Brussels, 01/03/2006 (Agence Europe) - The convergence programme for Poland and Germany's stability programme, which were adopted late due to the elections held in both countries at the end of last year, have had mixed receptions on the part of the European Commission, which recommends that the excessive deficit proceedings for both countries be continued. Despite the recommendations of the Council of July 2004 (EUROPE 8741), the Warsaw deficit is unlikely to go back under 3% before 2009, and Poland will remain under excessive deficit proceedings. The Commission has reassessed the figures for the Polish deficit, taking account of a decision reached by Eurostat in March 2004 insisting that contributions to the capitalisation pension scheme are excluded from the calculation of public revenue as of 2007. The resumption of the proceedings against Berlin comes as no surprise, and the figures have been available since last week (EUROPE 9138). By dint of the flexibility provided for by the reformed Stability and Growth Pact, the Commission is proposing a pragmatic adjustment timetable, in line with the forecasts of the stability programme and which is likely to be acceptable to Berlin. This decision tends to prove that the new Stability and Growth Pact (SGP) does not lack "teeth" and that the Commission intends to use the procedure whilst counting on political dialogue with the countries in question. Showing that "nobody can be exempt from the application of the rules of the new Pact", this decision guarantees equal and fair treatment for the large and small countries of the Union alike and "reinforces the credibility of the Pact", Commissioner Almunia told the press on Wednesday.
Poland will continue to experience sharp levels of growth, with 4.3% in 2006 and 4.6% in 2007, but although this scenario is "broadly realistic, this is not the case for the last year of the programme", stressed Joaquin Almunia, who doubts that there will be a 5% increase in GNI in 2008. Despite these good performances, Poland is unlikely to be able to correct its excessive deficit between now and 2007, the Commissioner for Economic and Monetary Affairs told the press. In light of the opinion which the Ecofin Council is to return on the convergence programme on 14 March, the European Commission will recommend a new adjustment. Firstly, it will make a proposal to the Council to take note, on the basis of article 104§8, of the absence of effective measures, and soon afterwards will table new adjustment recommendations, but no new deadline has as yet been determined, said Mr Almunia. These new recommendations will be proposed under article 104§7, which is the stage of the proceedings to be invoked for States which are not members of the euro zone.
The Polish programme, which anticipates a deficit of 2.9% in GNI in 2005, 2 .6% in 2006 and 2.2% in 2007, fails to take account of a Eurostat decision on the classification of public revenue related to pension schemes, the Commission explains. However, by applying this decision (which will be effective in spring 2007), much higher alternative figures are arrived at. According to the Commission, Poland's deficit would thus be 4.7% in 2005, 4 .6% in 2006 and 4.1% in 2007. Only in 2009 does a return to a level below 3% seem likely, because in 2008, at the end of the period covered by the programme, the Commission is still forecasting a deficit of 3.7%. The Commission further notes that the Polish budgetary results could be less favourable than anticipated, despite the 2004 and 2005 performances, and notes that the broad reform of pensions could be endangered by granting specific treatment to certain groups. Debt is set to climb from 42.5% of GNI in 2005 to 45% in 2006, then stabilising at slightly higher levels, according to the Polish authorities. When asked by the press about the date for Poland to adopt the single currency, Commissioner Almunia explained: "once we have decided on a cut-off date to correct the Polish deficit, I will ask Poland whether they agree with what we propose and whether they will be able to establish a date thereafter to join the euro zone".
Under Germany's stability programme, the new government hopes to bring its deficit down to 2.5% of GNI in 2007, compared to 3.3% in 2005. Despite this reduction, compared to 3.7% in 2007, and to previous forecasts, Germany found itself in an excessive deficit situation in 2005, for the fourth year running. Further to the decision by the Court of Justice cancelling the decision of the finance ministers to shelve proceedings against France and Germany (EUROPE 8747 and 8848), Berlin was supposed to have returned below 3% in 2005. Last year's results, which were largely influenced by positive revenue in the fourth quarter, constitute "good news, but not good enough" to avoid a resumption of the excessive deficit proceedings, said Mr Almunia.
Although proposing that the Council strengthen the excessive debt procedure and make new recommendations in line with Article 104§9, the Commissioner notes also that the new government's reform programme, adopted at the end of 2005, is “ambitious” and that, hitherto, decisions made had been coherent in relation to statements. Finance Ministers are expected to adopt these recommendations on 14 March, leaving Germany four months to put forward the measures it intends to take. The July deadline should suit Berlin, which planned to present its 2007 budget at this time and to include the expected measures. In the light of German commitments, Mr Almunia said he was “optimistic” about the possibility of reaching an effective correction of the deficit, representing at least 1% in structural terms over the next two years. If, in July, the German measures are deemed to be adequate, the procedure will be suspended, but monitoring will continue through detailed reports.
Germany, however, will not reach its medium-term objective before the end of 2008, which implies the structural adjustment being successfully concluded after the correction in the excessive deficit in 2007, pointed out Mr Almunia. Despite a constantly rising public debt (it will increase from 67.5% in 2005 to 69% on 2006, before dropping back considerably), Germany is facing a 'medium risk” to its public finances over the effect of an ageing population. Pensions reform has already been implemented, but there is no room for complacency and social security reforms have to be pursued, insisted the Commissioner.