Considerations on SEC(2005)1305 - Recommendation for a Council Decision Establishing, in accordance with Article 104(8) of the Treaty establishing the EC, that the action taken by Hungary in response to the Council recommendation of 8 March 2005 pursuant to Article 104(7) of the Treaty is proving to be inadequate - Main contents
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dossier | SEC(2005)1305 - Recommendation for a Council Decision Establishing, in accordance with Article 104(8) of the Treaty establishing the EC, ... |
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document | SEC(2005)1305 |
date | November 8, 2005 |
(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. The Stability and Growth Pact includes Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit procedure (1), which was adopted in order to further the prompt correction of excessive general government deficits. |
(3) | The Resolution of the European Council on the Stability and Growth Pact in Amsterdam of 17 June 1997 (2) solemnly invites all parties, namely the Member States, the Council and the Commission, to implement the Treaty and the Stability and Growth Pact in a strict and timely manner. |
(4) | By Council Decision 2004/918/EC of 5 July 2004, the Council decided, in accordance with Article 104(6), that an excessive deficit exists in Hungary (3). |
(5) | In accordance with Article 104(7) of the Treaty and Article 3(4) of Regulation (EC) No 1467/97, on 5 July 2004 the Council also adopted a recommendation (4) addressed to the Hungarian authorities and calling on them to bring the existence of an excessive deficit to an end as rapidly as possible and to take action in a medium-term framework to achieve the objective of bringing the deficit below 3 % of GDP by 2008 in a credible and sustainable manner, in accordance with the path for deficit reduction specified in the convergence programme submitted by the authorities and endorsed in the opinion of the Council of 5 July 2004 (5). That recommendation established the deadline of 5 November 2004 for the Hungarian Government to take effective action regarding the measures envisaged to achieve the original 2005 deficit target of 4,1 % of GDP. |
(6) | On 18 January 2005, in accordance with Article 104(8) of the Treaty, on the basis of a recommendation by the Commission, the Council recognised that a number of measures had been taken to reduce the government deficit in 2004 and 2005 by the deadline of 5 November 2004. However, it considered that they were not sufficient to achieve the targets and would not avoid a deviation from the planned adjustment path of the Hungarian convergence programme of May 2004. Moreover, it considered that the continued commitment of the government to correct the excessive deficit by 2008 needed to be underpinned by decisive measures of further fiscal consolidation and a more determined pursuit of structural reforms. Against that background, the Council decided that Hungary had not taken effective action by 5 November 2004 in response to the recommendation of 5 July 2004. |
(7) | In accordance with Article 104(7) of the Treaty and Article 3(4) of Regulation (EC) No 1467/97, on 8 March 2005 the Council adopted a second recommendation (6) addressed to the Hungarian authorities and calling on them to bring the existence of an excessive deficit to an end as rapidly as possible and to take action in a medium-term framework to achieve the objective of bringing the deficit below 3 % of GDP by 2008 in a credible and sustainable manner, in accordance with the path for deficit reduction specified in the convergence programme update submitted by the Hungarian authorities in December 2004 and endorsed in the opinion of the Council of 8 March 2005. Among other things, that recommendation established the deadline of 8 July 2005 for the Hungarian government to take effective action regarding the measures envisaged to achieve the 2005 deficit target of 3,6 % of GDP (7). |
(8) | On 13 July 2005 the Commission adopted a Communication on Hungary. On the basis of the information available at the time, including corrective measures decided by the Government in March and June totalling 1,5 % of GDP to compensate for slippages and the firm commitment of the Hungarian government to carry out further measures if necessary, it stated that the Hungarian authorities had taken effective action by the deadline of 8 July 2005, although the situation remained fragile and further measures would be needed in the future. |
(9) | However, the recent developments show that the action taken by the Hungarian authorities is now proving to be inadequate:
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(10) | In line with the Resolution of the European Council of the Stability and Growth Pact, Hungary agreed to make the Council’s recommendation of 8 March 2005 public, |