IP/09/273. Brussels, 18 February 2009

Transcription

1 IP/09/73 Brussels, 18 February Commission assesses Stability and Convergence Programmes of Bulgaria, the Czech Republic, Denmark, Germany, Estonia, Hungary, the Netherlands, Poland, Sweden, Finland and the United Kingdom Today the European Commission examined the updated Stability and Convergence Programmes 1 of 17 EU countries including Bulgaria, the Czech Republic, Denmark, Germany, Estonia, Hungary, the Netherlands, Poland, Sweden, Finland and the United Kingdom (see IP/09/74 for separate programmes). These assessments are seen against the background of a sharp economic slowdown. A majority of the countries concerned (the Czech Republic, Denmark, Germany, the Netherlands, Poland, Sweden, Finland and the United Kingdom) have adopted fiscal stimulus measures in to cope with the economic crisis, in line with the Economic Recovery Plan proposed by the Commission and endorsed by EU leaders. In the UK, the expansionary measures coupled with the adverse impact of the downturn have significantly weakened the country's budgetary position. Hungary has made considerable progress to put its public finances on a sounder footing and needs to sustain this effort to secure investor confidence. Similarly, in Bulgaria and Estonia, the fiscal policy stance is appropriately geared towards diminishing macro-economic ims. "We are going through a very serious crisis that is taking its toll on public finances. Fortunately, many countries have entered the crisis with public finances in a solid position, allowing them to the respond to the European Council's call for stimulus measures in. Implemented swiftly and effectively, these measures should help to create, together with the bank rescue plans and the significant easing of monetary policy, the conditions for a gradual recovery in the second half of the year. If in 010, as we believe, economic activity gathers momentum, fiscal policy needs to revert to a consolidation path. This is also important for Member States which are in a relatively favourable position in order to avoid a permanent deterioration in the sustainability of their public finances. In this context it is important that the Stability and Growth Pact remains the framework within which the Commission and the Council advices Member States on their conduct of fiscal policy", said Economic and Monetary Affairs Commissioner Joaquín Almunia. 1 According to Council Regulation (EC) No 1466/97 on the strengthening of budgetary surveillance and the surveillance and coordination of economic policies, Member States must submit updated macroeconomic and budgetary projections every year. Such updates are called stability programmes in the case of countries that have adopted the euro, and convergence programmes in the case of those that have not yet done so. This regulation is also referred to as the 'preventive arm' of the Stability and Growth Pact.

2 BULGARIA The programme's medium-term budgetary strategy aims at maintaining a sound budgetary position reflected in the high targeted general government surpluses of 3% of GDP throughout the programme period ( ). GDP growth has been high in Bulgaria at over 6% per year since 003, accompanied by a widening external deficit and high inflation. As the impact of the global economic slowdown and financial crisis unfolds, Bulgaria faces the challenge of sustaining growth while addressing the existing macroeconomic ims through maintaining tight fiscal and income policies. Bulgaria's fiscal policy is geared towards maintaining investor confidence and preserving macro-economic stability. The government's focus on structural measures to strengthen the economy's resilience also represents a timely and adequate response to the current economic outlook. In view of the above assessment and also given the need to ensure sustainable convergence, Bulgaria is invited to: (i) continue maintaining a sound fiscal position by restraining expenditure growth, with a view to help contain existing external ims and counteract possible revenue shortfalls; (ii) contain public sector wage growth in order to contribute to overall wage moderation and improve competitiveness; and (iii) further strengthen the efficiency of public spending, in particular through full implementation of programme budgeting, reinforced administrative capacity and reforming the areas of labour and product markets, education and healthcare, in order to increase productivity and reduce the external deficit. THE CZECH REPUBLIC Starting from relatively low government deficit and debt levels, the programme targets a general government deficit of 1.6% and 1.5% of GDP in and 010 respectively, based on favourable growth assumptions. Against the background of the recent improvement in public finances, the Czech Republic adopted a sizeable fiscal stimulus package. This package is in line with the EU Recovery Plan, in being timely and well-target to sectors of the economy likely to be most severely affected by the slowdown. It will be important to reverse them once economic conditions improve. While pension and health care reforms have been introduced that will reduce expenditure, concerns remain regarding long term fiscal sustainability due to a rapidly ageing population. In view of the Commission assessment, and also given the need to ensure sustainable convergence, the Czech Republic is invited to: (i) implement the measures in line with the EERP as planned.; (ii) reverse the adverse budgetary impact of the fiscal stimulus once the economy recovers and back-up the budgetary strategy with specific measures for reducing expenditure in and (iii) continue with the necessary pension and health care reforms, given the projected increase in age-related expenditures, in order to improve the long-term sustainability of public finances.

