Following last week's assessment of 17 Stability and Convergence Programmes, the European Commission today examined the updated programmes of Italy, Luxembourg, Lithuania and Portugal.
Article created February 25, 2009.
What is the legal background?
According to Council Regulation (EC) No 1466/97 on the strengthening of budgetary surveillance and the surveillance and coordination of economic policies, 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 otherwise. This regulation is also referred to as the 'preventive arm' of the Stability and Growth Pact.
What is the link to the economic and financial crisis?
This year's assessment round takes place against the background of the ongoing sharp economic downturn.
Luxembourg and Portugal
These two countries examined today have adopted fiscal stimulus measures in 2009 to cope with the economic crisis, in line with the Economic Recovery Plan proposed by the Commission and endorsed by EU leaders in December.
Italy's recovery measures are budgetary neutral, which seems adequate in view of the country's very high debt ratio.
How are budgetary positions set to develop?
Budgetary positions are projected to deteriorate markedly in 2009 in Italy, Luxembourg and Portugal, also reflecting the stimulus packages adopted in line with the European Recovery Plan in the latter two countries.
The planned restrictive fiscal stance set out in the Lithuanian programme seems appropriate in view of the existing economic imbalances. However, the budgetary outcomes in the programme are subject to significant downside risks.
Based on its assessment, the Commission has adopted recommendations for Council opinions on the programmes which, together with last week's recommendations for a first round of 17 EU countries, , will be discussed at the forthcoming ECOFIN meeting of 10 March.