28.3.2007   

EN

Official Journal of the European Union

C 71/1

(1)

On 27 February 2007 the Council examined the updated stability programme of Finland, which covers the period 2006 to 2010.

(2)

(3)

For 2006, the general government surplus is estimated at 2,9 % of GDP in both the Commission services' autumn 2006 forecast and in the current programme update, against a target of 1,6 % of GDP set in the previous update of the stability programme. This is due to the carry-over from the better-than-expected outcome in 2005 and the positive growth surprise in 2006 boosting government revenue, while expenditure has remained contained.

(4)

(5)

(6)

The risks to the budgetary projections in the programme appear broadly balanced. The programme's macroeconomic assumptions as well as the tax revenue projections appear plausible. The risks to the latter emanating from the composition of growth are counterbalanced by conservative tax elasticity assumptions. Deviations from the projected growth path could have a strong impact on the fiscal outcome. In addition, notable risks are considered to be related to developments in local government expenditure.

(7)

In view of this risk assessment, the budgetary stance in the programme seems sufficient to meet the MTO by a considerable margin throughout the programme period, as envisaged in the programme. In addition, it provides a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations over the programme period. The fiscal policy stance implied by the programme is fully in line with the Stability and Growth Pact.

(8)

(9)

The long-term budgetary impact of ageing in Finland is higher than on average in the EU, although enacted pension reform measures have helped to contain the increase in pension expenditure to close to the EU average as a share of GDP over the coming decades. The initial budgetary position, with a large structural surplus, contributes significantly to easing the long-term budgetary impact of ageing. Moreover, the large assets accumulated in the public pension fund will finance part of the increase in pension expenditure. However, maintaining high primary surpluses over the medium term would contribute towards containing risks to the sustainability of public finances. Overall, Finland appears to be at low risk with regard to the sustainability of public finances.

(10)

The stability programme contains a qualitative assessment of the overall impact of the October 2006 implementation report of the national reform programme within the medium-term fiscal strategy. In addition, it provides systematic information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme and its budgetary projections explicitly take into account the public finance implications of the actions outlined in the national reform programme. The measures in the area of public finances envisaged in the stability programme seem consistent with those foreseen in the national reform programme. In particular, both programmes envisage the implementation of measures to improve the productivity of both central and local governments and confirm the intention to continue applying central government budgetary spending limits beyond the current legislative period.

(11)

The budgetary strategy in the programme is broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008.

(12)

As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme has some gaps in the required and optional data (2).

28.3.2007   

EN

Official Journal of the European Union

C 71/5

(1)

On 27 February 2007 the Council examined the updated stability programme of Portugal, which covers the period 2006 to 2010.

(2)

The macroeconomic scenario underlying the programme envisages that real GDP growth will pick up from 1,4 % in 2006 to 1,8 % in 2007 and 2,4 % in 2008 and eventually to 3 % per year over the rest of the programme period. Assessed against currently available information, this scenario appears to be based on favourable growth assumptions for 2008 and for the outer years, with the output gap closing rapidly. The programme's projections for inflation appear realistic.

(3)

For 2006, the general government deficit is estimated at 4,6 % of GDP in the Commission services' autumn 2006 forecast and in the new update, which would correspond to the target set in the previous update of the stability programme. According to the new update, both total government revenue and expenditure level targets have been largely met. As percent of GDP, both ratios are somewhat lower than in the Commission services' autumn 2006 forecast.

(4)

The main goal of the programme's medium-term budgetary strategy is a lasting correction of the large fiscal imbalances, notably a reduction of the general government deficit to below the 3 % of GDP reference value in the year 2008 and further budgetary consolidation thereafter. Substantial steps towards fiscal consolidation are planned throughout the programme period: the government deficit is targeted to gradually decline from 4,6 % of GDP in 2006 to 0,4 % in 2010; the adjustment path for the primary balance is similar, with an improvement from a deficit of 1,7 % of GDP in 2006 to a surplus of 2,5 % in 2010. The planned deficit reduction is to be achieved mainly by curbing primary expenditure, the overall level of which is to decline in real terms over the programme period thanks to corrective measures of a structural nature concentrated on restructuring central government, personnel and public services and also on controlling social security and health expenditure. In the earlier years of the programme, higher tax revenues coming mainly from an increase in some rates and lower tax benefits, and the continued efforts in fighting fraud and tax evasion, also contribute to fiscal consolidation. The programme confirms the planned adjustment outlined in the December 2005 update of the stability programme against a largely unchanged macroeconomic scenario.

(5)

(6)

The budgetary outcomes are subject to downside risks deriving, in particular, from the impact of the measures to contain government spending. Against the backdrop of a difficult macroeconomic environment, the government has recently implemented decisive measures to tackle expenditure growth, notably in public administration, health care and social welfare, in addition to the new legal framework to improve the fiscal discipline of regional and local governments. Others measures partly also relating to the government sector, are still in preparation. The budgetary relief to be expected from these measures is nevertheless subject to uncertainty, notably for 2008 and beyond. Since fiscal consolidation relies crucially on expenditure retrenchment, further progress with the ongoing improvement of the budgetary framework and implementation of mechanisms of assessing and controlling budgetary execution will also be instrumental to the achievement of the budgetary targets. The macroeconomic scenario raises the risk of a less marked recovery of economic activity thus providing more moderate relief to government finances. The assumptions about the elasticity of tax revenue to economic activity in 2007 depend on the planned further improvement in tax collection..