3 DENMARK After a period of strong economic activity and sizeable budgetary surpluses, Denmark's economic slowdown in 008 was rapid and pronounced, as the cyclical downturn has been exacerbated by the global economic and financial crisis. At the current juncture and given the comfortable fiscal position, the overall fiscal stance is considered adequate in view of the discretionary fiscal expansion in and the relatively strong automatic stabilisers at play. The government debt has been nearly halved in the present decade to a low of 6.3% of GDP in 007, thanks to high budgetary surpluses benefiting from a strong fiscal framework. In view of the Commission assessment, Denmark is invited to (i) implement the planned measures in line with the European Recovery Plan and (ii) identify the required structural reform measures to achieve its budgetary targets in the outer years of the programme. FINLAND After GDP growth above potential in 006 and 007 (4.9% and 4.% respectively), the Finnish economy decelerated rapidly in 008 and is expected to be negative this year. The Finnish Programme submitted mid December still envisaged GDP growth of 0.6 % in, but this appears optimistic given the deteriorated outlook in the past months. The fundamentals of the Finnish economy are sound, though, with a significant surplus in both the current account and the public finances. Thanks to a prudent fiscal policy in the good times, Finland is expected to continue recording surpluses in general government finances during the programme period although they could turn less important than projected. The programme envisages a large fiscal stimulus over and 010, complemented by new measures announced in January. This appears appropriate, provided that action will also be taken to ensure fiscal retrenchment once the economic crisis abates in order to preserve the long term sustainability of the public finances. The public debt is expected to increase somewhat from an estimated figure of less than 33% in 008. In view of the Commission assessment, Finland is invited to: (i) implement the measures in line with the Recovery Plan and; (ii) reverse the adverse budgetary impact of the fiscal stimulus measures once the economy recovers in order to preserve the long-term sustainability of public finances. GERMANY After successfully reaching a close-to- budget in 007 and 008, Germany faces a deterioration in its public finances due to overall worsened economic situation and as a result of the steps undertaken to counter the sharp slowdown caused by the global economic and financial crisis. The Stability Programme completed at the end of January, foresees a budget deficit of 3% of GDP in and 4% of GDP in 010. Budgetary consolidation would be resumed after 010 with the deficit falling to ½% in 01. Given the sharp deterioration in the global economy and distress in the financial sector, the budgetary strategy is subject to downside risks. 3

4 Using the room of manoeuvre afforded by the budgetary consolidation during the good times, Germany adopted a sizeable fiscal stimulus package between the autumn 008 and January in line with the EU Recovery Plan. The stimulus focuses on income support, public and private investment, access to financing, avoiding lay-offs, improving qualifications and providing measures that support the automotive industry. It is a timely and targeted response to the economic crisis, commensurate with the scale of the downturn. But it is also important to ensure a return to a credible fiscal consolidation path once the economy recovers. In this sense, the envisaged new constitutional rule limiting federal government structural deficits to 0.35% of GDP and the debt repayment schedule are important steps. Given increasing public debt, recent ad hoc changes to the pension adjustment formula and uncertainty as to the impact of the health-care reform, preserving the achievements made to improve long-term sustainability is critical. Therefore, Germany is invited to (i) implement the measures in line with the Recovery Plan as planned and reverse the budgetary impact of the fiscal stimulus measures in order to support budgetary consolidation once the economy recovers; (ii) strengthen the institutional fiscal framework by implementing the new budgetary rule as currently envisaged in order to underpin the necessary consolidation course after 010; (iii) give renewed attention to measures strengthening the long-term sustainability of public finances and ensure that the deviation from the pension adjustment formula in 008 is reversed as envisaged. ESTONIA After many years of strong growth, Estonia is experiencing a severe downturn. The global financial crisis and weakening external demand have added to the reversal of the cycle and speeded up the contraction of the economy. While external and internal ims are now clearly subsiding, the loss of cost competitiveness accumulated over the years of wage growth well in excess of productivity growth hinders an orderly economic adjustment. Following the updated Convergence Programme's submission in early December, more recently-announced measures aim at keeping the general government deficit below 3% of GDP. The expenditure cuts, which include a reduction of the public sector wage bill, are intended to support the adjustment process and strengthen the competitiveness of the economy. This is a welcome development that anticipates the policy invitations put forward by the Commission (see below). Recent modernisation of the labour law is also a timely step to improve the responsiveness of labour market. The Estonian authorities should now ensure that these measures are implemented. In view of the Commission assessment and also given the need to ensure sustainable convergence and a smooth participation in ERM II, Estonia is invited to: (i) strengthen the consolidation of public finances in the short term to keep the general government deficit below 3% of GDP and take necessary measures to underpin the consolidation in the medium term; (ii) implement prudent public sector wage policies to support the adjustment of the economy and to strengthen competitiveness; (iii) reinforce the medium-term budgetary framework, particularly by improving expenditure planning and efficiency. 4

