Considerations on SEC(2004)828 - Recommendation for a Council recommendation to Poland with a view to bringing an end to the situation of an excessive government deficit

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dossier SEC(2004)828 - Recommendation for a Council recommendation to Poland with a view to bringing an end to the situation of an excessive ...
document SEC(2004)828 EN
date June 24, 2004
 
(1) According to Article 104 of the Treaty, Member States are to avoid excessive government deficits;

(2) The Stability and Growth Pact is based on the objective of sound government finances as a means of strengthening the conditions for price stability and for strong sustainable growth conducive to employment creation;

(3) The Council has decided on [5 July] 2004, in accordance with Article 104(6), that an excessive deficit exists in Poland;

(4) Having decided on the existence of an excessive deficit in Poland, the Council, in accordance with Article 104(7) of the Treaty and Article 3 of Council Regulation (EC) No 1467/97, is required to make at the same time recommendations to the Member State concerned with a view to bringing that situation to an end within a given period;

(5) According to Article 3 i of Council Regulation (EC) No 1467/97, this recommendation should specify that effective action is to be taken by the Member State concerned within four months at most and that the correction of the excessive deficit should be completed in the year following its identification unless there are special circumstances. Such special circumstances are present in the case of Poland namely because the general government deficit upon EU accession was significantly above the reference value and because of the ongoing structural shift in the economy;

(6) The existence of special circumstances authorises the Council to allow the correction of the excessive deficit in a medium-term framework. It is appropriate to consider the convergence programme submitted by Poland in May 2004, and its subsequent updates, and the Council Opinions thereof as providing the adjustment path for the correction of the excessive deficit. The convergence programme of May 2004 plans to complete the correction of the excessive deficit by 2007, with the following annual targets for the general government deficit: 5.7% of GDP in 2004, 4.2% of GDP in 2005, 3.3% in 2006 and 1.5% of GDP in 2007. The programme builds its projections for 2005 and beyond on the so-called Hausner plan. The adjustment path is based on a macro-economic scenario which, according to the Council Opinion of [5 July] 2004 on the convergence programme, reflects rather favourable growth assumptions in the outer years of the programme;

(7) In the view of the Council, budgetary consolidation measures should secure a lasting improvement in the general government balance, while being geared towards enhancing the quality of the public finances and reinforcing the growth potential of the economy.

HEREBY RECOMMENDS:

- the Polish authorities to put an end to the present excessive deficit situation as rapidly as possible;

- the Polish authorities to take action in a medium-term framework in order to bring the deficit below 3% of GDP in 2007 in a credible and sustainable manner, in accordance with the path for deficit reduction specified in the Council Opinion on the convergence programme;

- the Polish authorities to implement with vigour the measures envisaged in the May 2004 convergence programme, in particular those contained in the so-called Hausner plan;

- the Polish authorities to take effective action by [5 November 2004] regarding the measures envisaged to achieve the 2005 deficit target.

In addition, the Council invites the Polish authorities:

- to allocate possible extra revenues to decrease the general government deficit;

- to ensure the rise in the debt ratio is brought to a halt.

This recommendation is addressed to the Republic of Poland.

Done at Brussels, [5 July] 2004.

For the Council

The President

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