(7)

In view of this risk assessment, the budgetary stance in the programme is broadly consistent with a correction of the excessive deficit by 2008 as recommended by the Council, provided the measures announced in the programme are fully and effectively implemented and reinforced in case of lower-than-projected economic growth. Following the correction of the excessive deficit, the programme targets an adjustment that is in line with the Pact. However, taking into account the risks to the budgetary targets, the budgetary stance in the programme may not provide a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations until the very end of the programme period. Consequently, the risks to the budgetary targets may compromise reaching the MTO by 2010, as envisaged in the programme. Thus, in the years following the correction of the excessive deficit, the adjustment towards the MTO outlined in the programme could require reinforcing the measures to be in line with the Stability and Growth Pact, which specifies that, for euro-area and ERM II Member States, the annual improvement in the structural balance should be 0,5 % of GDP as a benchmark and that the adjustment should be higher in good economic times and could be lower in bad economic times.

(8)

(9)

Portugal has recently enacted pension reforms aimed at strengthening the sustainability of the public finances. Estimates in the programme suggest that the overall increase in age-related expenditure over the coming decades would be significantly lower as a result of the reform, though remaining sizeable. The initial budgetary position, albeit markedly improved compared with 2005, still constitutes a risk to sustainable public finances even before the long-term budgetary impact of an ageing population is considered. Moreover, the current level of gross debt is above the Treaty reference value. Overall, Portugal appears to be at high risk with regard to the sustainability of public finances. The planned budgetary consolidation coupled with the expected containment of the age-related expenditure, arising from ongoing reforms, would significantly contribute to reducing such risks.

(10)

The stability programme contains a qualitative assessment of the overall impact of the October 2006 Implementation Report of the National Reform Programme within the medium-term fiscal strategy. In addition, it provides systematic information on the direct budgetary costs or savings of the main reforms envisaged in the National Reform Programme and its budgetary projections explicitly take into account the public finance implications of the actions outlined therein. The measures in the area of public finances envisaged in the stability programme seem consistent with those foreseen in the National Reform Programme. In particular, both programmes address the linkages between public administration reform and the fiscal consolidation strategy and provide complementary information on various policy measures.

(11)

The budgetary strategy in the programme is broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008.

(12)

As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme provides all required and most of the optional data (2). As regards the model structure, it deviates on some material points from the one specified in the code of conduct (3).

(i)

implement with rigour the structural measures envisaged in the programme so as to correct the excessive deficit by 2008 and stand ready to reinforce these measures to deal with the budgetary impact of possible lower-than-projected economic growth;

(ii)

once the excessive deficit has been corrected, carry out the envisaged adjustment towards the MTO, backing it up with reinforced measures if necessary; and ensure that the debt-to-GDP ratio is reduced accordingly;

(iii)

pursue the ongoing reform of public administration; continue strengthening the budgetary framework, including the assessment and control of budgetary execution at all levels of the general government, notably in order to attain the planned expenditure containment;

(iv)

in view of the level of debt and the projected increase in age-related expenditure, improve the long-term sustainability of public finances by achieving the MTO and by securing and possibly enhancing the benefits of the adopted pension reforms.

28.3.2007   

EN

Official Journal of the European Union

C 71/9

(1)

On 27 February 2007 the Council examined the first stability programme of Slovenia, which covers the period 2006 to 2009.

(2)

The macroeconomic scenario underlying the programme envisages that real GDP will grow steadily at above 4 % over the programme period. Assessed against currently available information, this scenario appears to be based on plausible growth assumptions. The programme's projections for inflation also appear realistic.

(3)

For 2006, the general government deficit is estimated at 1,6 % of GDP in the Commission services' autumn 2006 forecast, against a target of 1,7 % of GDP set in the December 2005 update of the convergence programme. The 2006 estimated outturn, based on more recent figures, of 1,2 % GDP is lower compared to 2005.

(4)

The programme's budgetary strategy is geared to achieving the medium-term objective (MTO) for the budgetary position as meant in the Stability and Growth Pact by 2009 through a back-loaded consolidation. Reflecting the ongoing tax reform and a number of cost-saving expenditure measures, revenues and expenditure as a percentage of GDP fall significantly throughout the programme period. Until 2008, when the respective ratios decrease in broadly equal measure, the general government deficit is planned to linger at around 1,5 % of GDP. In 2009, the deficit declines to 1,0 % as expenditure reduction outweighs the revenue loss. The primary balance initially deteriorates from 0,1 % of GDP in 2006 to -0,3 % of GDP in 2008 before improving to 0,3 % of GDP in 2009. Compared with the last update of the convergence programme, the stability programme postpones the target of achieving a nominal deficit of 1 % of GDP by one year against a more favourable macroeconomic scenario.

