Brussels, 30/01/2003 (Agence Europe) - On Thursday, the European Commission adopted recommendations on the updated stability programmes of Spain, Belgium, and Ireland, as well as on the convergence programmes of the United Kingdom and Denmark. During a press conference, Commissioner Pedro Solbes condemned the forecast increase in the British public deficit and was worried by the high level of inflation and risks to long term viability in the Spanish public finances. He also stressed that for the Danish government, implementation of ambitious reform of the labour market constituted a real challenge. The Ecofin Council is expected to adopt opinions on these programmes on 18 February.
Here is a summary of the main comments made by the Commission on the programmes:
United Kingdom: Mr Solbes indicated that the British "programme projects the general government balance to move from a slight deficit of 0.2% of GDP in 2001-02 to 2.2% in 2003-04, before falling to 1.6% in the latter years of the programme". The Commissioner also indicated that structural deficit is expected to rise from around 1% of GDP in 2002 to 1.5% id the laser years of the programme. The Commissioner recognised that the increase in the structural deficit could be explained to a large extent by an increase "that should be welcomed" in net investment into the public sector in relation to GDP (public investment as a percentage of GDP is expected to increase by 0.9% in 2001-2002 ad by 2.2% in 2007-2008). Mr Solbes said that this was "in line with the 2002 Broad Economic Policy Guidelines" and in an effort to talk the positive aspect up, explained that the British public finances were judged to be healthy overall due to the very low level of public debt and the positive development of spending linked to the development of the pyramid of the past. However, Mr Solbes repeated that the 3% reverse value for nominal deficit still applied. The Commissioner warned that a structural deficit of around 1.5% of GDP associated with a nominal deficit of 2.2% in 2003-2004 could be in certain circumstances be responsible for a nominal deficit that is close to reference value. In its recommendations, the Commission outlined that a relatively high deficit forecast of 2.2% in 2003 was part of an optimistic 2.75% forecast. Mr Solbes underlined the fact that, "Such budgetary developments could lead to a deficit that could potentially approach the 3% of GDP Treaty threshold" and consequently lead to more budgetary discipline". The Commissioner also stressed that Ireland could count on a very low debt ratio (35% of GDP, the second lowest in the Union. As for the long-term viability of public finances, Ireland is well-place to deal with the budgetary consequences of an ageing population, indicates the Commission also illustrated the low level of debt the gradual accumulation of capital in the national pension funds and a large proportion of young people in the population. The Commission emphasised, nevertheless, that there was a risk in long-term budgetary imbalance and that to "ensure that public finances are on a sustainable footing, sustainable financing arrangements for social welfare expenditure have to be developed, while underlying deficits should not be perpetuated".
Spain: Mr Solbes explained that the upward revision of the inflation projection from 2.4% as an average for the programme period in the previous update to 2.8% in the 2002 update "raises policy questions". He also pointed out risks to long-term sustainability of public finances due to the effects of ageing population. The Commission is seeking more information on the timetable for concrete measures on the implementation of pension reform, which are currently being examined. For other aspects, Mr Solbes believes that Spain should respect the objectives of the Stability Pact (budgetary balance in 2003-04) and surplus for the following years, gradual reduction of the public debt. The Commission is calling on the Spanish government to implement new structural reforms particularly for competition in the services sector and increase overall productivity. It also called for the gradual abandonment of index linked wages, together with discipline over wages in conformity with the Council's recommendations, which could play an important role in this respect.
Denmark: Mr Solbes gave a run down on the updating of the Danish convergence programme, based on a realistic macro-economic scenario, in expectation of high budgetary surpluses to the tune of 2% of GDP over the whole period, as well as a strong reduction in public debt (estimated at 25% of GDP in 2010). He also said that the country was still respecting the objectives of the Stability Pact. He did, however stress that the implementation of the ambitious market reforms of the labour market planned for in the programme could turn out to be a real challenge to the government. The Commission concluded in its recommendations that Denmark respect the inflation convergence criteria, long-term interest rates, the exchange rate and public finance.
The Commissioner also stressed that Ireland could count on a very low debt ratio (35% of GDP, the second lowest in the Union. As for the long-term viability of public finances, Ireland is well-place to deal with the budgetary consequences of an ageing population, indicates the Commission also illustrated the low level of debt the gradual accumulation of capital in the national pension funds and a large proportion of young people in the population. The Commission emphasised, nevertheless, that there was a risk in long-term budgetary imbalance and that to "ensure that public finances are on a sustainable footing, sustainable financing arrangements for social welfare expenditure have to be developed, while underlying deficits should not be perpetuated".
Spain: Mr Solbes explained that the upward revision of the inflation projection from 2.4% as an average for the programme period in the previous update to 2.8% in the 2002 update "raises policy questions". He also pointed out risks to long-term sustainability of public finances due to the effects of ageing population. The Commission is seeking more information on the timetable for concrete measures on the implementation of pension reform, which are currently being examined. For other aspects, Mr Solbes believes that Spain should respect the objectives of the Stability Pact (budgetary balance in 2003-04) and surplus for the following years, gradual reduction of the public debt. The Commission is calling on the Spanish government to implement new structural reforms particularly for competition in the services sector and increase overall productivity. It also called for the gradual abandonment of index linked wages, together with discipline over wages in conformity with the Council's recommendations, which could play an important role in this respect.
Denmark: Mr Solbes gave a run down on the updating of the Danish convergence programme, based on a realistic macro-economic scenario, in expectation of high budgetary surpluses to the tune of 2% of GDP over the whole period, as well as a strong reduction in public debt (estimated at 25% of GDP in 2010). He also said that the country was still respecting the objectives of the Stability Pact. He did, however stress that the implementation of the ambitious market reforms of the labour market planned for in the programme could turn out to be a real challenge to the government. The Commission concluded in its recommendations that Denmark respect the inflation convergence criteria, long-term interest rates, the exchange rate and public finance.