15.7.2011   

EN

Official Journal of the European Union

C 209/1

(1)

On 26 March 2010, the European Council agreed to the Commission's proposal to launch a new strategy for jobs and growth, Europe 2020, based on enhanced coordination of economic policies, which will focus on the key areas where action is needed to boost Europe's potential for sustainable growth and competitiveness.

(2)

On 13 July 2010, the Council adopted a recommendation on the broad guidelines for the economic policies of the Member States and the Union (2010 to 2014) and, on 21 October 2010, adopted a decision on guidelines for the employment policies of the Member States (2), which together form the ‘integrated guidelines’. Member States were invited to take the integrated guidelines into account in their national economic and employment policies.

(3)

On 12 January 2011, the Commission adopted the first Annual Growth Survey, marking the start of a new cycle of economic governance in the EU and the first European semester of ex ante and integrated policy coordination, which is anchored in the Europe 2020 strategy.

(4)

On 25 March 2011, the European Council endorsed the priorities for fiscal consolidation and structural reform (in line with the Council's conclusions of 15 February and 7 March 2011 and further to the Commission's Annual Growth Survey). It underscored the need to give priority to restoring sound budgets and fiscal sustainability, reducing unemployment through labour market reforms and making new efforts to enhance growth. It requested Member States to translate these priorities into concrete measures to be included in their Stability or Convergence Programmes and National Reform Programmes.

(5)

On 25 March 2011, the European Council also invited the Member States participating in the Euro Plus Pact to present their commitments in time to be included in their Stability or Convergence Programmes and their National Reform Programmes.

(6)

On 15 April 2011, Belgium submitted its 2011 Stability Programme update covering the period 2011-2014 and its 2011 National Reform Programme. In order to take account of the interlinkages, the two programmes have been assessed at the same time.

(7)

Belgium experienced robust GDP growth averaging 2,3 % per year in the decade before 2008. The country felt the full impact of the global economic recession in 2009, and GDP contracted by 2,8 %. The impact of the recession on employment was relatively contained. A temporary decline in hours worked and a decline in labour productivity per hour provided a buffer. After a decrease of 0,4 % in 2009, employment increased again in 2010. However, unemployment rose from 7 % before the recession to 8,3 % in 2010. Thanks to the upturn in world trade, the recovery in 2010 was stronger than expected, with GDP growing by 2,2 %. Due to the automatic stabilisers and the discretionary measures taken in reaction to the crisis, the general government deficit rose from 1,3 % in 2008 to 5,9 % of GDP in 2009.

(8)

Based on the assessment of the updated Stability Programme pursuant to Regulation (EC) No 1466/97, the Council is of the opinion that the macroeconomic scenario underpinning the budgetary projections in the Stability Programme is plausible. Although it is based on slightly less favourable growth assumptions for 2011, it is broadly in line with the latest Commission services’ spring 2011 forecast. After a better-than-expected deficit of 4,1 % in 2010, the objective of the budgetary strategy outlined in the Stability Programme is to further reduce the deficit to 3,6 % in 2011 and below the 3 % reference value by 2012, the deadline set by the Council for correcting the excessive deficit. The reduction in the deficit planned for 2011 seems feasible in view of the rather cautious economic projections. However, the fiscal effort is likely to be below the 0,75 % of GDP average annual effort recommended by the Council, in particular in 2011 and 2012 when it would only amount to 0,4 and 0,3 % of GDP in structural terms respectively. Moreover, the deficit targets for 2012 and subsequent years are not supported by specific adjustment measures. Lastly, the medium-term objective (MTO), which is a structural surplus of 0,5 % of GDP, is not expected to be achieved within the 2011-2014 Stability Programme period.

(9)

In view of the better-than-expected outcome recorded in 2010, a more ambitious reduction in the deficit in 2011, and faster-than-projected progress towards the 3 % of GDP threshold, would be appropriate. Moreover, it will not be possible to bring the excessive deficit to an end by 2012 and to continue to make progress towards the MTO without further consolidation measures. Since the tax burden, especially that on labour income, is already very high in Belgium, these consolidation measures should be essentially expenditure-based.

(10)

The economic and financial crisis reversed the previous long-term trend of declining government debt. The debt ratio, which had been on a downward trend since 1993 (when it peaked at 134 % of GDP, after which it continued falling until it reached 84 % of GDP in 2007), has increased again since 2008 and reached 96,8 % of GDP at the end of 2010. The high level of public debt remains a major challenge, in particular because the long-term budgetary impact of ageing is higher than the EU average, mainly as a result of a relatively high increase in pension expenditure, which will put further strains on public finances. In the Stability Programme, the authorities outline a three-pronged strategy to curb the projected substantial increase in age-related expenditure (reducing the public debt level, increasing employment and participation rates and providing a strong and solidarity-based social security system). Ensuring sufficient primary surpluses over the medium term and further reforming the Belgian social security system, in particular the pension system, should improve the long-term sustainability of public finances. According to the Commission's latest assessment, the risks with regards to long - term sustainability of public finances appear to be high.