5 HUNGARY In spite of distinct improvements in its high ims, including the reduction in its budget deficit from 9.3% in 006 to below 3½% in 008, Hungary has been particularly exposed to the financial crisis due to still high levels of government and external debt.. Thus, to restore investor confidence Hungary adopted a policy of further fiscal adjustment and tighter deficit targets. The updated Convergence Programme submitted in December is based on the economic policy programme adopted by the government in response to the financial crisis and supported by international financial assistance, including a 6.5 billion loan from the European Union. The programme foresees a continuation of the front-loaded budgetary consolidation strategy, with another important reduction in to.6% of GDP. Thereafter, it plans a more moderate progress towards a deficit of.% in 011. In view of the recent substantially deteriorated macroeconomic outlook and the related budgetary risks, the government adopted on 15 February an additional corrective package of 0.7% of GDP and slightly revised its deficit target upwards. The sustainability of public finances hinges on the continuation of structural reforms, as recently announced, to the extent that they increase long-term growth, help meet budgetary targets, and reduce the country s vulnerabilities. Given this assessment, Hungary is invited, (i) in view of the risks, maintain adequate buffers, take the necessary measures to keep the budget deficit below 3% of GDP and ensure that adequate progress in budgetary consolidation is made, thereby setting the debt-to-gdp ratio on a declining path towards the 60% of GDP threshold. (ii) ensure full implementation of the fiscal responsibility law and continue the expenditure moderation through additional structural reforms and strengthen financial market regulation and supervision. Finally, (iii) Hungary is invited to further improve the long-term sustainability of public finances namely through a continuation of the reforms in the pension system. THE NETHERLANDS Economic activity is expected to decrease sharply in, as the Netherlands is set to be severely hit by the sharp fall in world trade and the financial crisis. The Stability Programme submitted in November and updated on 18 December aimed at achieving and maintaining stable budgetary surplus between 008 and 011, but this scenario is subject to risks linked to the evolution of economic growth and gas prices as well as the risks associated with the sizeable guarantees given to the financial sector. However, and despite the increase in the public debt to 57% of GDP at the end of 008 (due to the rescue plans to the financial sector), the main challenges lie in addressing the low confidence in the financial sector and supporting investment. The Dutch government adopted two support packages, in November 008 and January, aimed at fostering private investment, protecting employment and improving credit supply. The measures are in line with the European Recovery Plan (timely, temporary and targeted), but their budgetary impact is rather limited. In view of this assessment, the Netherlands is invited to implement measures in line with the European Recovery Plan. 5