(5)

(6)

The risks to the budgetary projections in the programme appear broadly balanced but the budgetary outcome could be worse than projected in 2009. On the one hand, the assumptions on growth and tax revenues seem plausible. Furthermore, Slovenia has established a track record of better-than-projected budgetary outcomes in recent years, also supported by an effective budgetary mechanism of containing general government expenditures in response to an unexpected revenue shortfall. On the other hand, notwithstanding the efforts to restructure the general government expenditure, the share of mandatory expenditure remains very high but on a declining path. The measures that underpin the considerable cut in primary expenditure as a percentage of GDP announced for 2009 remain to be specified in more detail.

(7)

In view of this risk assessment, the budgetary stance in the programme may not be sufficient to ensure that the MTO is achieved by 2009, as envisaged in the programme. However, it provides a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations throughout the programme period. The pace of the adjustment towards the MTO implied by the programme is insufficient and should be strengthened to be in line with the Stability and Growth Pact, which specifies that, for euro-area and ERM II Member States, the annual improvement in the structural balance should be 0,5 % of GDP as a benchmark and that the adjustment should be higher in good economic times and could be lower in bad economic times. In particular, good times are expected to occur throughout the programme period but the structural balance is not planned to improve noticeably before the last year of the programme.

(8)

Government gross debt is estimated to have reached 28,5 % of GDP in 2006, well below the 60 % of GDP Treaty reference value. The programme projects the debt ratio to decline by 0,8 percentage point over the programme period.

(9)

The long-term budgetary impact of ageing in Slovenia is among the largest in the EU, influenced notably by a considerable increase in pension expenditure as a share of GDP. While some action is being taken, stronger fiscal consolidation and implementation of further reform measures aimed at containing the substantial increase in age-related expenditures would contribute to reducing risks to the sustainability of public finances. Although the initial budgetary position contributes to stabilising the debt ratio over the medium term, the low structural improvement over the programme period will not be sufficient to contain the expected budgetary impact of ageing in the long term. Overall, Slovenia appears to be at high risk with regard to the sustainability of public finances.

(10)

The stability programme contains a qualitative assessment of the overall impact of Slovenia's October 2006 national reform programme within the medium-term fiscal strategy. In addition, it provides some information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme but its budgetary projections do not explicitly take into account the public finance implications of all actions outlined in the national reform programme. The measures in the area of public finances envisaged in the stability programme seem consistent with those foreseen in the national reform programme. In particular, the stability programme provides details of the tax reform announced in the national reform programme and complements the actions envisaged in the national reform programme with expenditure measures.

(11)

The budgetary strategy in the programme is partly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008. In particular, the adjustment path towards the MTO is insufficient.

(12)

As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme has some gaps in the required and optional data. (2)

(i)

taking advantage of the good economic conditions, including the better than expected budgetary outcome in 2006, speed up the achievement of the MTO;

(ii)

in view of the projected increase in age related expenditure, improve the long-term sustainability of public finances, in particular by strengthening the ongoing pension reform with additional measures, geared especially to increasing labour participation of older workers and encouraging the move towards a greater reliance on private pension saving schemes.

28.3.2007   

EN

Official Journal of the European Union

C 71/12

(1)

On 27 February 2007 the Council examined the updated convergence programme of Denmark, which covers the period 2006 to 2010.

(2)

The macroeconomic scenario underlying the programme envisages that real GDP growth will slow from 2,7 % in 2006 to 1,0 % on average over the rest of the programme period. Assessed against currently available information, this scenario appears to be based on markedly cautious growth assumptions, in particular for the period 2008-2010 due to the technical assumption in the update of the closing of a (positive) output gap in 2010. The programme's projections for inflation appear realistic.

(3)

For 2006, the general government surplus is estimated at 3,2 % of GDP in the Commission services' autumn 2006 forecast, against a target of 2,1 % of GDP set in the previous update of the convergence programme. This reflects higher-than-expected growth as well as continued high energy prices given the importance of revenues linked to Denmark's oil and gas production.

(4)

(5)

(6)

The budgetary outcomes could be better than projected in the programme, in particular for the years 2008 to 2010. This is essentially because of the programme's markedly cautious macroeconomic scenario, which outweighs the risk that real public consumption expenditure growth could be higher than targeted.

(7)

In view of this risk assessment, the budgetary stance in the programme seems sufficient to maintain the MTO throughout the programme period, as envisaged in the programme. In addition, it provides a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations in each year. The fiscal policy stance implied by the programme is fully in line with the Stability and Growth Pact.

(8)

Government gross debt is estimated to have declined below 30 % of GDP in 2006, well below the 60 % of GDP Treaty reference value. The programme projects the gross debt ratio to decline by around a further 11 percentage points over the programme period.

(9)

The long-term budgetary impact of ageing in Denmark is projected to be higher than on average in the EU; influenced notably by a relatively high increase in pension expenditure as a share of GDP over the coming decades. However, the comprehensive reform package adopted in June 2006, the ‘Agreement on Future Prosperity, Welfare and Investments in the Future ’or simply Welfare Agreement, aims at delaying retirement. Both the general pension age and the early retirement age will be gradually increased by 2 years followed later by an indexation of the age thresholds to changes in life expectancy. Therefore, the Welfare Agreement contributes to curb the long-term expenditure trends and thus improves public finance sustainability. Moreover, the initial budgetary position with a large structural surplus contributes significantly to ease the long-term budgetary impact of ageing. Maintaining high primary surpluses over the medium-term will contribute to reducing risks to the sustainability of public finances. Taking into account these developments, Denmark appears to be at low risk with regard to the sustainability of public finances.

