Brussels, 15/01/2002 (Agence Europe) - On Tuesday, the European Commission adopted a series of recommendations to the Ecofin Council on the subject of updating the stability programmes of the Benelux countries, of Austria and Finland, and concerning updating of Sweden's convergence programme. The Commission considers that the programmes of these six countries meet the requirements of the Stability and Growth Pacts and the Broad Economic Policy Guidelines. It does, however, make certain remarks against the Netherlands (on the subject of optimistic growth estimates), Belgium (on its strategy for budgetary improvement that lacks consistency) and Sweden (the crown is still not tied to the new exchange rate mechanism and recently fluctuated considerably compared to the euro). Tuesday's Ecofin Council will, on the basis of Commission recommendations, adopt formal opinions on each of these programmes presented at the end of 2001.
Netherlands: Services under Commissioner Pedro Solbes reproach the government of the Netherlands for not having sufficiently revised the growth prospects for 2001 and 2002. The Netherlands tabled on GDP growth of 2% in 2001 and 2002, while the Commission underlines the fact that real growth of GDP fell sharply in 2001, falling to 1% in 2001 as opposed to 3.5% in 2000. The general government balance should remain in surplus until 2004, continues the Commission, which, however, notes that the surplus predicted (+1% of GDP in 2001 and in 2002, then +1.2% in 2003 and +1.3% in 2004) is a little too optimistic. "The government in the 2002 budget did not strictly apply the 50-50 formula for revenue allocation to debt reduction and tax alleviation" (with a view to countering inflationary risks, strengthen the budgetary balance and better prepare for the consequences of population ageing), the Commission also stressed.
Belgium: The Commission considers that Belgium did well, in 2001, to update its budgetary objectives in line with the loss of real GDP growth in 2001 and 2002, which reaches 2.6 percentage points. It does, however, cast doubt on the hypothesis of vigorous economic recovery during the second quarter of 2002 (Belgium provides for growth of 1.3% in 2002 and 3% in 2003). The Commission, moreover, expresses concern about the strategy of budgetary improvement followed by Brussels (whose touchstone consists in reducing its public debt estimated at 107% of GDP in 2001, 103.3% in 2002 and 97.7% in 2003, then 88.6% in 2005). While it should have given preference to achieving major primary surpluses ("a policy particularly well adapted for such a country"), Belgium is tabling on a gradual fall in such surpluses combined with regular cuts in interest rates. This seems to surprise Mr Solbes' services. Furthermore, the programme does not define any norm for the increase in primary expenditure in Entity I (federal government and social security) "while a clear binding norm for expenditure control is to be considered instrumental in reaching the budgetary objectives", writes the Commission.
Austria: The average annual growth scenario (2.25% over the period 2001-2005) for public finances (balanced over 2001 compared to a deficit of 1.1% of GDP the previous year) and state balances (in balance until 2003 then in surplus in 2004 and 2005) appear to be feasible in the eyes of the Commission which adds that reforms in the field of pensions and public administration should allow major savings to be continued in 2002 and 2003 especially. It is recommended that the government should seek to alleviate the burden of taxation over the next few years, mainly labour taxes.
Finland: The forecasts of GDP growth acceleration (1.6% in 2002, 2.7% in 2003 and 3% in 2004, after a slowdown to 0.6% in 2001) on which the figures for budgetary surplus of public administrations are based in particular (4.7% of GDP in 2001, then more than 2% in 2002, 2003 and 2004) are considered plausible by the Commission, even if the short term prospects are particularly uncertain because of external economic developments.
Luxembourg: The relatively sustained growth of GDP in 2001, close to 4%, allowed Luxembourg to record a surplus government balance of 4% in 2001, more than initially forecast, the Commission is pleased to note. It adds that the rate of indebtedness, already very low at the present time, should continue to fall. Efforts must, however, be made to control the rate of increase in current expenditure of government expenditure (10.5% in 2002).
Sweden: Growth forecasts (1.7% in 2001, 2.4% in 2002 and 2.6% in 2003) are quite optimistic, considers the Commission, which specifies, however, that the difference compared to its autumn forecasts can be explained by the fact that the figures announced were finalised several days before the attacks perpetrated on 11 September. Public finance is doing well, notes the Commission, mainly thanks to the good results of its budgetary improvement policy (which is translated by an ambitious target of 2% GDP surplus over the period 2002-2004). Sweden meets the convergence criteria on the budgetary balance, inflation and long term interest rates, but still not on that relating to the rate of exchange.
For the first time, this analysis makes a specific reference to the impact of population ageing on the economy, a problem that concerns the whole of Europe, stressed European Economic and Monetary Affairs Commissioner Pedro Solbes, who presented the Commission recommendations to the press, on the sidelines of the European Parliament plenary session in Strasbourg. The impact that the loss of growth will have on public spending varies considerably from one country to the next. Thus, some countries have, despite this trend, been able to improve their budgetary situation (such is the case for Finland, Luxembourg, the Netherlands and Austria). Mr Solbes also restated the Commission's wish to see Sweden enter the euro zone.
Discussion on Argentina, on the basis of the communication from Commissioners Chris Patten and Pascal Lamy, is still in progress, said Mr Solbes. He went on to add that the communication essentially sets out an analysis of the situation, and puts questions regarding the impact that such a situation will have on European economies, by presenting several preliminary conclusions. The main conclusion is that Argentina should define an economic programme whose key element would be relations with the IMF.
European Commission President Romano Prodi, for his part, presented to the press, in Strasbourg, the Commission's communication on the Lisbon Strategy with a view to the European Council in Barcelona. He insisted on three priority fields that should receive decisive impetus at the European Summit in March: - continued definition of employment policies, "connecting Europe and connecting markets", and increasing investment with regard to knowledge. In addition to this, a strategy is needed to intensify the coordination of economic policies, said Mr Prodi, returning to one of his pet concerns. In answer to questions put to him, Mr Prodi affirmed that, if it is not possible to take a decision on the Galileo project in Barcelona, then "Galileo is dead". Regarding liberalisation of the energy market, he acknowledges that the imminent nature of French elections does pose a problem. The Commission does not present new proposals but quite simply insists on implementation of existing proposals, possibly in successive stages.