6 POLAND Poland's strong GDP growth is expected to slow markedly in mainly due to the impact of the global financial crisis, through the deterioration in global trade flows, the slowdown in FDI activity and the limited availability of external financing. The updated Convergence Programme sent at the end of December targets a general government deficit of ½% of GDP in, based on rather favourable growth assumptions. Further ahead, the programme targets a budget deficit of.3% of GDP in 010 based on expenditure restraint about which there is presently little information. Poland is planning adequate fiscal stimulus measures, some of which are not temporary, which will stimulate both aggregate demand in the short term and strengthen the supply side of the Polish economy in a longer term. In line with the European Recovery Plan, the fiscal stimulus measures adopted by Poland mostly contemplate increased public investment in infrastructure as well as some cuts in income taxes which reduce the tax wedge. In view of the Commission assessment and also given the need to ensure sustainable convergence, Poland is invited to: (i) implement the stimulus measures in line with the Recovery Plan as planned, while ensuring that the deficit remains below 3% of GDP in ; (ii) back up the budgetary strategy with specific deficitreducing measures for 010 and 011; (iii) reinforce the budgetary framework through better control over expenditure, including the swift implementation of the amended public finance act and performance budgeting. SWEDEN After a prolonged period of relatively strong economic growth, Sweden is experiencing a sharp economic slowdown, which will negatively affect its budget this year. However, the medium-term budgetary position of Sweden is sound. Large surpluses in good times have created space to allow fiscal policy to play an active role in the current downturn, not only by boosting demand in the short term but also by strengthening the economy's long-term growth potential. The fiscal stance has appropriately become expansionary in. However, there are short-term risks to the fiscal, and there is a need to strengthen the fiscal framework to ensure that the government improves once the economy picks up again. In view of the Commission assessment, Sweden is invited to (i) implement the measures in response to the EERP as planned; (ii) reverse the adverse budgetary impact of the fiscal stimulus measures once the economy recovers. THE UNITED KINGDOM The United Kingdom's convergence programme update, submitted on 18 December, confirms a rapid deterioration in the UK s budgetary position that has considerably strained the sustainability of its public finances. The probably significantly weakerthan-envisaged outlook in the near term also entails the risk of higher government deficits throughout the programme period. Following the rapid worsening in the macroeconomic situation, the government deficit is estimated in the programme at 5½% of GDP in 008/09 and is forecast to peak at 8.% in /10. The budgetary projections include the cost of the fiscal stimulus package announced in November

7 As recommended in the EU Recovery Plan, the stimulus package is temporary and timely, with measures targeted towards supporting domestic demand in. However, taking into account the probability of a worse-than-expected deterioration in the budgetary position in the near term and the heightened risks to fiscal sustainability, there is need for a more ambitious consolidation effort in the medium term. After the expansionary fiscal measures in /10, the UK authorities plan some consolidation from 010/11 onwards, but there are risks to the achievement of this consolidation and the deficit in 013/14 would still be above 3% of GDP. Improvements would depend on a significant economic recovery as well as the achievement of spending targets. The debt ratio, which was close to 40% of GDP in 007/08, is now expected to rise to almost 70% of GDP by the end of the programme period. In view of the Commission assessment, the United Kingdom is invited to (i) proceed in financial year /10 with the stimulus measures consistent with the European Recovery Plan while avoiding any further deterioration of public finances; (ii) strengthen the pace of budgetary consolidation from 010/11 onwards to ensure a rapid correction of the excessive deficit; (iii) define a fiscal framework consistent with an improvement of the long-term sustainability of its public finances. The country-specific Commission recommendations for a Council opinion on each programme are available at: 7

8 BULGARIA Real HICP Comparison of key macroeconomic and budgetary projections CP Dec GDP n.a. CP Dec n.a. CP Dec inflation n.a. CP Dec n.a. CP Dec n.a. CP Dec n.a. n.a. CP Dec Net lending/borrowing vis-àvis the rest of the world n.a. CP Dec n.a. CP Dec revenue n.a. CP Dec n.a. CP Dec expenditure n.a. CP Dec n.a. CP Dec n.a. CP Dec n.a. CP Dec Primary n.a. CP Dec n.a. CP Dec Cyclically-adjusted n.a. CP Dec n.a. n.a. CP Dec Structural n.a. CP Dec n.a. n.a. CP Dec Government gross debt n.a. CP Dec n.a. Notes: 1 Output gaps and cyclically-adjusted s according to the programmes as recalculated by Commission services on the basis of the information in the programmes. Based on estimated potential growth of 5.0%, 6.3%, 6.0% and 6.0% respectively in the period