(10)

The convergence programme contains a qualitative assessment of the overall impact of the October 2006 implementation report of the national reform programme within the medium-term fiscal strategy. In addition, it provides systematic information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme and its budgetary projections explicitly take into account the public finance implications of the actions outlined in the national reform programme. The measures in the area of public finances envisaged in the convergence programme seem consistent with those foreseen in the national reform programme. In particular, both programmes envisage the implementation of reforms aimed at increasing labour supply in the long term, in particular the agreement to raise statutory pension ages and thus promote longer effective working lives.

(11)

The budgetary strategy in the programme is broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008.

(12)

As regards the data requirements specified in the code of conduct for stability for stability and convergence programmes, the programme provides all required data and most optional data (3).

28.3.2007   

EN

Official Journal of the European Union

C 71/16

(1)

On 27 February 2007 the Council examined the updated convergence programme of Cyprus, which covers the period 2006 to 2010.

(2)

The macroeconomic scenario underlying the programme envisages that real GDP growth will pick up from 3,7 % in 2006 to 4.1 % on average over the rest of the programme period. Assessed against currently available information, this scenario appears to be based on plausible growth assumptions. The programme's projections for inflation also appear realistic.

(3)

For 2006, the general government deficit is estimated at just below 2 % of GDP in the Commission services' autumn 2006 forecast, as targeted in the previous update of the convergence programme. With real GDP growth lower than projected in the previous update (3,7 % instead of 4,2 %), total expenditure is estimated to be higher than planned but this is estimated to be offset by higher total revenues.

(4)

(5)

(6)

The risks to the budgetary projections in the programme appear broadly balanced. The target for 2007 seems plausible when compared with the Commission services' autumn 2006 forecast and, for the year 2008, when the primary surplus is planned to improve, there is relatively detailed information in the programme about the measures that support the adjustment. However, there is some risk of spending slippages given the high degree of expenditure restraint envisaged and the limited information on the spending ceilings and their enforcement. On the other hand, the overall track record with respect to the achievement of the budgetary targets is good.

(7)

In view of this risk assessment, the budgetary stance in the programme seems sufficient to ensure that the MTO is achieved by 2008, as envisaged in the programme. In addition, it seems to provide a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations throughout the programme period. The pace of adjustment towards the MTO implied by the programme is in line with the Stability and Growth Pact, which specifies that, for euro-area and ERM II Member States, the annual improvement in the structural balance should be 0,5 % of GDP as a benchmark and that the adjustment should be higher in good economic times and could be lower in bad economic times. After the achievement of the MTO, the fiscal policy stance implied by the programme is also in line with the Pact.

(8)

(9)

The long-term budgetary impact of ageing in Cyprus is among the highest in the EU, influenced notably by a very large increase in pension expenditure as a share of GDP. The initial budgetary position contributes to easing part of the projected considerable long-term budgetary impact of an ageing population, but it is not sufficient to cover it. Moreover, the current level of gross debt is above the Treaty reference value. Continuing the consolidation of the public finances simultaneously with adopting pension reform measures aimed at containing the significant increase in age-related expenditures would contribute, as recognised by the authorities, to reducing risks to the sustainability of public finances. Overall, Cyprus appears to be at high risk with regard to the sustainability of public finances.

(10)

The convergence programme contains a qualitative assessment of the overall impact of the October 2006 implementation report of the national reform programme within the medium-term fiscal strategy. In addition, it provides systematic information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme and its budgetary projections seem to take into account the public finance implications of the actions outlined in the national reform programme. The measures in the area of public finances envisaged in the convergence programme seem consistent with those foreseen in the national reform programme. In particular, both programmes envisage the gradual implementation of pension and healthcare reforms in order to address the impact of ageing populations. Also, there is a need to enhance life-long learning, and to further increase employment and training opportunities for young persons.

(11)

The budgetary strategy in the programme is broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008.

(12)

As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme provides all required and most of the optional data (2).

(i)

control public pension expenditure and implement further reforms in the areas of pensions and health care in order to improve the long-term sustainability of the public finances.

(ii)

implement the fiscal consolidation path as foreseen in the programme.

28.3.2007   

EN

Official Journal of the European Union

C 71/19

(1)

On 27 February 2007 the Council examined the updated convergence programme of Lithuania, which covers the period 2006 to 2009. The update was submitted almost two weeks beyond the 1 December deadline set in the code of conduct in view of a change in the approval procedure for the programme which now involves the Parliament.

(2)

The macroeconomic scenario underlying the programme envisages that real GDP growth will decelerate progressively from 7,8 % in 2006 to 4,5 % in 2009. Assessed against currently available information, this scenario appears to be based on cautious growth assumptions from 2007. The programme's projections for inflation appear to be on the low side in the light of recent developments.

