Brussels, 01/02/2006 (Agence Europe) - Talking to reporters on Wednesday, Economic and Monetary Affairs Commissioner Joaquin Almunia said he was very satisfied with the efforts of six Member States which presented their stability and convergence programmes, while encouraging them to pursue and intensify their efforts, in some cases to meet the criteria for entry to the euro zone. In January, the plans from Finland, Denmark, Sweden, Slovakia, the Czech Republic and Hungary were assessed (see EUROPE 9107) and on 22 February, plans from twelve others will be assessed, he said, adding that, with Germany adopting its stability programme on 22 February, the Commission will “work hard” to make its assessment as quickly as possible. The assessment will not be presented to the Ecofin Council before April or May, he said in answer to a question. Mr Almunia pointed out:
With regard to stability programmes: Austria plans a reduction of the government deficit from 1.9% in 2005 to zero in 2008, and government debt of below 60% of GDP, as against 63.5% in 2005. Its overall strategy is good and Austria appears to be at “low risk” with regard to the sustainability of its long-term public finances, thanks largely to the recent pensions reform. Belgium is aiming for a healthy budgetary surplus (0.5%, which goes beyond the requirements of the stability pact: editor's note), but debt remains one of the EU's highest. However, Mr Almunia recognised the “remarkable achievement” of Belgium which, with a public debt of 140% of GDP in 1993, is seeking to drop to around 91% in 2006 (with the rate estimated at 94% for 2005) and under 80% in 2009. With regard to public finances, Belgium is at “medium risk” largely because of its ageing population. Luxemburg is in a “very positive” position, with its debt (less than 10%) far below the 60% ceiling provided for in the Treaty and it intends to reduce its budget deficit, which is expected to be 2.3% in 2005, to 0.2% in 2008. Luxemburg is, however, at medium risk as regards the long-term sustainability of its public finances.
With regard to the convergence programmes of three new Member States, Mr Almunia commented that these countries had reasons to be “proud” and could look to the future with confidence but Estonia and Latvia, having higher that EU average growth rates (around 6.3%-6.6% for Estonia and 7% for Latvia), should be able to be “a little bit more ambitious”. Mr Almunia explained: Estonia has a budget on balance and, with 5% of GDP in 2005, the lowest gross debt ratio of the EU and appears to be at low risk from the projected budgetary costs of an ageing population: it can be “hailed as an example of good fiscal policy”. Latvia is in a comfortable budgetary situation (in 2005, deficit of 1.5% and debt of 15%: editor's note), but has a high rate of inflation (6.9% in 2005, which it wants to bring down to 5.6% in 2006, 4.3% in 2007 and 3.5% in 2008) and an external debt of over 10%. Slovenia is also positive (in 2005, the deficit was 1¾% and debt below 30%) but the budgetary costs of an ageing population are projected to rise significantly after 2020, so that Slovenia is at “high risk” as regards the long-term sustainability of its public finances, unless it undertakes further reforms.
Austria: the Commission recommends that Austria implement further measures to place public finances on a sounder footing in 2007 and 2008. In its updated programme (2005-2008), Vienna predicts a return to a balanced budget in 2008, against a deficit of 1.9% in 2005. Public debt reached 63.4% of GDP in 2005 and Austria aims to reduce it progressively to 59.5% in 2008.
Belgium: the Commission recommends intensification of the structural adjustment in 2006 and implementing additional structural measures in subsequent years to limit recourse to one-off measures. According to the new version of its programme (2005-209), Belgium seeks to take its budgetary excess to 0.5% of GNP in 2008 (after a balanced situation from 2004 to 2006). Public debt should go from 94.3% of GDP in 2005 to 79.1% in 2009 (90.7% in 2006, 87% in 2007 and 83% in 2008).
Luxemburg: it would be appropriate to strengthen the budgetary adjustment effort in 2006 and take the necessary measures for 2007 and 2008 to address the long-term budgetary implications of an ageing population. The Commission believes the Luxemburg programme for 2005-2008 to be “slightly optimistic” in the outer years. Luxemburg expects to reduce its government deficit from 2.3% in 2005 to 0.2% 2008, relying exclusively on expenditure restraint. Government debt is expected to remain low (9.6% in 2006, 9.9% in 2007 and 10.2% in 2008) but up on 2005's 6.4% of GDP.
Estonia: the Commission feels that Estonia should aim for a higher budgetary surplus for 2006 and the following years, given the better than expected results in 2005 (surplus of 0.3% of GDP). This would allow it to accelerate the correction of the external debt.
Latvia: Latvia should have “more ambitious” budgetary targets, bring forward the attainment of the medium-term objective (a structural deficit of around 1% of GDP) and avoid pro-cyclical fiscal policies in good times, according to the Commission analysis of its 2005-2008 programme. Budgetary outcomes may be lower than projected so “the budgetary stance in the programme may not be sufficient to achieve the programme's medium-term objective”, points out the Commission.
“I will never close the door” to those who want to join the euro zone, but the conditions
must be met, says Mr Almunia
When asked by reporters, Mr Almunia said of the accession prospects of the three new Member States who want to join the euro zone quickly: Estonia wants to join on 1st January 2007, but that will be difficult because until now it has not met the inflation condition (inflation must not exceed the rate of the three best countries plus 1.5%, pointed out Mr Almunia, and he indicated that today's reference value is around 2.6%) although it is possible that it could succeed in the course of 2006; Latvia wants to join in 2008, but it hasn't met the inflation condition either; Slovenia is in a better position and could even join today, but it should continue to meet the conditions in the coming months too, when there will be a Commission assessment. The Commissioner saluted the “brilliant” results of these three countries and assured them, “The doors are, I'll never close these doors” to countries wishing to join the euro zone. To a journalist who asked if the criterion of GNP per capita would be added to those in the Treaty, Mr Almunia said that that condition was not in the Treaty and would not be assessed. He added he was firmly against any new conditions being added and would give equal treatment to new Member States.