Brussels, 22/01/2002 (Agence Europe) - As expected, the ECOFIN's examination in Brussels on Tuesday of the 2001 update of the Stability Programmes for five countries (Luxembourg, Belgium, the Netherlands, Austria and Finland), and Sweden's Convergence Programme, was a mere formality. After consulting the Economic and Financial Committee (EFC), the European Economics and Finance Ministers adopted an opinion of each of the six countries without batting an eyelid since in each case (apart for Belgium and Austria) the budget is either in excess or in equilibrium. Echoing the Commission's comments of a week ago, the ministers stressed that the programmes met the demands of the Stability and Growth Pact. A summary of the opinions adopted by the Council:
Belgium. Following discussion at the EFC, the Commission had to admit that it had been mistaken about various aspects of the Belgian Programme in terms of public accounts, noted the Belgian Economics and Finance Minister, Didier Reynders. The Council therefore adopted a more positive opinion than the Commission in several areas, stating that primary surpluses of more than 6% GDP a year (a figure the Commission said it did not have) were particularly appropriate for Belgium given the still very high level of its public debt and the fact that the 1.6% limit (a figure that the Commission hadn't seen) set for increasing primary federal government and social security expenditure was taken as the Programme's reference point. More generally, the Council was satisfied that the public budget balance was forecast to remain close to equilibrium or in excess throughout the entire period covered by the agreement (2002-2005) and unlike the Commission, it did not mention over-optimistic forecasts with regard to growth (forecast at 1.3% in 2002 and nearly 3% in 2003).
Luxembourg. The Council noted that healthy management of public finances remained the Luxembourg Stability Programme's leitmotif, with the country's budget strategy following three lines - protecting public administration's funding capabilities; budget equilibrium for central government; and a lower rise in ordinary expenditure than in the overall budget. The ministers welcomed the fact that when it came to public spending, Luxembourg was still prioritising investment to improve infrastructure, business technology and human resources. One comment was made - the rigidity of standard spending could become a risk factor if growth slowed down sharply in the medium term.
Austria. The Council praised the far-reaching structural savings made in 2001 (pensions and civil service) which had helped balance the public books. It noted, however, that fiscal pressure had increased more sharply than expected from an already high level and this had had the effect of more than cancelling out the effects of income tax changes introduced in 2000. The Council believes the growth forecasts (1.3% in 2001 and 2002, and 2.4% in 2003) as realistic in the absence of any serious macroeconomic imbalances, as long as the social partners continue to protect international competitiveness through their pay moderation policies.
Finland. The Finnish public administration's budget surplus (outstripping the 2000 forecasts) should remain at a relatively high level throughout the entire Programme (2001-2004) noted the ECOFIN Council with satisfaction, adding that the public debt/GDP ratio would continue to fall, although slightly slower than predicted.
Sweden. The Council was pleased that the Convergence Programme foresaw public surpluses until 2004 (by 2% of GDP on average throughout the 2001-2004 period) and welcomed the country's attention to public finances. The macroeconomic scenario (of GDP growing by 1.7% in 2001 and 2.4% in 2002) was overoptimistic in the Council's view given the serious risks of economic slowdown, particularly in 2002. The ministers pointed out that Sweden now met the price stability convergence criterion (and this was likely to continue into 2004). As before, it continues to meet the interest rate criterion but it had not yet met the exchange rate requirement. The Council stressed the crown's volatility since the unveiling of the most recent updated Programme, insisting that Sweden had to prove its capacity to maintain an appropriate level of euro/crown parity over a long enough period of time without strong tension. To this end, the ECOFIN Council expected Sweden to decide to join the Exchange Rate Mechanism at an appropriate moment.