(11)

An important challenge for Belgium is to ensure a stable and well-functioning financial sector, capable of meeting the financial intermediation needs of the real economy. During the past two years, the Belgian financial sector has been severely hit by the financial crisis, resulting in reduced balance sheets, substantial state aid and a modification of banking supervision. The financial situation of the banking sector remains fragile. Furthermore, in Belgium the banking sector is highly concentrated and relatively large compared to the size of the economy.

(12)

The 1996 Law on ‘Employment Promotion and Precautionary Protection of Competitiveness’ stipulates that the trend in wages in Belgium should be in line with the wage trend in the three neighbouring countries (France, Germany, The Netherlands), thereby keeping labour costs under control. Nevertheless, this law has not been able to prevent a situation where, over the period 2005-2010, wages have increased faster in Belgium than in the three neighbouring countries, while productivity growth has been slower. As a consequence, unit labour costs have risen at a faster rate in Belgium compared to its neighbouring countries and the euroarea average. This is particularly problematic as Belgium is specialised in goods with relatively low technology content, facing fierce competition from lowercost countries. Even though the wage rule helps to frame the wage negotiations, it could be improved by taking into account differences in productivity growth and by providing a more effective system to implement corrections ex post if the targets are not met.

(13)

The labour market is characterised by a number of rigidities that create significant disincentives to taking up work, namely: unlimited unemployment benefit duration; high effective marginal tax rates and a high tax wedge (particularly for low paid workers); and the combination of the withdrawal of social assistance benefits and high taxation when taking up work. Moreover, several exit routes for older workers provide incentives to leave the labour market before the statutory retirement age of 65. Further reform of active labour market policies, and extending them to cover the over 50, would help increase the overall employment rate and improve incentives to look for jobs. In addition, further decreases in the level and duration of unemployment benefits over time would provide younger workers with a greater incentive to enter the labour market. Making the access criteria for early retirement more stringent would encourage older workers to stay in the active labour force, and older workers who have been out of work for a period of time to return to the labour market. Lastly, non-EU nationals have an employment rate (40,9 %) which is much lower than the EU average.

(14)

The overall tax burden on labour in Belgium is one of the highest in the EU; therefore, its reduction would contribute to making work more attractive. However, given the substantial consolidation effort ahead, this needs to be compensated by equivalent increases in less distorting taxes, for example on consumption or by means of a shift towards environmentallyfriendly taxes. Belgium has much lower implicit tax rates on energy than neighbouring countries. Combined with the high tax wedge on labour, Belgium has the lowest ratio of environmental taxes compared with labour taxes in the whole of the EU. This has contributed to a situation where high unemployment coexists with a relatively high use of energy, making it more difficult to achieve targets on employment and energy efficiency.

(15)

Prices for many goods and services are generally higher than in other Member States, reflecting weak competitive pressures — especially in the retail sector and network industries — and a weak supervisory framework. In the retail sector, barriers to entry and operational restrictions are high. In particular, competition-restricting regulations still restrict opening hours, protect incumbents against new entry and inhibit the spread of new business models and technologies. A common competition problem in the network sectors in Belgium is the strong position of the incumbent and the high entry barriers compared to other Member States, meaning that former monopolists in these sectors can still reap higher profits by charging higher prices than a competitive market would allow.

(16)

The Belgian authorities have made a number of commitments related to the Euro Plus Pact. The commitments refer to the four areas of the Pact. They focus on measures to bring down the deficit, keep energy prices under control and encourage competition, control real wage increases, implement a supervisory framework to monitor the financial sector and introduce measures to increase the effective retirement age. However, there is no information on the measures to be taken in order to achieve the required objective on the fiscal side; nor is there any information on how real wage growth or energy prices could be controlled. Concerning early retirement schemes, it is not clear whether and when the ‘Generation Pact’ will be reviewed and what the impact of that review would be in terms of concrete measures. These commitments have been assessed and taken into account in the recommendations.

(17)

The Commission has assessed the Stability Programme and National Reform Programme, including the Euro Plus Pact. It has taken into account their relevance for sustainable fiscal and socio-economic policy in Belgium, and their compliance with EU rules and guidance, given the need to reinforce the overall economic governance of the EU by providing EU level input into future national decisions. In this light, the Commission considers that a more ambitious reduction of the deficit in 2011 should be possible, and that further consolidation measures should be specified for 2012 and beyond. In order to improve the long-term sustainability of public finances, further reform of the pension system is needed. Further steps should also be taken to strengthen competitiveness, to help people into jobs and to shift the tax burden from labour to consumption and energy, as well as opening up more opportunities for investment and growth in the service sector and network industries.

(18)

In the light of this assessment, also taking into account the Council Recommendation of 2 December 2009 under Article 126(7) of the Treaty on the Functioning of the European Union, the Council has examined the 2011 update of the Stability Programme of Belgium and its opinion (3) is reflected in particular in its recommendations (1) and (2) below,

1.

Take advantage of the ongoing economic recovery to accelerate the correction of the excessive deficit. To this end, take the necessary specified measures — mainly on the expenditure side — by the time of the 2012 budget to achieve an average annual fiscal effort in line with the recommendations under the EDP, thus bringing the high public debt ratio on a declining path. This should bring the government deficit well below the 3 % of the GDP reference value by 2012 at the latest. Ensure progress towards the medium-term objective by at least 0,5 % of GDP annually.

2.