9 3 The different net borrowing position in 007 in the current update of the programme and the Commission services' January interim forecast reflects a discrepancy in the on goods and services component. 4 Cyclically-adjusted excluding one-off and other temporary measures. Cyclically-adjusted s according to the programmes as recalculated by the Commission services on the basis of the information in the programmes. The most recent programme provides no information on one-off and other temporary measures; according to the Commission services' January interim forecast, they are 3.3% of GDP(expenditure side) in The differing projections about the debt-to-gdp ratio in the programme compared to the Commission services' January interim forecast are due almost entirely to the higher projected accumulation of financial assets, which is not considered by the Commission services under a no-policy-change scenario. Source: Convergence programme (CP); Commission services Commission services calculations CZECH REPUBLIC Comparison of key macroeconomic and budgetary projections January interim forecasts (COM);

10 Real HICP GDP inflation Net lending/borrowing vis-à-vis the rest of the world CP Nov n.a. CP Nov n.a. CP Nov n.a. CP Nov n.a. CP Nov n.a. CP Nov n.a. CP Nov n.a. CP Nov n.a. CP Nov revenue n.a. CP Nov n.a. expenditure Primary Cyclically-adjusted 1 Structural 3 Government debt gross CP Nov n.a. CP Nov n.a. CP Nov n.a. CP Nov n.a. CP Nov n.a. CP Nov n.a. CP Nov n.a. CP Nov n.a. CP Nov n.a. CP Nov n.a. CP Nov n.a. CP Nov n.a. Notes: 1 Output gaps and cyclically-adjusted s according to the programmes as recalculated by Commission services on the basis of the information in the programmes. Based on estimated potential growth of 4.5%, 4.5%, 4.4% and 4.% respectively in the period

11 3 Cyclically-adjusted excluding one-off and other temporary measures. Oneoff and other temporary measures are 0.1% of GDP in 008 according to the most recent programme, which but it was allocated to the normal spending categories on the basis that the components are recurring elements of government expenditure and of a small scale in the Commission services' January interim forecast. Source: Convergence programme (CP); Commission services January interim forecasts (COM); Commission services calculations DENMARK Comparison of key macroeconomic and budgetary projections CP Dec Real GDP n.a. n.a. n.a. CP Dec n.a. n.a. n.a. CP Dec HICP inflation n.a. n.a. n.a. CP Dec n.a. n.a. n.a. Net lending/borrowing vis-à-vis the rest of the world revenue 4, 6 General government expenditure 4, 6 6 Primary Cyclically-adjusted 1 Structural 3, 5 Government gross debt Notes: CP Dec n.a. n.a. n.a. CP Dec n.a. n.a. n.a. CP Dec n.a. n.a. n.a. CP Dec n.a. n.a. n.a. CP Dec n.a. n.a. n.a. CP Dec n.a. n.a. n.a. CP Dec n.a. n.a. n.a. CP Dec n.a. n.a. n.a. CP Dec n.a. n.a. n.a. CP Dec n.a. n.a. n.a. CP Dec n.a. n.a. n.a. CP Dec n.a. n.a. n.a. CP Dec n.a. n.a. n.a. CP Dec n.a. n.a. n.a. CP Dec n.a. n.a. n.a. CP Dec n.a. n.a. n.a. CP Dec n.a. n.a. n.a. CP Dec n.a. n.a. n.a. 4

