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Commission recommends paths for deficit correction and assesses effective action in response to Council recommendations of April

The European Commission today concluded on the existence of excessive deficits in Austria, Belgium, the Czech Republic, Germany, Italy, Slovakia, Slovenia, the Netherlands and Portugal and proposed deadlines for their correction to the Council. It also assessed responses to the Council recommendations of April in Greece, Spain, France, Ireland and the UK.

11/11/2009


What is the legal background?

The EU budgetary surveillance framework implies, inter alia, that excessive deficits should be avoided. The excessive deficit procedure (EDP), as the "corrective arm" of the Pact, is regulated by Article 104 of the Treaty and further specified in Council Regulation 1467/97.

Which steps were taken under the excessive deficit procedure today?

In view of planned budget deficits of more than 3% in 2009, the European Commission today concluded on the existence of excessive deficits in Austria, Belgium, the Czech Republic, Germany, Italy, Slovakia, Slovenia, the Netherlands and Portugal. Given the size of the deficits, consolidation over the medium-term is warranted. Therefore, in all but two cases, the Commission recommended that the Council set a deadline of 2013 to reduce the budget deficits below 3% of GDP. In Belgium and Italy, the comparatively limited size of the deficits and the existence of high debt ratios call for an earlier deadline of 2012. The Commission also assessed whether effective action in response to the Council recommendations issued in April according to Article 104(7) has been taken in Greece, Spain, France, Ireland and the UK. Having assessed the impact and the composition of the fiscal consolidation measures taken by the Greek authorities so far, the Commission is of the opinion that there has been no effective action, and it recommends the Council to decide accordingly. For the other four countries, taking into account economic developments compared to the projections in the Commission services' January 2009 interim forecast, it can be concluded that effective action as required by the Council recommendation has been taken. Since unexpected adverse economic events with major unfavourable consequences for government finances are considered to have occurred, the Commission recommends to issue revised recommendations for all four countries, extending the deadline for correction by one year, i.e. 2013 for France and Spain, 2014 for Ireland and financial year 2014/15 for the UK.

Next steps

The Ecofin Council is expected to discuss the recommendations at the upcoming December gathering. The Member States concerned will then have six months to indicate what action they intend to take to progressively reduce the budget deficit. In the case of Greece, the Commission is expected to proceed with a recommendation in accordance with Article 104(9), inviting the Council to give notice to Greece to take measures for the deficit reduction within a specified time-limit. Any Council decision to give such a notice to Greece should be taken within two months of its decision establishing that no effective action has been taken in accordance with Article 104(8).

Documents

>> Press release IP/09/1694 Choose translations of the previous link  - Commission Excessive Deficit Procedure steps: the Stability and Growth Pact as the anchor for fiscal exit strategies

>> Presentationpdf by Commissioner Almunia


Art. 104(5) Commission opinion on the existence of an excessive deficit


Art. 104 (6-7) Commission recommendations for a Council decision on the existence of an excessive deficit and a Council recommendation to end the excessive deficit situation


Art. 104(7) Commission recommendation for a Council recommendation to end the excessive deficit situation


Art. 104(8) Commission recommendation for a Council decision establishing inadequate action

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