Take steps to improve the long-term sustainability of public finances. In line with the framework of the three-pronged EU strategy, the focus should be put on curbing age-related expenditure, notably by preventing early exit from the labour market in order to markedly increase the effective retirement age. Measures such as linking the statutory retirement age to life expectancy could be considered.

3.

Address the structural weaknesses in the financial sector, in particular by finalising restructuring of the banks in need of an adequately funded and viable business model.

4.

Take steps to reform, in consultation with the social partners and in accordance with national practice, the system of wage bargaining and wage indexation, to ensure that wage growth better reflects developments in labour productivity and competitiveness.

5.

Improve participation in the labour market by reducing the high tax and social security burden for the low-paid in a budgetary neutral way and by introducing a system in which the level of unemployment benefits decreases gradually with the duration of unemployment. Take steps to shift the tax burden from labour to consumption and to make the tax system more environmentally friendly. Improve the effectiveness of active labour policies by targeting measures at older workers and vulnerable groups.

6.

Introduce measures to boost competition in the retail sector, by lowering barriers to entry and reducing operational restrictions; and introduce measures to strengthen competition in the electricity and gas markets by further improving the effectiveness of the sectoral regulatory and competition authorities.

15.7.2011   

EN

Official Journal of the European Union

C 209/5

(1)

On 26 March 2010, the European Council agreed to the Commission's proposal to launch a new strategy for jobs and growth, Europe 2020, based on enhanced coordination of economic policies, which will focus on the key areas where action is needed to boost Europe's potential for sustainable growth and competitiveness.

(2)

On 13 July 2010, the Council adopted a recommendation on the broad guidelines for the economic policies of the Member States and the Union (2010 to 2014) and, on 21 October 2010, adopted a decision on guidelines for the employment policies of the Member States (2), which together form the ‘integrated guidelines’. Member States were invited to take the integrated guidelines into account in their national economic and employment policies.

(3)

On 12 January 2011, the Commission adopted the first Annual Growth Survey, marking the start of a new cycle of economic governance in the EU and the first European semester of ex-ante and integrated policy coordination, which is anchored in the Europe 2020 strategy.

(4)

On 25 March 2011, the European Council endorsed the priorities for fiscal consolidation and structural reform (in line with the Council's conclusions of 15 February and 7 March 2011 and further to the Commission's Annual Growth Survey). It underscored the need to give priority to restoring sound budgets and fiscal sustainability, reducing unemployment through labour market reforms and making new efforts to enhance growth. It requested Member States to translate these priorities into concrete measures to be included in their stability or convergence programmes and national reform programmes.

(5)

On 25 March 2011, the European Council also invited the Member States participating in the Euro Plus Pact to present their commitments in time to be included in their stability or convergence programmes and their national reform programmes.

(6)

On 15 April 2011, Bulgaria submitted its 2011 convergence programme update covering the period 2011-2014 and its 2011 national reform programme. In order to take account of the interlinkages, the two programmes have been assessed at the same time.

(7)

The economic crisis interrupted a period of strong growth fuelled by substantial foreign direct investment inflows and credit expansion. GDP growth returned in the second quarter of 2010, after falling cumulatively by 7,1 % from peak to trough, resulting in a broadly flat real GDP for 2010 as a whole. A strong upturn in exports and restocking of inventories have been the most important growth drivers. The general government balance moved form a surplus prior to the crisis into a deficit of 4,7 % of GDP in 2009 and 3,2 % of GDP in 2010. While output and employment in export-led industries increased, subdued activity in construction, real estate and retail has constrained the recovery over the past year. Employment bore the brunt of the output correction with a loss of about 358 000 jobs since the peak in 2008. As a result, unemployment increased by several percentage points to 10,2 % in 2010, and employment is not expected to return to its pre-crisis level in the medium term.

(8)

Based on the assessment of the updated convergence programme pursuant to Regulation (EC) No 1466/97, the Council is of the opinion that the macroeconomic scenario underpinning the fiscal projections is based on more favourable growth projections than those of the Commission services forecast. The updated convergence programme foresees a correction of the excessive general government deficit in 2011 in compliance with the Council Recommendation of 13 July 2010, and further reductions afterwards. After a considerable and frontloaded budgetary adjustment of more than 2 percentage points in structural terms in 2010, the fiscal effort in 2011 is well below the recommended adjustment of at least 0,75 % of GDP but on average, for the whole EDP period, the fiscal effort remains above 1 % of GDP. For the period 2012-2014 the update does not provide sufficient details of the planned budgetary measures to achieve the fiscal targets in these years. The downward revised medium-term objective (MTO) of a structural deficit of 0,6 % of GDP, scheduled for 2014, is still more ambitious than the minimum required level. It reflects the objectives of the Stability and Growth Pact and it is foreseen to be achieved by the end of the convergence programme period (2014). However, the envisaged annual average structural fiscal effort in 2012-2014, after the planned correction of the excessive deficit in 2011, is well below the recommended minimum annual structural improvement of 0,5 % of GDP. In view of the gradually improving economic outlook, the convergence programme should aim for a faster progress towards the achievement of the MTO. When assessed against a prudent estimate of medium-term potential output growth, the projected budgetary expenditure growth in 2012-2013 seems to be on the optimistic side, posing a risk to the structural fiscal position in the medium term.