(3)

For 2006, the general government deficit is estimated at 1 % of GDP in the Commission services' autumn 2006 forecast against a target of 1,4 % of GDP set in the previous update of the convergence programme. The updated programme presents a deficit estimated at 1,2 %. However, preliminary data for the whole of 2006 point to an even better deficit outcome close to balance. This is due to much higher-than-foreseen economic activity and employment, faster wage growth and improvements in tax collection and was achieved in spite of a budget amendment in July 2006 which increased expenditures by around 0,5 % of GDP.

(4)

The main goal of the programme is to gradually reduce the general government deficit throughout the programme period so as to achieve the medium-term objective (MTO, see below) by 2008 and a balanced budget in 2009. The primary deficit is expected to be in balance by 2007 and to record a surplus of 0,8 % of GDP at the end of the programme period. Compared with the previous update, the planned adjustment is more ambitious, but backloaded against a less favourable macroeconomic scenario towards the end of the programme period. The envisaged fiscal consolidation relies on an increase in the revenue-to-GDP ratio that is higher than the increase in the expenditure-to-GDP ratio (2,6 percentage points compared to 1,4 percentage points). On the revenue side, only 0,5 percentage point is explained by an increase in the tax ratio, which is mainly due to an expected improvement in tax collection. The rest of the increase is not specified in the programme, but seems to be linked to the inflow of EU funds. On the expenditure side, the changes stem from a rise in public investment, social transfers and ‘other ’primary expenditures, which is less than fully offset by a significant cut in government consumption as a percentage of GDP (by more than 2 percentage points).

(5)

(6)

The risks to the budgetary projections in the programme appear broadly balanced until 2007, but budgetary outcomes could be worse than projected in the programme from 2008 onwards. The budgetary strategy relies on a significant increase in the revenues-to-GDP ratio and the substantial cut in public consumption-to-GDP ratio, which could have been better substantiated, taking into account the medium-term framework for the planning and control of public finances which is not sufficiently binding. While the likely carry-over from a lower-than-estimated deficit outcome in 2006 implies that the target for 2007 could be achieved, the lack of detailed information on the envisaged measures introduces considerable uncertainty for the achievement of the budgetary targets from 2008 onwards.

(7)

In view of this risk assessment, the budgetary stance in the programme may not be sufficient to ensure that the MTO is achieved by 2008, as envisaged in the programme. However, it seems to provide a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations throughout the programme period. According to the programme, the pace of the adjustment towards the MTO is in line with the Stability and Growth Pact which specifies that the adjustment should be higher in good economic times and could be lower in bad economic times. Nevertheless, in view of the risks identified above, the planned structural adjustment should be strengthened by backing it up with measures so that the annual improvement in the structural balance is 0.5 % of GDP as a benchmark, as required for euro-area and ERM II Member States.

(8)

(9)

The long-term budgetary impact of ageing in Lithuania is lower than the EU average, with a limited increase in pension expenditure over the coming decades, influenced by the pension reforms enacted. The current level of gross debt is very low in Lithuania and improving the budgetary position as planned in the convergence programme update would contribute to containing the risks to the long-term sustainability of public finances. Overall, Lithuania appears to be at low risk with regard to the sustainability of public finances.

(10)

The convergence programme does not contain a qualitative assessment of the overall impact of the October 2006 implementation report of the national reform programme within the medium-term fiscal strategy. However, it provides systematic information on the direct budgetary costs of the main reforms envisaged in the national reform programme and its budgetary projections seem to take into account the public finance implications of the actions outlined in the national reform programme. The measures in the area of public finances envisaged in the convergence programme seem consistent with those foreseen in the national reform programme. In particular, both programmes highlight the ongoing pensions, health care and tax reforms. Nevertheless, the general government deficit targets presented in the convergence programme are significantly lower than those presented in the national reform programme.

(11)

The budgetary strategy in the programme is broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008.

(12)

As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme provides all required and most of the optional data (2).

(i)

exploit the good times by aiming for a more demanding deficit target in 2007 in view of the likely better deficit outcome in 2006 and back-up the adjustment towards the MTO with measures which would ensure an annual improvement in the structural balance of 0,5 % of GDP as a benchmark as required for euro-area and ERM II Member States, and the intended improvement beyond the MTO.

(ii)

continue to improve the medium-term framework for the planning and control of public finances.

28.3.2007   

EN

Official Journal of the European Union

C 71/23

(1)

On 27 February 2007 the Council examined the updated convergence programme of Hungary, which covers the period 2006 to 2010.

(2)

The programme's macroeconomic scenario expects a slow-down of economic activity for the years 2007 and 2008, as a result of the fiscal consolidation measures, with a recovery to pre-consolidation growth rates by 2009. Assessed against currently available information, this scenario appears to be broadly plausible for the years up to 2008 and might even be slightly cautious, while for the outer years it seems rather favourable. The programme projects inflation to surge in 2007 and rapidly decline thereafter; however, the projected inflation path over the entire programme horizon is somewhat favourable.

