Brussels, 24/06/2004 (Agence Europe) - On Thursday, the European Commission adopted its assessments of the convergence programmes of the ten new Member States. The Ecofin Council is to adopt opinions on this on 5 July. Commissioner Joaquin Almunia told the press that this exercise is the "tangible proof" that these countries are getting ready to join the euro zone. "Each at their own pace and according to their own means, but all with a steadfast commitment to respect all the convergence criteria, consolidate their public funds and maintain high and sustainable growth rates", added Mr Almunia. Here is a summary of the Commission's conclusions:
Poland: It is planning a gradual increase in growth (3.7% in 2003, 5.0% in 2004 and 2005, then 5.7% in 2006 and 2007). The figures presented for 2004 and 2005 seem to be in line with the Commission's forecasts, unlike the rather optimistic ones on growth for 2006 and 2007. Poland intends to bring its public deficit below 3% of GDP by 2007, and keep its public debt below the ceiling of 60% of GDP for the entire programme.
Hungary: Growth forecasts "seem to be slightly optimistic", writes the Commission. Hungary forecasts growth of 3.3% to 3.5% in 2004, and between 4.5% and 5% in 2008. It intends to bring its deficit below 3% of GDP in 2008 (deficit of 4.6% in 2004, to be reduced to 2.7% in 2008). Public debt will go from around 60% of GDP in 2004, to around 54% in 2008.
Czech Republic: A slight increase in growth is forecast (from 2.8% in 2004 to 3.5% in 2007), a scenario the Commission considers "cautious". It tables on gradual reduction of the general government deficit from 12.9% in 2003 (5.9% of GDP excluding a major one-off operation) to 3.3% of GDP in 2007. This strategy should, the Commission says, allow the excessive deficit situation to be remedied by 2008 at the latest. "Budgetary improvement seems credible but not very ambitious", the Commission underlines, however. The GDP deficit threshold increases by 4.1 percentage points over the programming period to reach 41.7% of GDP in 2007. The Commission states that the development of the country's public debt could be "less favourable" given above all the lower than expected receipts from privatisation.
Slovakia: The Commission notes that the government recently implemented "impressive" reform measures in the field of public finance, mainly setting in place, from 2005, a funded pension pillar system and broad fiscal reform. The Commission considers that the budgetary strategy followed seems sufficiently rigorous to bring the deficit down to 3% of GDP in 2007. The Commission nonetheless considers that the planned adjustment "does not seem very ambitious" given the strong growth forecast (4.1% in 2004, 5.0% in 2006 and 4.7% in 2007). The level of government debt does not pose a problem (45.1% in 2005 and 45.5% in 2007).
Slovenia: As the Commission sees it, only the hypothesis of growth for 2004 (3.6%) "seems optimistic". Forecasts for the other years are in line with the Commission's forecasts (3.7% in 2005 and up to 3.9% in 2007). Slovenia foresees gradual reduction of the public deficit (from 1.9% in 2004 to 0.9% in 2007), but the Commission does not rule out less satisfactory budgetary results, mainly in 2004. In its view, the budgetary guidelines of the programme are not compatible with the aim of the Stability and Growth Pact which provides for a budgetary position close to medium-term balance. The debt ratio is projected to rise to 29.5% of GDP in 2005 and 29.4% in 2007).
Lithuania: Growth forecasts provided by the government are considered by the Commission as optimistic (between 6.3 and 7.3%). The Commission regrets the lack of ambition in budgetary strategy which consists in "approximation to a cyclical balanced general governemnt budget". The Commission asks whether budgetary choices will make it possible to prevent the deficit from exceeding the reference value of 3% of GDP, at least in 2004. The public debt should fall to stabilise at around 21% in 2007.
Latvia: The programme provides for annual growth of 6.6% on average for the whole of the period, a scenario considered by the Commission as plausible. The debt ratio is expected to be around 2% of GDP at the end of the period. Generally speaking, the lack of measures for coming closer to budgetary balance seems to show a lack of ambition, the Commission believes, however. The debt-to-GDP ratio should increase from 15.3% of GDP to 17.7% of GDP in 2007.
Estonia: Growth estimates are considered realistic by the Commission (5.7% on average over the whole period). Public administration accounts should remain in surplus, from 0.7% of GDP in 2004, before falling to a balance again from 2005. These projections, the Commission says, are realistic. It nonetheless believes the budgetary strategy is conform to the aim of the Stability Pact (budgetary position close to medium-term balance). The country is presently very successful regarding public deficit (5.4% of GDP in 2004 and up to 3.2% in 2008).
Cyprus: In its programme, the country projects accelerated growth (3.5% in 2004, 4.3% in 2005 and 4.5% in 2006), which is conform to the Commission's forecasts. Cyprus plans to bring its government debt below the 3% of GDP bar in 2005. Nonetheless, given the size of the adjustment planned and the mitigated results regarding budgetary improvements, this aim is difficult to achieve, the Commission stresses. An objective of the programme is to reverse the upward trend of the debt to GDP ratio, to reduce it by almost 7 percentage points between 2004 and 2007 to bring it down to below 69% by 2007.
Malta: In its programme, Malta covers the period 2004-2007. Its government provides for accelerated growth of 1.1% in 2004 and 2.1% in 2006 and 2007. The Commission, for its part, is more optimistic (1.4% in 2004 and 2.0% in 2005). Malta projects bringing the general government deficit from 5.2% of GDP in 2004 to 1.4% in 2007 (the deficit would be brought under the 3% of GDP bar in 2006). Malta plans to reach these results by improving expenditure control and, as far as receipts are concerned, by taking measures to prevent tax evasion. The public debt should ncrease slightly in 2004 and 2005 then gradually fall from 72.4% of GDP in 2005 to 70.4% of GDP in 2007 (i.e. well below the reference value of 60% of GDP).