(9)

Correcting the excessive deficit as envisaged by the end of 2011 will help regain confidence and strengthen the credibility of government policies. Over the medium term, achieving the objective of a small structural deficit of 0,6 % of GDP is important to ensure that fiscal policy is supportive to the monetary regime in place. However, fiscal consolidation is hindered by inefficiencies in the public sector which may lead to considerable expenditure pressures, while budget revenues are likely to be structurally lower than in the pre-crisis boom years. Ambitious public finance reforms are thus needed in order to carry out the necessary fiscal adjustment and help secure funding for the implementation of necessary structural reforms, including the co-financing needed for EU-supported projects.

(10)

The Bulgarian fiscal performance was positive in the favourable economic environment prior to the crisis. Fiscal targets were consistently met and sizeable fiscal buffers were accumulated. In 2009, under the impact of the economic crisis; for the first time in many years the budget went into deficit, and the rule to keep the budget balanced or in surplus and public expenditure below 40 % of GDP was breached. This was partly related to weaknesses in expenditure planning and control. It further reflected the fact that the revenue windfalls resulting from the buoyant economic activity prior to the crisis had been used to finance relatively large increases in ad-hoc expenditure and cuts in the social security rate. To address these problems, the authorities undertook several initiatives to improve expenditure control and monitoring and reporting systems, including the adoption of a comprehensive legislative package, strengthening the fiscal rules and the medium-term budgetary framework. It is expected to enhance fiscal discipline and the predictability of policies, to reduce macroeconomic volatility and to ensure less a pro-cyclical fiscal policy. According to the Commission's latest assessment, the risks with regard to long-term sustainability of public finances appear to be medium.

(11)

The pre-crisis boom years saw a considerable tightening of the labour market and high wage growth, outpacing the increases in productivity. This led to an increase in the average wage level, which thus moved closer to the EU average. Wage growth peaked at an annual rate close to 20 % in the fourth quarter of 2007. Following the downturn, wages have started to decelerate, although wage growth remained relatively high at close to 10 % in 2010 for employees under labour contracts (representing around 65 % of the labour force).

(12)

Labour market participation barriers reflect the recent deterioration of the labour market situation during the crisis and the insufficient provision of active labour market policies (ALMP), together with underfunded public employment services. The quality of public services in the areas of activation, job search assistance and retraining is insufficient. The weak capacity to monitor and evaluate programme results requires further strengthening with a view to improving the policy design process. As pointed out by a recent report commissioned by the Ministry of Labour and Social Policy (‘Main results from the net impact evaluation of public employment services’), more individualised and better-quality services, as well as better infrastructure of labour offices, would support more effectively the unemployed in finding a job.

(13)

The economic crisis continues to impact the labour market. The unemployment rate increased from 5,4 % in 2008 to 10,2 % in 2010, while for young persons (aged 15-24) it reached 23,2 % in 2010. The crisis particularly hit low-skilled workers (including a large part of the Roma minority), who represent almost 70 % of the unemployed. The share of long-term unemployment (46 % in 2010) is higher than the EU average (2010: 40 %), and there may be a risk of it becoming structural. The youth activity rate has consistently stayed at less than two thirds of the EU average (2009: 29,5 %; EU: 43,8 %). The youth employment rate was 24,8 % in 2009 (EU: 35,2 %). Bulgaria also has the highest share of young people who are neither in education nor employment (19,5 % of persons aged 15-24). One of the main barriers to youth participation in the labour market is the shortage of opportunities to combine education and work, in particular through internships and apprenticeships in their field of study, which facilitate transition to the labour market.

(14)

Despite an above average educational attainment, Bulgaria has over 40 % of low achievers in literacy and numeracy. This shows there is scope for improvements in the education system to better align it to labour market needs. Building on the positive results of the recent school decentralisation reform, the upcoming Law on Pre-School and School Education is expected to provide some solutions which can be further strengthened, i.e. with respect to financial autonomy, pre-school participation rates and external evaluation, as well as ensuring accountability. The early school leaving rate (14,7 % in 2009) is close to the EU average, but is particularly high among the Roma (where it was estimated at 43 % in 2008). Tertiary attainment rates (27,9 % in 2009) remain below the EU average (32,2 %). Bulgaria has significantly delayed its higher education reform. The new Higher Education Law, already tabled in 2010 but subsequently withdrawn, should provide a useful step to address reform needs.

(15)

The pension reform decided in 2010 is not linked to life expectancy or to the situation of the health and long-term care system. The implementation period is from 2011 to 2026, with most of the measures taking effect in the second half of the period which could put both the implementation and the sustainability of the first pillar of the pension system at risk.

(16)

Bulgarian citizens experience a greater degree of poverty in comparison to the EU average (41,9 % of the population experiences severe material deprivation as compared to 8,1 % for EU). Around 66 % of the elderly are at risk of poverty, which is considerably higher than the EU average. There are signs of deteriorating living conditions in the last couple of years. Given the demographic situation, achieving the national reform programme targets for poverty reduction depends to a large extent on the proper design of policies for older workers and disadvantaged people, as well as on the adequacy of social transfers. The national reform programme announces the development of an operational strategy for Roma integration (estimated at 10 % of the population (3)), to address the multiple barriers faced in the domains of employment, education, health and housing in a single comprehensive plan.