12 1 Output gaps and cyclically-adjusted s from the programmes as recalculated by Commission services on the basis of the information in the programmes. Based on estimated potential growth of 1.8%, 1.4%, 1.0% and 0.9% respectively in the period Cyclically-adjusted excluding one-off and other temporary measures. One-off and other temporary measures are -1.0% of GDP in 008, -1.7% in and 010, and -0.% in 011, all deficit-reducing/surplusincreasing, according to the most recent programme, and -0.5% of GDP in 008, -0.% in and -0.8% in 010, all deficit-reducing/surplus-increasing, according to the Commission services' January Interim economic forecast. 4 The programme data for revenue and expenditure differ from the data reported to Eurostat, following the harmonised approach (cf. Commission Regulation No. 1500/000), on which the Commission services' forecast is based. The difference relates primarily to the treatment of public sales of goods and services and of the consumption of fixed capital. The is, however, unaffected. 5 Using the recalculated cyclically-adjusted, based on the information in the programme, and the definition of one-offs and other temporary measures applied by the Commission services, the structural would be 3.6% of GDP in 008 and 1.1 in, and 0.9 in For 007, the figures differ from those reported to Eurostat in the October 008 EDP notification. The figures used reflect more recent, revised data published by Statistics Denmark, which has not yet been validated by Eurostat. Source: Convergence programme (CP); Commission services January interim forecasts (COM); Commission services calculations GERMANY Comparison of key macroeconomic and budgetary projections SP Dec ¼ 1¼ 1¼ 1¼ Real GDP n.a. n.a. SP Nov ½ 1½ 1½ n.a. SP Dec 008 n.a. n.a. n.a. n.a. n.a. n.a. HICP inflation n.a. n.a. SP Nov 007 n.a. n.a. n.a. n.a. n.a. n.a. SP Dec n.a. n.a. SP Nov n.a. Net lending/borrowing vis-àvis SP Dec the rest of the world n.a. n.a. SP Nov n.a. SP Dec ½ 4½ 4½ 43 revenue n.a. n.a. SP Nov ½ 4 n.a. SP Dec ½ 46½ 45½ 45½ expenditure n.a. n.a. SP Nov ½ ½ n.a. SP Dec ½ n.a. n.a. SP Nov ½ 0 ½ ½ n.a. Primary SP Dec ½ ½ n.a. n.a. Cyclically-adjusted 1 Structural 3 SP Nov ½ ½ 3 3½ n.a. SP Dec n.a. n.a. SP Nov n.a. SP Dec n.a. n.a. SP Nov n.a. SP Dec ½ 68½ 70½ 71½ 7½ Government gross debt n.a. n.a. 5

13 Notes: SP Nov ½ -59½ -57½ n.a. 1 Output gaps and cyclically-adjusted s from the programmes as recalculated by Commission services on the basis of the information in the programmes. Based on estimated potential growth of 1.1%, 1.%, 0.9% and 1.0% respectively in the period Cyclically-adjusted excluding one-off and other temporary measures. One-off and other temporary measures are 0.3% of GDP in 007 and 1/% of GDP in 008 all deficit-increasing according to the most recent programme and 0.3% of GDP in 007, 0.3% of GDP in 008 and 0.1% of GDP in 010 all deficit-increasing in the Commission services' January interim forecast. Source: Stability programme (SP); Commission services January interim forecasts (COM); Commission services calculations ESTONIA Comparison of key macro economic and budgetary projections CP Nov Real GDP n.a. n.a. CP Nov n.a. CP Nov HICP inflation n.a. n.a. CP Nov n.a. CP Nov n.a. n.a. CP Nov n.a. CP Nov n.a. n.a. Net lending/borrowing vis-à-vis the rest of the world CP Nov n.a. CP Nov revenue n.a. n.a. CP Nov n.a. CP Nov n.a. n.a. expenditure CP Nov n.a. CP Nov n.a. n.a. CP Nov n.a. CP Nov Primary n.a. n.a. CP Nov n.a. Cyclically-adjusted CP Nov n.a. n.a. CP Nov n.a. CP Nov Structural n.a. n.a. Government gross debt CP Nov n.a. CP Nov n.a. n.a. CP Nov n.a. Notes: 1 Output gaps and cyclically-adjusted s from the programmes as recalculated by Commission services on the basis of the information in the programmes. 6

14 Based on estimated potential growth of 4.6%, 4.1%, 3.7% and 3.5% respectively in the period Cyclically-adjusted excluding one-offs and other temporary measures. One-offs and other temporary measures are 0.4% of GDP in 007, 0.% in 008, 0.1% in, 0.4% in 010 and 0.1% in 011; all deficit-reducing according to the most recent programme. One-offs for the period -011 are not considered to be of a one-off nature according to the Commission services' January interim forecast. Source: Convergence programme (CP); Commission services January interim forecasts (COM); Commission services calculations. HUNGARY Comparison of key macroeconomic and budgetary projections CP Dec Real GDP n.a. CP Nov CP Dec HICP inflation n.a. CP Nov CP Dec n.a. CP Nov CP Dec Net lending/borrowing vis-àvis the rest of the world n.a. CP Nov CP Dec revenue n.a. CP Nov CP Dec expenditure n.a. CP Nov CP Dec n.a. CP Nov CP Dec Primary n.a. CP Nov CP Dec Cyclically-adjusted n.a. CP Nov CP Dec Structural n.a. CP Nov Government gross debt CP Dec