(3)

(4)

The main goal of the update is to correct the excessive deficit by 2009 (reducing the deficit from 10,1 % of GDP in 2006 to 3,2 % of GDP in 2009 (3)), in line with the September 2006 update against a background of a broadly similar macroeconomic scenario, with a further reduction in 2010. The improvement in the primary balance is of the same magnitude. The planned adjustment is front-loaded, with nearly half of the reduction in the deficit ratio to take place in 2007. The planned nominal adjustment over the programme period is to be achieved by increasing the revenue-to-GDP ratio by nearly 1 percentage point and by reducing the expenditure-to-GDP ratio by 6.5 percentage points. An initial increase in the tax burden by 1,6 percentage points of GDP in 2007 is progressively replaced by measures on the expenditure side. On top of the expenditure cuts and budgetary freezes adopted since summer 2006, the authorities have started to strengthen expenditure controls and enhance the institutional framework of public finances. Moreover, the programme spells out a broad structural reform agenda aimed to ensure the achievement of the deficit targets, especially in the outer years of the programme.

(5)

(6)

The budgetary outcomes could be worse than targeted in the programme, especially from 2008. The risks to the deficit path stemming from the macroeconomic outlook are broadly balanced until 2008, but lower-than-projected GDP growth in the outer years could lead to a higher deficit. Although the short-term expenditure cuts and temporary budgetary freezes were incorporated into the 2007 budget as planned, there is still some uncertainty about the effective enforcement of the expenditure freezes (also because of the poor track-record of similar controls in 2004-2006). The effectiveness of the new fiscal rules and the initial steps taken towards a multi-annual budgetary framework in reversing the pattern of regular expenditure overruns will have to be tested. The Government has taken decisions on a number of steps to reform the public administration, health, pension, price subsidies and education systems. Based on these measures the budgetary outcomes could be closer to the deficit targets for 2007 and 2008 than expected in the Commission services' autumn 2006 forecast. However, the remaining structural reform steps, necessary to replace the expenditure-curbing measures that expire at the end of 2008, still need to be further specified and fully implemented. In addition, in the outer years of the programme, there is a risk of a budgetary loosening as evidenced by past experience. Finally, should the restructuring plans of the public transport companies fail to yield the expected results, the accumulating losses of these companies might temporarily increase the deficit.

(7)

In view of this risk assessment, the budgetary stance in the programme seems broadly consistent with a correction of the excessive deficit by 2009 as recommended by the Council provided that the budgetary strategy is fully implemented. This concerns in particular the full implementation of the consolidation measures announced in the 2007 budget and in the new programme as well as the further specification and timely adoption of the announced additional structural reform measures. In 2010, after the planned correction of the excessive deficit, the pace of the adjustment towards the MTO implied by the programme should be strengthened. This would also be a first step towards providing a sufficient safety margin against breaching the 3 % of GDP deficit threshold with normal macroeconomic fluctuations, which is not in place.

(8)

(9)

The long-term budgetary impact of ageing in Hungary is well above the EU average, notably as a result of the high increase in pension expenditure as a share of GDP over the long term. While first important steps have been taken, full implementation of further reform measures aimed at containing the significant increase in age-related expenditures as planned in the programme would contribute to reducing risks to the sustainability of public finances. Moreover, and importantly, the weak initial budgetary position, having deteriorated substantially compared with 2005, constitutes a risk to sustainable public finances even before the long-term budgetary impact of an ageing population is considered. In addition, the current level of gross debt is above the Treaty reference value. Further budgetary consolidation as planned would contribute to reducing risks to the sustainability of public finances. Overall, Hungary appears to be at high risk with regard to the sustainability of public finances.

(10)

The convergence programme contains a qualitative assessment of the overall impact of the Hungarian October 2006 revised national reform programme within the overall medium-term strategy. In addition, it provides some information on the direct budgetary costs or savings of the main reforms envisaged in the national reform programme, but its budgetary projections do not explicitly take into account all the public finance implications of the actions outlined in the national reform programme. The measures in the area of public finances envisaged in the convergence programme seem consistent with those foreseen in the national reform programme. In particular, the structural reform plans and recently adopted measures outlined in the convergence programme entirely correspond to the reform agenda presented in the national reform programme, notably the reform steps adopted in the fields of public administration, health-care, pension and education and various subsidy systems.

(11)

The budgetary strategy in the programme is broadly consistent with the broad economic policy guidelines included in the integrated guidelines for the period 2005-2008.

(12)

As regards the data requirements specified in the code of conduct for stability and convergence programmes, the programme provides all required and most of the optional data (4).

(i)

Rigorously implement the 2007 budget and take adequate action to ensure the correction of the excessive deficit by 2009, if necessary through additional measures; and ensure, including by using any extra revenues for deficit reduction, that the gross debt-to-GDP ratio is brought onto a firm downward trajectory, preferably before 2009.

(ii)

Improve budgetary control by enhancing fiscal rules and by strengthening the institutional framework of public finances, building on the first steps undertaken in the budget for 2007.

(iii)

Curb expenditure in a permanent manner through the adoption and swift implementation of the announced streamlining of the public administration and healthcare systems and the envisaged reform of the education system.

(iv)

In view of the level of debt and the increase in age-related expenditure, improve the long-term sustainability of public finances by making adequate progress towards the MTO and taking additional pension reform measures as announced.