(17)

The low efficiency of public services remains an obstacle to growth. Despite recent streamlining, the public administration reform has not dealt with upgrading the quality of staff or key functions. Bulgaria has a very low fixed broadband penetration — at 14,9 % it has the second-lowest figure of the EU, which also limits uptake of all electronically delivered services.

(18)

The public procurement irregularity rate reaches 60 % of all procedures verified and is even higher for large public infrastructure projects, where the authorities have an obligation of ex-ante control. The capacity of the Public Financial Inspection Agency has been reduced substantially in 2006 and as a result, the agency performed ex-post controls in only 12 % of all public procurement procedures in 2007-2009. Recent amendments of the Law on Public Procurement and the Law on Public Financial Inspection were approved by the Council of Ministers and forwarded into parliamentary procedure.

(19)

The energy intensity of the Bulgarian economy is one of the highest in the EU. A salient example is household heating, with poorly maintained multi-apartment buildings accounting for the bulk of the problem. Recent changes in the eligibility rules create the possibility of using EU Structural Funds to support energy efficiency investments. Few investments have been made, whilst revenues from energy and transport taxes have fallen relative to GDP and also relative to taxes on labour, which are well above the EU average. Access to the energy market is hampered by reduced competition and opaque price setting mechanisms.

(20)

Bulgaria has made a number of commitments under the Euro Plus Pact. On the fiscal side, the commitments indicate that the sustainability of public finances will be underpinned by pension reform measures, action to ensure performance-based pay in the public sector by freezing pensions and wages until 2013 and strengthening of the domestic fiscal framework through the adoption of a Financial Stability Pact, which includes binding numerical fiscal rules. To foster employment, measures will be taken to reduce the share of undeclared employment and increase labour participation. Competitiveness measures focus on reducing administrative burdens and increasing e-governance; improving access to education and enhancing the performance of the education system. The above commitments refer to three out of the four areas of the Pact, leaving out the financial sector. They represent a continuity of the broader reform agenda outlined in the convergence and national reform programmes, and step up ongoing reform projects in the areas of fiscal governance, public administration and education. The Euro Plus Pact commitments have been assessed and taken into account in the recommendations.

(21)

The Commission has assessed the convergence programme and national reform programme, and the Euro Plus Pact commitments. It has taken into account not only their relevance for sustainable fiscal and socio-economic policy in Bulgaria but also their compliance with EU rules and guidance, given the need to reinforce the overall economic governance of the EU by providing EU-level input into future national decisions. It considers that after a considerable and frontloaded budgetary adjustment in 2010, fiscal consolidation plans for 2011 should be implemented as envisaged and the deficit should be brought below the 3 % reference value in line with the Council Recommendation of 13 July 2010. The update does not provide sufficient details for planned budgetary measures to achieve the fiscal targets in 2012-2014 and a faster progress towards the selected MTO could have been ensured. Strengthening of the domestic fiscal framework will anchor fiscal discipline and provide for predictability and credibility of government policy in the medium term. Further steps should also be taken to strengthen competitiveness, to help people into jobs, to protect the most vulnerable groups facing multiple barriers, to enhance the capacity of public administration and regulators, to increase resource efficiency as well as to open up more opportunities for investment and growth.

(22)

In light of this assessment, also taking into account the Council Recommendation under Article 126(7) Treaty on the Functioning of the European Union of 13 July 2010, the Council has examined the 2011 update of the convergence programme of Bulgaria and its opinion (4) is reflected in particular in its recommendations (1) and (2) below. Taking into account the European Council conclusions of 25 March 2011, the Council has examined the national reform programme of Bulgaria,

1.

Proceed with effective budget implementation so as to correct the excessive deficit in 2011, in line with the Council Recommendation of 13 July 2010 under the EDP. Specify the measures underpinning the budgetary strategy for 2012-2014. Take advantage of the economic recovery to ensure adequate progress towards the medium-term objective, primarily by keeping tight control over expenditure growth, while prioritising growth-enhancing expenditure.

2.

Take further steps to improve the predictability of budgetary planning and the implementation control, including on an accruals basis, in particular by strengthening fiscal governance. To this end, design and put in place binding fiscal rules and a well-defined medium-term budgetary framework that ensures transparency at all government levels.

3.

Implement the agreed steps with social partners under the current pension reform, advance some of its key measures that would help to increase the effective retirement age and reduce early exit, such as through the gradual increase of the social insurance length of service, and strengthen policies to help older workers to stay longer in employment.

4.

Promote, in consultation with the social partners and in accordance with national practices, policies to ensure that wage growth better reflects developments in productivity and sustain competitiveness while paying attention to on-going convergence.

5.

Take steps to address the challenge of combating poverty and promoting social inclusion, especially for vulnerable groups facing multiple barriers. Take measures for modernising public employment services to enhance their capacity to match skills profiles with labour market demand; and focusing support on young people with low skills. Advance the educational reform by adopting a Law on Pre-School and School Education and a new Higher Education Act by mid 2012.

6.