15 Notes: n.a. CP Nov Output gaps and cyclically-adjusted s according to the programmes as recalculated by Commission services on the basis of the information in the programmes. Based on estimated potential growth of 1.7%, 1.3%, 0.9% and 0.5% respectively in the period Cyclically-adjusted excluding one-off and other temporary measures. Cyclically-adjusted s according to the programmes as recalculated by the Commission services on the basis of the information in the programmes. One-off and other temporary measures are 0.9% of GDP in 007 and 0.4% in 008; all deficit-increasing, according to the most recent programme and 0.9% of GDP in 007 and 0.3% of GDP in 008; all deficit-increasing, according to the Commission services' January interim forecast. Source: Convergence programme (CP); Commission services January interim forecasts (COM); Commission services calculations THE NETHERLANDS Comparison of key macroeconomic and budgetary projections SP Dec ¼ 1¼ Real GDP n.a. SP Nov 007 ¾ ½ 1¾ 1¾ n.a. SP Dec ½ 3¼ HICP inflation n.a. SP Nov 007 1½ ¼ n.a. SP Dec n.a. SP Nov n.a. n.a. SP Dec Net lending/borrowing vis-àvis the rest of the world n.a. SP Nov n.a. SP Dec revenue n.a. SP Nov n.a. SP Dec expenditure n.a. SP Nov n.a. SP Dec n.a. SP Nov n.a. SP Dec Primary n.a. SP Nov n.a. Cyclically-adjusted 1 SP Dec n.a. 8

16 Structural 3 Government gross debt SP Nov n.a. n.a. SP Dec n.a. SP Nov n.a. n.a. SP Dec n.a. SP Nov n.a. Notes: 1 The figures in this table reflect the baseline scenario as presented in the stability programme, they do not reflect the figures presented in the addendum to the stability programme. Output gaps and cyclically-adjusted s according to the programmes as recalculated by Commission services on the basis of the information in the programmes. 3 Based on estimated potential growth of 1.7%, 1.8%, 1.3% and 1.% respectively in the period Cyclically-adjusted excluding one-off and other temporary measures. One-off and other temporary measures are 0.3%of GDP in ; deficit-reducing, according to the most recent programme and in the Commission services' January interim forecast. Source: Stability programme (SP); Commission services January interim forecasts (COM); Commission services calculations POLAND 9

17 Comparison of key macroeconomic and budgetary projections Real HICP GDP inflation Net lending/borrowing vis-àvis the rest of the world General revenue General expenditure General Primary government government government Cyclically-adjusted 1 Structural 3 Government gross debt Notes: CP Dec n.a. CP Mar n.a. CP Dec n.a. CP Mar n.a. CP Dec n.a. CP Mar n.a. CP Dec n.a. CP Mar n.a. CP Dec n.a. CP Mar n.a. CP Dec n.a. CP Mar n.a. CP Dec n.a. CP Mar n.a. CP Dec n.a. CP Mar n.a. CP Dec n.a. CP Mar n.a. CP Dec n.a. CP Mar n.a. CP Dec n.a. CP Mar n.a. 1 Output gaps and cyclically-adjusted s according to the programmes as recalculated by Commission services on the basis of the information in the programmes. Based on estimated potential growth of 5.%, 4.9%, 4.% and 3.7% respectively in the period Cyclically-adjusted excluding one-off and other temporary measures. One-off and other temporary measures are 0.% in 010, deficit-increasing, and zero for other years according to the most recent programme and the Commission services' January interim forecast. 10

18 Source: Convergence programme (CP); Commission services January interim forecasts (COM); Commission services calculations. SWEDEN Comparison of key macro economic and budgetary projections CP Dec Real GDP n.a. CP Nov n.a. CP Dec n.a. n.a. HICP inflation n.a. CP Nov n.a. Net lending/borrowing vis-àvis the rest of the world General revenue General expenditure General Primary government government government Cyclically-adjusted 1 Structural 3 Government gross debt Notes: CP Dec n.a. CP Nov n.a. CP Dec n.a. CP Nov n.a. CP Dec n.a. CP Nov n.a. CP Dec n.a. CP Nov n.a. CP Dec n.a. CP Nov n.a. CP Dec n.a. CP Nov n.a. CP Dec n.a. CP Nov n.a. CP Dec n.a. CP Nov n.a. CP Dec n.a. CP Nov n.a. 11