28.3.2007   

EN

Official Journal of the European Union

C 71/28

Commission of the European Communities

Competition DG

Merger Registry

Rue Joseph II/Jozef II-straat 70

B-1000 Brussels

28.3.2007   

EN

Official Journal of the European Union

C 71/29

28.3.2007   

EN

Official Journal of the European Union

C 71/33

—

from the Europa competition website (http://ec.europa.eu/comm/competition/mergers/cases/). This website provides various facilities to help locate individual merger decisions, including company, case number, date and sectoral indexes,

—

in electronic form on the EUR-Lex website under document number 32007M4441. EUR-Lex is the on-line access to European law. (http://eur-lex.europa.eu)

28.3.2007   

EN

Official Journal of the European Union

C 71/33

—

from the Europa competition website (http://ec.europa.eu/comm/competition/mergers/cases/). This website provides various facilities to help locate individual merger decisions, including company, case number, date and sectoral indexes,

—

in electronic form on the EUR-Lex website under document number 32007M4544. EUR-Lex is the on-line access to European law. (http://eur-lex.europa.eu)

28.3.2007   

EN

Official Journal of the European Union

C 71/34

—

from the Europa competition website (http://ec.europa.eu/comm/competition/mergers/cases/). This website provides various facilities to help locate individual merger decisions, including company, case number, date and sectoral indexes,

—

in electronic form on the EUR-Lex website under document number 32007M4560. EUR-Lex is the on-line access to European law. (http://eur-lex.europa.eu)

28.3.2007   

EN

Official Journal of the European Union

C 71/35

(1)

The Council of the European Union attaches fundamental importance to the establishment of an area of freedom, security and justice, which is a fundamental concern of the people of the States brought together in the Union.

(2)

The European Union has set itself the goal of giving the citizens in that area of freedom, security and justice a high degree of security by developing common procedures among the Member States in the field of police and judicial cooperation in criminal matters.

(3)

The conclusions of the European Council meeting in Tampere in October 1999 confirmed the need for improved exchange of information between the competent authorities of the Member States for the purpose of detecting and investigating offences.

(4)

In the Hague Programme for strengthening freedom, security and justice in the European Union of November 2004, the European Council set forth its conviction that for that purpose an innovative approach to the cross-border exchange of law enforcement information was needed.

(5)

The European Council accordingly stated that the exchange of such information should comply with the conditions applying to the principle of availability. This means that a law enforcement officer in one Member State of the Union who needs information in order to carry out his duties can obtain it from another Member State and that the law enforcement agencies in the Member State that holds this information will make it available for the declared purpose, taking account of the needs of investigations pending in that Member State.

(6)

The European Council set 1 January 2008 as the deadline for achieving this objective in the Hague Programme.

(7)

The Framework Decision 2006/960/JHA of 18 December 2006 on simplifying the exchange of information and intelligence between law enforcement authorities of the Member States of the European Union (2) lays down rules whereby the Member States' law enforcement authorities may exchange existing information and intelligence expeditiously and effectively for the purpose of carrying out criminal investigations or criminal intelligence operations.

(8)

The Hague Programme for strengthening freedom, security and justice states, however, that full use should be made of new technology and that there should also be reciprocal access to national databases. The Hague Programme also stipulates that new centralised European databases should be created only on the basis of studies that have shown their added value.

(9)

For effective international cooperation it is of fundamental importance that precise information can be exchanged swiftly and efficiently. The aim is to introduce procedures for promoting fast, efficient and inexpensive means of data exchange. For the joint use of data these procedures shall be subject to accountability and incorporate appropriate guarantees as to the accuracy and security of the data during transmission and storage as well as procedures for recording data exchange and restrictions on the use of information exchanged.

(10)

These requirements are satisfied by the Prüm Treaty of 27 May 2005 between the Kingdom of Belgium, the Federal Republic of Germany, the Kingdom of Spain, the French Republic, the Grand Duchy of Luxembourg, the Kingdom of the Netherlands and the Republic of Austria on the stepping up of cross-border cooperation, particularly in combating terrorism, cross-border crime and illegal migration. In order that the substantive requirements of the Hague Programme can be fulfilled for all Member States and that its targets in terms of time-scale can be achieved, the essential parts of the Prüm Treaty need to be made applicable to all Member States. This Council Decision should therefore be based on the main provisions of the Prüm Treaty.

(11)

This Decision should therefore contain provisions designed to improve the exchange of information, whereby Member States grant one another access rights to their automated DNA analysis files, automated dactyloscopic identification systems and vehicle registration data. In the case of data from national DNA analysis files and automated dactyloscopic identification systems, a hit/no hit system should enable the searching Member State to request specific related personal data from the Member State administering the file and, where necessary, to request further information through mutual assistance procedures.

(12)

This would considerably speed up existing procedures by enabling Member States to find out whether any other Member State, and if so, which, has the information it requires.

(13)

Cross-border data comparison should open up a new dimension in crime fighting. The information obtained by comparing data should open up new investigative approaches for Member States and thus play a crucial role in assisting Member States' law enforcement agencies.

(14)

The rules should be based on networking Member States' national databases and should thus constitute a simple and effective approach to tackling cross-border crime.

(15)

Subject to certain conditions, Member States should be able to supply personal and non-personal data in order to improve the exchange of information in connection with major events with a cross-border dimension.