Step up efforts to enhance administrative capacity in key government functions and regulatory authorities, in order to make public services more effective in responding to the needs of citizens and businesses; introduce and implement effectively measures to check public procurement on the basis of risk assessments, strengthen the capacity of the authorities to prevent and sanction irregularities, in order to improve quality and value-for-money in the use of public funds.

7.

Abolish barriers to entry, guaranteed profits arrangements and price controls and ensure full independence of the Bulgarian Energy Regulator, in order to open up the electricity and gas markets to greater competition. Introduce incentives to upgrade the energy efficiency of buildings.

15.7.2011   

EN

Official Journal of the European Union

C 209/10

(1)

On 26 March 2010, the European Council agreed to the Commission's proposal to launch a new strategy for jobs and growth, Europe 2020, based on enhanced coordination of economic policies, which will focus on the key areas where action is needed to boost Europe's potential for sustainable growth and competitiveness.

(2)

On 13 July 2010, the Council adopted a recommendation on the broad guidelines for the economic policies of the Member States and the Union (2010 to 2014) and, on 21 October 2010, adopted a decision on guidelines for the employment policies of the Member States (2), which together form the ‘integrated guidelines’. Member States were invited to take the integrated guidelines into account in their national economic and employment policies.

(3)

On 12 January 2011, the Commission adopted the first Annual Growth Survey, marking the start of a new cycle of economic governance in the EU and the first European semester of ex-ante and integrated policy coordination, which is anchored in the Europe 2020 strategy.

(4)

On 25 March 2011, the European Council endorsed the priorities for fiscal consolidation and structural reform (in line with the Council's conclusions of 15 February and 7 March 2011 and further to the Commission's Annual Growth Survey). It underscored the need to give priority to restoring sound budgets and fiscal sustainability, reducing unemployment through labour market reforms and making new efforts to enhance growth. It requested member states to translate these priorities into concrete measures to be included in their stability or convergence programmes and national reform programmes.

(5)

On 15 April 2011, Hungary submitted its 2011 convergence programme update covering the period 2011-2015 and its 2011 national reform programme. In order to take account of the interlinkages, the two programmes have been assessed at the same time.

(6)

Hungary was severely hit by the crisis in autumn 2008, with the country losing access to market-based financing. To overcome these difficulties, Hungary implemented an adjustment programme that focused on fiscal consolidation and financial sector supervision and was supported by financial assistance from the EU and the IMF. Against this background, the country regained market access in spring 2009 and the economy emerged from recession: after a contraction of 6,7 % in 2009, GDP grew by 1,2 % in 2010, supported by increasing exports. At the same time, unemployment increased further to over 11 % from the pre-crisis level of below 8 %. In the second half of 2010, the government announced significant tax cuts to be implemented over 2010-2013. To limit the fiscal deterioration, it introduced in parallel extraordinary levies and took additional spending cuts of a permanent nature. Moreover, the decision to abolish the mandatory private pension pillar has resulted in both permanent and one-off revenues. Although these measures made it possible to limit the slippage in 2010 to 0,4 % of GDP above the deficit target of 3,8 % of GDP and will result in a surplus in 2011, the underlying position deteriorated significantly. Against this background, and with a view to strengthening the economic growth potential, the government announced a structural reform programme in March 2011 and adopted further consolidating measures.

(7)

Based on the assessment of the updated convergence programme pursuant to Council Regulation (EC) No 1466/97, the Council is of the opinion that, based on the Commission services 2011 spring forecast, the macroeconomic scenario underpinning the budgetary projections is slightly favourable, in particular regarding the development of domestic demand. The update aims to correct the excessive deficit by the 2011 deadline set by the Council, to be achieved with a surplus of 2 % of GDP thanks to the significant one-off revenues from the pension assets. The budget would turn into a deficit of 2,5 % of GDP in 2012 and thereafter gradually decline to 1,5 % of GDP in 2015, mainly based on expenditure restraint. The update confirms the country's medium-term objective (MTO) for the budgetary position in structural terms, a deficit of 1,5 % of GDP. The consolidation strategy is expected to reduce the budgetary deficit in a structural way and put the debt on a downward path to reach 64 % of GDP by 2015. However, it appears to be rather back-loaded with structural improvement starting only from 2012, whereas the cumulative structural deterioration of over 3 % of GDP over 2010 and 2011 is not in line with the Council Recommendation of July 2009 asking Hungary to achieve a structural adjustment of at least 0,5 % of GDP. The spring forecast shows a deficit of 3,3 % of GDP in 2012, which assumes some implementation risks of 0,5 % of GDP; on this basis it cannot be excluded that the threshold may be breached again in that year unless further measures are taken. In addition, the projected structural deficit path, as recalculated by the Commission, does not provide for the necessary adjustments that would ensure achievement of the MTO by the end of the convergence programme period; in particular, there is no further structural adjustment beyond 2013, though the margin to the MTO is small.

Finally, the abolishment of the mandatory private pension pillar results in additional one-off and permanent revenues but also increases the long-term liabilities. The ensuing likely deterioration of the long-term fiscal sustainability taking into account that part of the pension funds' assets are used to finance current expenditure, is partly offset by several announced steps related to the pension system in the context of the structural reform programme (e.g. the partly already implemented parametric changes in the public pillar). According to the Commission's latest assessment, the risks with regards to the long-term sustainability of public finances appear to be medium.