19 1 Output gaps and cyclically-adjusted s according to the programmes as recalculated by Commission services on the basis of the information in the programmes. Based on estimated potential growth of.6%,.3%, 1.3% and 1.% respectively in the period Cyclically-adjusted excluding one-off and other temporary measures. One-off and other temporary measures are 0.3% of GDP in 008 and 0.1% in -11 all deficit-reducing according to the most recent programme and 0.3 % of GDP in 008 and 0.1% in ; all deficit-reducing in the Commission services' January interim forecast. Source: Convergence programme (CP); Commission services January interim forecasts (COM); Commission services calculations FINLAND Comparison of key macro economic and budgetary projections SP Jan Real GDP n.a. n.a. SP Nov n.a. SP Jan HICP inflation n.a. n.a. SP Nov n.a. Net lending/borrowing vis-àvis the rest of the world General revenue General expenditure General Primary government government government Cyclically-adjusted 1 Structural 3 SP Jan n.a. n.a. SP Nov n.a. SP Jan n.a. n.a. SP Nov n.a. SP Jan n.a. n.a. SP Nov n.a. SP Jan n.a. n.a. SP Nov n.a. SP Jan n.a. n.a. SP Nov n.a. SP Jan n.a. n.a. SP Nov n.a. SP Jan n.a. n.a. SP Nov n.a. SP Jan n.a. n.a. SP Nov n.a. 1

20 Government gross debt Notes: SP Jan n.a. n.a. SP Nov n.a. 1 Output gaps and cyclically-adjusted s from the programmes as recalculated by Commission services on the basis of the information in the programmes. Based on estimated potential growth of.8%,.6%,.0% and 1.9% respectively in the period Cyclically-adjusted excluding one-off and other temporary measures. There are no one-off and other temporary measures in any year over the programme period according to the most recent programme. However, according to the Commission services' January interim forecast there is one deficit-increasing one-off measure of 0.% of GDP in 010, arising from a temporary loss of VAT revenue due to changes in the tax collection principles. Source: Stability programme (SP); Commission services January interim forecasts (COM); Commission services calculations. UNITED KINGDOM Comparison of key macro economic and budgetary projections 13

21 Financial years 007/8 008/9 /10 010/11 011/1 01/13 013/14 CP Dec ¼ -½ n.a. n.a. n.a. CP Nov ¾ ½ ½ n.a. CP Dec 008 ¼ 3¾ n.a. n.a. n.a. Real GDP HICP inflation CP Nov 007 ¼ n.a. CP Dec n.a. n.a. n.a. CP Nov n.a. Net lending/borrowing vis-à-vis CP Dec 008 n.a. n.a. n.a. n.a. n.a. n.a. n.a. the rest of the world n.a. n.a. n.a. CP Nov 007 n.a. n.a. n.a. n.a. n.a. n.a. n.a. CP Dec revenue n.a. n.a. n.a. CP Nov n.a. CP Dec expenditure n.a. n.a. n.a. CP Nov n.a. CP Dec n.a. n.a. n.a. CP Nov n.a. CP Dec Primary n.a. n.a. n.a. CP Nov n.a. CP Dec Cyclically-adjusted n.a. n.a. n.a. CP Nov n.a. CP Dec Structural n.a. n.a. n.a. CP Nov n.a. CP Dec Government gross debt n.a. n.a. n.a. CP Nov n.a. Notes: 1 Output gaps and cyclically-adjusted s from the programmes as recalculated by Commission services on the basis of the information in the programmes using the commonly agreed methodology. figures are based on estimated potential growth of 1.5%, 0.9%, and 1.0% respectively in the period Data refers to calendar years. 3 Cyclically-adjusted excluding one-off and other temporary measures. There are no one-off and other temporary measures during the programme period. Source : Convergence programme (CP); Commission services January Interim economic forecasts (COM); Commission services calculations 14