debt reduction cannot be excluded.

Regarding the long-term sustainability of the public finances, Spain seems relatively well placed to cope with the budgetary costs of ageing. However, such long-term projections of expenditure are very sensitive to the underlying assumptions, in particular on demography, where the impact of immigration is difficult to assess. Therefore, current policies aimed to increase employment rates and reduce debt need to be supplemented by measures to prevent the emergence of unsustainable trends in the medium term, in particular reform pension system reform measures.

Portugal

In the case of Portugal, the stability programme estimates the deficit below 3% of GDP for 2003. If those figures are confirmed by final data Portugal would have complied with one aspect of the Article 104(7) Council recommendation addressed to the country in November 2002. What remains to be seen, however, is the sustainability of the budgetary improvement. The Commission plans to make such an assessment later in the Spring at the time of the Excessive Deficit Procedure notification and probably our Spring forecast. In the case of a positive assessment I will propose to abrogate the excessive deficit procedure.

The programme projects a gradual decline in the government deficit from 2.8% of GDP in 2004 to just above 1% in 2007. On the basis of the cyclically adjusted balance, Portugal converges towards a close to balance budgetary position by the end of the programme period, with a deficit of 0.7% of GDP in 2007.

Finally, as far as sustainability is concerned, further measures in the area of pension reform are necessary to complete the reform process initiated in 2001 and to secure age related expenditure in the face of an ageing population.

Orientation debate

Beyond the assessment of these four programmes, the Commission held today an orientation debate on the improvement of economic governance in the Union. The main objective of this discussion was (i) to take stock of our experience after five years of applying the Broad Economic Policy Guidelines and the Stability and Growth Pact, (ii) to identify areas of possible improvement and (iii) to set a road map for discussions the member states and economic agents. We have reached a common agreement that there is no scope and no reason to modify any aspects of the Treaty as part of this initiative. Excessive deficits have to be avoided, cyclically adjusted budget deficits and the path to debt reduction have to be the guiding element in setting budgetary objectives over the medium term and the Treaty established thresholds of 3.0% and the 60% remain valid.

We also have to start promoting again economic policy coordination as a positive instrument fostering convergence rather than managing divergence. We are all aware that the costs of non-coordination in EMU are high but somehow there is no concrete translation of this principle into national policies.