(8)

Fiscal consolidation remains a major challenge. Without rigorous implementation of the measures announced and additional measures of a structural nature as needed, it cannot be ensured that the excessive deficit is corrected on a sustainable basis and appropriate progress is made towards the MTO. Moreover, fiscal consolidation will also help to put debt reduction on an appropriately declining path and improve long-term sustainability which appears to be at medium risk. Making full use of windfall revenues could help accelerate the fiscal consolidation. Against this background, the authorities' bi-annual Excessive Deficit Procedure progress reports will serve as a useful tool for closely monitoring progress of fiscal consolidation.

(9)

The recently adopted Constitution establishes a constitutional debt brake at 50 % of GDP and gives the Fiscal Council a veto right over the annual budget, which could be a first step forward improving the budgetary framework. However, important details will only be specified in the subsequent ‘cardinal’ laws (e.g. what the temporary numerical rules will be until the debt ratio declines to 50 %, the precise interpretation of the escape clause). The imposition of a nominal debt cap if used as an all-purpose device could, ceteris paribus, lead to a pro-cyclical fiscal stance. In addition, the remit of the revamped fiscal body is relatively narrow (limited to preparing an opinion on the draft budget, although with a strong right to veto) and does not cover the entire budgetary cycle (e.g. through real-time assessments of new policies with major budgetary implications). Finally, other aspects of fiscal governance, such as the medium-term orientation of fiscal policy and the issue of transparency still need to be clarified.

(10)

The employment rate is among the lowest in the EU (60,4 %). The employment rate of women is also low (55 %), while the gap between the employment rates of women with and without children aged six and under is the second biggest in the EU (33,6, against the EU average of 12,1 percentage points). There are deficiencies in the capacity of day-care services in Hungary, with particularly scant provision outside the larger cities, and in regions with very high unemployment. Improving day-care provision would be an important measure to facilitate both parents' participation in the labour force.

(11)

Hungary has had a relatively high tax burden on labour. The new personal income tax system partly addresses its negative effects on employment, particularly for those above-medium-income and/or those with children, and thus aims at tackling the most urgent competitiveness and demographic issues. Though the tax rate was reduced, the tax burden on low earners without children has in fact increased, when taking into account the phasing out of employment tax credits.

(12)

The public employment services (PES) suffer from insufficient administrative capacity, and previous injections of funds have not improved considerably the efficiency of services in integrating the unemployed into the labour market. The funding of employment programmes is not sufficiently linked to results, especially in the case of nationally funded measures. Recently, it has been announced that the duration of unemployment benefits is to be reduced to the lowest levels in the EU. The impact of this measure on the labour market needs to be assessed, in particular to determine its effectiveness in raising employment participation.

(13)

Poverty and related factors, such as joblessness or low education levels, continue to affect some disadvantaged groups, particularly the Roma, disproportionately. The low-skilled have a particularly low employment rate (36,8 %, compared with the European average of 53,4 %), especially among men. According to estimates, 70 % of the Roma population live under the poverty threshold. A great majority of them live in deprived regions, with little access to labour market opportunities and public services.

(14)

SMEs have been hindered by the complexity of the regulatory framework, a heavy administrative burden and limited accountability and transparency in public administration. SMEs' access to early-stage financing has been more scant than the EU average. The national reform programme includes a number of measures to reduce administrative burdens and improve business environment in general. The role of non-banking funding mechanisms is lagging behind that played in other European countries. The effectiveness of prior programmes to support the sector has not been systematically evaluated.

(15)

The Commission has assessed the convergence programme and national reform programme for Hungary and has also taken into account the government's intention to shadow the Euro Plus Pact. It has taken into account not only their relevance for sustainable fiscal and socio-economic policy in Hungary, but also their conformity with EU rules and guidance, given the need to reinforce the overall economic governance of the European Union by providing EU-level input into future national decisions. It considers that the fiscal adjustment strategy is mainly based on the expenditure side and that the 2011 deadline set by the Council for bringing the deficit below the 3 % of GDP threshold is only met due to the significant one-off revenues, notably from the pension assets, and the structural improvement will begin only in 2012. Taking into account the implementation risks, it cannot be excluded that the threshold may be breached again in that year unless further measures are taken. Moreover, in the longer term the convergence programme, as re-calculated by the Commission, does not secure further progress towards the MTO, though the margin is small. Further measures to increase labour market participation and modernise employment services would help to increase job opportunities. Further reductions in administrative burdens would help improve the business environment and help SMEs to grow.

(16)

In light of this assessment, also taking into account the Council Recommendation under Article 126(7) of the Treaty on the Functioning of the European Union of 7 July 2009, the Council has examined the 2011 update of the convergence programme of Hungary and its opinion (3) is reflected in particular in its recommendations (1) and (2) below. Taking into account the European Council conclusions of 25 March 2011, the Council has examined the national reform programme of Hungary,

1.