(16)

As international cooperation, particularly in combating cross-border crime, is to be further improved, this Decision, in addition to improving the exchange of information, should allow, amongst other things, closer cooperation between police authorities, for example by means of joint security operations (e.g. joint patrols) and cross-border intervention in the event of immediate danger to life or limb.

(17)

Closer police and judicial cooperation in criminal matters must go hand in hand with respect for fundamental rights, in particular the right to privacy and to protection of personal data. This should be guaranteed in this Decision by comprehensive special data protection arrangements, which should be tailored to the specific nature of the data exchange it regulates. The specific data protection provisions of the Decision should take particular account of the specific nature of cross-border on-line access to databases. Since, with on-line access, it is not possible for the Member State administering the file to make any prior checks, this Decision should ensure that post hoc monitoring takes place.

(18)

Aware of the importance which this Decision has for protecting the rights of individuals, and aware that the supply of personal data to another Member State requires a sufficient standard of data protection on the part of the receiving Member State, Member States should provide for efficient implementation of all data protection rules contained in the Decision.

(19)

Since the objectives of this Decision, in particular the improvement of information exchange in the European Union, cannot be sufficiently achieved by the Member States in isolation owing to the cross-border nature of crime fighting and security issues, and the Member States are forced to rely on one another in these matters, and can therefore be better achieved at European Union level, the Council may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 of the EC Treaty, to which Article 2 of the EU Treaty refers. In accordance with the principle of proportionality pursuant to Article 5 of the EC Treaty, this Decision does not go beyond what is necessary to achieve those objectives.

(20)

This Decision respects the fundamental rights and observes the principles set out in particular in the Charter of Fundamental Rights of the European Union,

(a)

Provisions on the conditions and procedure for the automated transfer of DNA profiles, dactyloscopic data and certain national vehicle registration data (Chapter 2);

(b)

Provisions on the conditions for the supply of data in connection with major events with a cross-border dimension (Chapter 3);

(c)

Provisions on the conditions for the supply of information in order to prevent terrorist offences (Chapter 4);

(d)

Provisions on the conditions and procedure for stepping up border police cooperation through various measures (Chapter 5).

(a)

the requesting Member State specifies the purpose for which this is required;

(b)

the requesting Member State produces an investigation warrant or statement issued by the competent authority, as required under that Member State's law, showing that the requirements for collecting and examining cellular material would be fulfilled if the individual concerned were present within the requesting Member State's territory; and

(c)

under the requested Member State's law, the requirements for collecting and examining cellular material and for supplying the DNA profile obtained are fulfilled.

(a)

data relating to owners or operators; and

(b)

data relating to vehicles.

(a)

notifying one another as promptly as possible of such situations with a cross-border impact and exchanging any relevant information;

(b)

taking and coordinating the necessary policing measures within their territory in situations with a cross-border impact;

(c)

as far as possible, dispatching officers, specialists and advisers and supplying equipment, at the request of the Member State within whose territory the situation has arisen.

(a)

‘processing of personal data ’shall mean any operation or set of operations which is performed upon personal data, whether or not by automatic means, such as collection, recording, organisation, storage, adaptation or alteration, sorting, retrieval, consultation, use, disclosure by supply, dissemination or otherwise making available, alignment, combination, blocking, erasure or destruction of data. Processing within the meaning of this Decision shall also include notification of whether or not a hit exists;

(b)

‘automated search procedure ’shall mean direct access to the automated files of another body where the response to the search procedure is fully automated;

(c)

‘referencing ’shall mean the marking of stored personal data without the aim of limiting their processing in future;

(d)

‘blocking ’shall mean the marking of stored personal data with the aim of limiting their processing in future.

(a)

establish whether the compared DNA profiles or dactyloscopic data match;

(b)

prepare and submit a police or judicial request for legal assistance in compliance with national law if those data match;

(c)

record within the meaning of Article 30.

(a)

if they are not or no longer necessary for the purpose for which they were supplied; if personal data have been supplied and were not requested, the receiving body shall immediately check if they are necessary for the purposes for which they were supplied;

(b)

following the expiry of the maximum period for keeping data laid down in the national law of the supplying Member State where the supplying body informed the receiving body of those maximum periods at the time of supplying the data.

(a)

state-of-the-art technical measures are taken to ensure data protection and data security, in particular data confidentiality and integrity;

(b)

encryption and authorisation procedures recognised by the competent authorities are used when having recourse to generally accessible networks; and

(c)

the admissibility of searches in accordance with Article 30(2), (4) and (5) can be checked.

(a)

the reason for the supply;

(b)

the data supplied;

(c)

the date of the supply; and

(d)

the name or reference number of the receiving body and of the body administering the file.

(a)

Only specially authorised officers of the national contact points may carry out automated searches or comparisons. The list of officers authorised to carry out automated searches or comparisons, shall be made available upon request to the supervisory authorities referred to in paragraph 5 and to the other Member States.

(b)

Each Member State shall ensure that each supply and receipt of personal data by the body administering the file and the receiving body is recorded, including notification of whether or not a hit exists. Recording shall include the following information:

(a)

monitoring data protection;

(b)

ensuring data security.

28.3.2007   

EN

Official Journal of the European Union

C 71/46

28.3.2007   

EN

Official Journal of the European Union

C 71/47