Saturday, 12 June 2010

EU Commission on stability programme Cyprus

The blog post EU: Updated stability programme Cyprus looked at the economic projections and reform plans of the island state in its own right, but also as an example of the dialogue on economic policy coordination between the European Union and the member states.


Transparency

This blog has criticised the lag between Council opinions and publication in the Official Journal of the European Union (OJEU). However, the Commission deserves brownie points for openness, because it started publishing its findings.

Thanks to the European Commission the monitoring processes are more transparent and credible than they could be under a restrictive interpretation of the Treaty on the Functioning of the European Union (Cf Article 126(7) TFEU).



The Stability and Growth Pact (SGP) pages of the Commission’s D-G Economic and Financial Affairs offer an overview of the member states and the various stages, including links to the documents:

Stability or convergence programme (update);

Commission services’ assessment;

Commission recommendation for a Council opinion;

Council opinion.




The overview page on country-specific excessive deficit procedures (EDP) is also useful.



Commission report

One month from the submission of the updated stability programme of Cyprus, the Commission offered its assessment. [Contradictory submission dates are offered in different documents: 1 or 13 April 2010.]



On 12 May 2010 Commission published a press release (IP/10/564) with the main findings on the Cypriot stability programme, including key projections.


For those interested, the Commission’s assessment is available:




Cyprus - Report prepared in accordance with Article 126(3) of the Treaty; Brussels, 12.5.2010 SEC(2010) 590 final (11 pages)


Article 126(3) TFEU is explained in the following way by the Commission (page 2):


The Stability and Growth Pact requires the Commission to prepare a report such as the present one whenever an actual or planned deficit of a Member State exceeds the 3% of GDP reference value. This report, which represents the first step in the “excessive deficit procedure” (EDP), analyses the reasons for the breach of the reference value with due regard to the economic background and all other relevant factors.



The Commission reached the following main conclusions with regard to Cyprus:


According to the April 2010 EDP notification the general government deficit in Cyprus reached 6.1% of GDP in 2009, above and not close to the 3% of GDP reference value. The planned excess over the reference value can be qualified as exceptional within the meaning of the Treaty and the Stability and Growth Pact. However, it cannot be considered temporary. This suggests that the deficit criterion in the Treaty is not fulfilled.

General government gross debt remains below the 60% of GDP reference value in 2009. However it is on a rising trend and it is planned to exceed the reference value in 2010. The debt ratio cannot be considered as diminishing sufficiently and approaching the reference value at a satisfactory pace within the meaning of the Treaty and the Stability and Growth Pact. This suggests that the debt criterion in the Treaty is not fulfilled.



Commission recommendation

At the same time, based on its assessment, the Commission made a recommendation to the Council, in practice a draft decision:



Recommendation for a Council Opinion on the updated stability programme of Cyprus, 2009-2013; Brussels, 12.5.2010 SEC(2010) 595 final (13 pages)



Technical analysis

The Cypriot stability programme was analysed by the staff of DG ECFIN. The technical analysis was finalised on 12 May, although the publication date is 26 May 2010:



Cyprus: Macro fiscal assessment – An analysis of the April 2010 update of the stability programme; Brussels, 26 May 2010 ECFIN/295829/2010 -EN (30 pages)


It took into account information published after the preparation of the Cypriot programme, such as the Commission services’ fresh forecast. The Spring Forecast is also available on the Commission’s web pages:



European Economic Forecast - Spring 2010 (published 5 May 2010; 225 pages)



Comment



In my view, DG ECFIN’s web pages with the Stability and convergence programmes and other information are fairly navigable and clear (although some design effort would not go amiss).

With regard to Cyprus, we find the programme update, the technical assessment and the Commission’s formal recommendation.

Only the Ecofin Council opinion (of 8 June 2010) is still missing.




Ralf Grahn