Strengthen the fiscal effort in order to comply with the Council recommendation to correct the excessive deficit in a sustainable manner, inter alia by avoiding the structural deterioration in 2011 implicit in the planned 2 % of GDP budget surplus and ensure that the budget deficit is kept safely below the 3 % of GDP threshold in 2012 and beyond, contributing to the reduction of the high public debt ratio. Fully implement the announced fiscal measures and adopt additional measures of a permanent nature if needed at the latest in the 2012 budget to secure the budgetary target for that year. The 2012 budget should also identify the additional measures in order to attain the 2013 target in the convergence programme. Ensure progress towards the medium-term objective (MTO) by at least 0,5 % of GDP annually until the MTO is reached and use possible windfall revenues to accelerate the fiscal consolidation.

2.

Adopt and implement regulations specifying the operational aspects of the new constitutional fiscal governance framework, including, inter alia, the numerical rules that will be implemented at the central and local level until the debt ratio has declined to below 50 % of GDP. Regarding the fiscal framework, implement and strengthen multiannual fiscal planning, improve the transparency of public finances and broaden the remit of the Fiscal Council.

3.

Enhance participation in the labour market by alleviating the impact of the tax reform on low earners in a budget-neutral manner. Strengthen measures to encourage women's participation in the labour market by expanding childcare and pre-school facilities.

4.

Take steps to strengthen the capacity of the Public Employment Service and other providers to increase the quality and effectiveness of training, job search assistance and individualised services. Reinforce active labour market measures delivering positive evidence-based results. In consultation with stakeholders, introduce tailor-made programmes, for the low-skilled and other particularly disadvantaged groups.

5.

Improve the business environment by implementing all the measures envisaged for regulatory reform and lowering administrative burdens in the national reform programme; assess the effectiveness of current SME support policies and adjust public programmes in order to improve access to non-bank funding.

15.7.2011   

EN

Official Journal of the European Union

C 209/14

—

in the merger section of the Competition website of the Commission (http://ec.europa.eu/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 (http://eur-lex.europa.eu/en/index.htm) under document number 32011M6229. EUR-Lex is the on-line access to the European law.

15.7.2011   

EN

Official Journal of the European Union

C 209/14

—

in the merger section of the Competition website of the Commission (http://ec.europa.eu/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 (http://eur-lex.europa.eu/en/index.htm) under document number 32011M6242. EUR-Lex is the on-line access to the European law.

15.7.2011   

EN

Official Journal of the European Union

C 209/15

—

in the merger section of the Competition website of the Commission (http://ec.europa.eu/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 (http://eur-lex.europa.eu/en/index.htm) under document number 32011M6282. EUR-Lex is the on-line access to the European law.

15.7.2011   

EN

Official Journal of the European Union

C 209/15

—

in the merger section of the Competition website of the Commission (http://ec.europa.eu/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 (http://eur-lex.europa.eu/en/index.htm) under document number 32011M6283. EUR-Lex is the on-line access to the European law.

15.7.2011   

EN

Official Journal of the European Union

C 209/16

—

in the merger section of the Competition website of the Commission (http://ec.europa.eu/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 (http://eur-lex.europa.eu/en/index.htm) under document number 32011M6253. EUR-Lex is the on-line access to the European law.

15.7.2011   

EN

Official Journal of the European Union

C 209/17

(1)

On 17 December 2007, the Council adopted Decision 2007/858/EC (2) appointing Mr Paul A.C.E. VAN DER KOOIJ as the Chairperson of the Board of Appeal of the Community Plant Variety Office and Mr Timothy MILLETT as his alternate.

(2)

Following the resignation of Mr Timothy MILLETT, the position as alternate to the Chairperson of the Board of Appeal has become vacant,

15.7.2011   

EN

Official Journal of the European Union

C 209/18

(1)

On 24 July 2006, the Council adopted Decision 2006/551/EC (2) appointing Mr Bart KIEWIET as the President of the Community Plant Variety Office.

(2)

The term of office of Mr Bart KIEWIET will expire on 31 July 2011,

15.7.2011   

EN

Official Journal of the European Union

C 209/19

15.7.2011   

EN

Official Journal of the European Union

C 209/20

15.7.2011   

EN

Official Journal of the European Union

C 209/21

15.7.2011   

EN

Official Journal of the European Union

C 209/29

1.

On 11 July 2011, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 (1) by which Bain Capital Investors, LLC (‘Bain Capital Investors’) and Hellman & Friedman Corporate Investors VII, Ltd or its affiliates (together with its affiliated and parallel funds and fund entities, ‘HFCP VII’). acquire within the meaning of Article 3(1)(b) of the Merger Regulation joint control of the whole of Securitas Direct AB and ESML SD Iberia Holding, S.L.U. and their subsidiaries (‘Securitas Direct’) by way of purchase of shares.

2.

The business activities of the undertakings concerned are:

3.

On preliminary examination, the Commission finds that the notified transaction could fall within the scope of the EC Merger Regulation. However, the final decision on this point is reserved. Pursuant to the Commission Notice on a simplified procedure for treatment of certain concentrations under the EC Merger Regulation (2) it should be noted that this case is a candidate for treatment under the procedure set out in the Notice.

4.

The Commission invites interested third parties to submit their possible observations on the proposed operation to the Commission.

Observations must reach the Commission not later than 10 days following the date of this publication. Observations can be sent to the Commission by fax (+32 22964301), by email to COMP-MERGER-REGISTRY@ec.europa.eu or by post, under reference number COMP/M.6324 — Bain Capital/Hellman & Friedman/Securitas Direct, to the following address: