De Commissie beoordeelt stabiliteitsprogramma's van Ierland, Griekenland en Spanje (en)

Today the European Commission assessed the updated stability programmes [1] of Ireland, Greece and Spain. Ireland is encouraged to maintain a balanced budget in structural terms while letting the automatic stabilisers absorb the slowdown in the economy reflecting developments in the residential property sector and a deterioration of the economic outlook in key trading partners. The Greek programme envisages speeding up the reduction of the still large budget deficit, but the MTO of a balanced position in structural terms is not planned to be fully achieved within the programme period. In Spain, the budgetary position is sound with high general government surpluses above the MTO and a relatively low debt ratio. Its challenge is to foster productivity-enhancing expenditure to underpin a smooth adjustment of the economy. With regard to the long-term sustainability of public finances, Spain and Ireland are at medium risk and are invited to take further measures to contain the impact of ageing on spending, while Greece remains at high risk, which calls for continued budgetary consolidation and further reforms of pensions and health care systems. [2]

" Ireland is facing challenges in its transition to a period of lower but more sustainable economic growth. But, it must try and avoid a deterioration of the budgetary situation beyond that implied by automatic stabilisers. The economy is slowing down, but the growth prospects remain good and well above the euro area and EU averages. Ireland should also consider further pension reforms to curb the expected increase in age-related expenditure.

Greece should use any budgetary over-performance to further speed up the consolidation process to reach its objective of a balanced budget within the programme period. A strong fiscal consolidation path would help address the imbalances of the economy, notably persistent inflation, competitiveness losses and a large external deficit. In view of the level of debt - still one of the highest in the euro area - and the projected increase in age-related spending, the long-term sustainability of public finances needs to be addressed.

Spain is commended for maintaining ambitious targets despite a slowdown in economic growth. The high budgetary surpluses and low debt level offer room for cushioning possible lower tax revenues following the ongoing adjustment in the property sector. Fostering productivity-enhancing expenditure is crucial to underpin a smooth adjustment of the economy. It is also invited to further improve the long-term sustainability of its public finances," said Economic and Monetary Affairs Commissioner Joaquín Almunia i.

Today the Commission assessed the updated Stability Programmes of Ireland, Greece and Spain. It also assessed the Convergence Programmes of Denmark and Lithuania (see IP/08/257). Two groups of countries were already assessed in January and discussed at the 12 February EU Finance Ministers Council. On 13 February the Commission examined a third group of programmes. The programmes from the third and fourth group are expected to be discussed at the 4 March EU Finance Ministers Council.

Ireland submitted a new update of its stability programme on 5 December 2007, covering the period 2007-2010.

After years of budgetary surpluses which reached +2.9% in 2006, the Irish budgetary position moved closer to balance in 2007 and is expected to turn into a small deficit this year and remain there until the end of the programme.

This reflects an adjustment to more normal, but still very healthy, economic growth levels including thanks to a return to a more sustainable activity in the housing sector after a decade of buoyant economic growth. Ireland is also affected by the expected slowdown in the United States and in the United Kingdom, both significant trading partners.

The public debt remains well below the 60% reference value in the EU Treaty, which is necessary in view of the expected increase in pensions and other age-related costs.

In view of the Commission assessment and also in the light of the April 2007 Eurogroup orientations for fiscal policies, Ireland is invited to (i) keep to the MTO in 2008 and thereafter, by maintaining firm control over expenditures; (ii) in view of the significant projected increase in age-related expenditure, improve the long-term sustainability of public finances by implementing further pension reforms.

Greece submitted a new update of its stability programme on 27 December 2007, covering the period 2007-2010.

The programme envisages speeding up the reduction of the still large budget deficit, in a context of strong growth, although the MTO of a balanced budget is not planned to be achieved within the programme period.

However, this consolidation, which relies on a significant increase in tax revenues throughout the programme horizon, is subject to risks as the underlying macroeconomic scenario is relatively favourable and the revenue-enhancing measures are not fully spelled out after 2008. Also, the reliance on results from the fight against tax evasion is significant and only partly backed up with reforms in tax collection. In addition, the planned cutbacks in some expenditure items (as a share of GDP) are not substantiated by specific measures and partly offset by plans to increase social payments.

Ensuring a strong fiscal consolidation path would help address the imbalances of the Greek economy, notably persistent inflation, competitiveness losses and a large external deficit. The level of debt which remains among the highest in the euro area, coupled with the projected increase in age-related spending, will affect negatively the long-term sustainability of public finances, which remains at high risk.

In view of the Commission assessment and also in the light of the April 2007 Eurogroup orientations for fiscal policies, Greece is invited to: (i) implement carefully the 2008 budget, carry-out the envisaged adjustment towards the MTO, if necessary by taking additional measures, reduce the debt-to-GDP ratio accordingly, and use any budgetary over-performance to speed up the consolidation process to reach the MTO within the programme period; (ii)pursue the ongoing reforms of tax administration and continue improving the budgetary process by increasing its transparency, spelling out the budgetary strategy within a longer time perspective and effectively implementing mechanisms to monitor, control and improve the efficiency of primary expenditure; (iii) in view of the level of debt and the projected increase in age-related expenditure, improve the long-term sustainability of public finances by achieving the MTO, continuing the ongoing reforms in the healthcare system and reforming the pension system; updated long-term projections for age-related expenditure should be produced as soon as possible.

Greece is also invited to improve compliance with the submission deadline for stability and convergence programmes specified in the code of conduct [3].

Spain submitted a new update of its stability programme on 21 December 2007, covering the period 2007-2010.

Spain has enjoyed comfortable budgetary surpluses since 2005. Its medium-term budgetary strategy remains sound with continued government surpluses above the MTO of a balanced budget and a relatively low debt ratio.

Growth is expected to remain well above the euro-area average throughout the programme period. But in light of the slowdown in the property sector and hence the economy, a careful assessment of the impact of tax cuts and/or expenditure increases is crucial to maintain a strong budgetary position and to ensure the long-term sustainability of public finances, which is at medium risk.

Fostering productivity-enhancing expenditure items, such as R&D, infrastructure and education, is also important to underpin a smooth adjustment of the economy in the light of external imbalances, the contraction of the housing sector and the existing inflation differential with the euro area.

The Spanish debt is expected to be at 30% in 2010 from around 36% in 2007 and nearly 60% at the beginning of the decade.

In view of the Commission assessment, while maintaining a strong budgetary position Spain is invited to further improve the long-term sustainability of public finances with additional measures to contain the future impact of ageing on spending programmes.

The country-specific Commission recommendations for a Council opinion on each programme are available at:

http://ec.europa.eu/economy_finance/thematic_articles/article11980_en.htm

IRELAND

Comparison of key macroeconomic and budgetary projections

[1] According to Council Regulation (EC) No 1466/97 on the strengthening of budgetary surveillance and the surveillance and coordination of economic policies (as amended by Regulation No 1055/2005), Member States must submit updated macroeconomic and budgetary projections every year. Such updates are called stability programmes in the case of countries that have adopted the euro, and convergence programmes in the case of those that have not yet done so. This regulation is also referred to as the 'preventive arm' of the Stability and Growth Pact.

[2] The analysis of long-term sustainability of public finances takes into account the current level of debt, the current budget deficit/surplus and the expected costs arising from an ageing population assuming no policy changes.

[3] Late submissions affect the effectiveness and consistency of the multilateral surveillance process.