Council Decision of 12 July 2011 addressed to Greece with a view to reinforcing and deepening fiscal surveillance and giving notice to Greece to take measures for the deficit reduction judged necessary to remedy the situation of excessive deficit (recast) (2011/734/EU)

Council Decision

of 12 July 2011

addressed to Greece with a view to reinforcing and deepening fiscal surveillance and giving notice to Greece to take measures for the deficit reduction judged necessary to remedy the situation of excessive deficit

(recast)

(2011/734/EU)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 126(9) and Article 136 thereof,

Having regard to the recommendation from the European Commission,

Whereas:

(1) Council Decision 2010/320/EU of 10 May 2010 addressed to Greece with a view to reinforcing and deepening fiscal surveillance and giving notice to Greece to take measures for the deficit reduction judged necessary to remedy the situation of excessive deficit(1) has been substantially amended several times(2). Since further amendments are to be made, it should be recast in the interests of clarity.

(2) Article 136(1)(a) of the Treaty on the Functioning of the European Union (TFEU) foresees the possibility of adopting measures specific to the Member States whose currency is the euro with a view to strengthening the coordination and surveillance of their budgetary discipline.

(3) Article 126 TFEU establishes that Member States are to avoid excessive government deficits and sets out the excessive deficit procedure to that effect. The Stability and Growth Pact, which in its corrective arm implements the excessive deficit procedure, provides the framework supporting government policies for a prompt return to sound budgetary positions taking account of the economic situation.

(4) On 27 April 2009, the Council decided, in accordance with Article 104(6) of the Treaty establishing the European Community (TEC), that an excessive deficit existed in Greece and issued recommendations to correct that deficit by 2010 at the latest, in accordance with Article 104(7) (TEC) and Article 3(4) of Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit procedure(3). The Council also set a deadline of 27 October 2009 for Greece to take effective action. On 30 November 2009, the Council established, in accordance with Article 126(8) TFEU, that Greece had not taken effective action; consequently, on 16 February 2010, the Council gave notice to Greece in accordance with Article 126(9) TFEU to take measures to correct the excessive deficit by 2012 at the latest (hereinafter ‘the Council Decision pursuant to Article 126(9)’). The Council also set a deadline of 15 May 2010 for effective action to be taken.

(5) According to Article 5(2) of Regulation (EC) No 1467/97, if effective action has been taken in compliance with Article 126(9) TFEU and unexpected adverse economic events with major unfavourable consequences for government finances occur after the adoption of that notice, the Council may decide, on a recommendation from the Commission, to adopt a revised notice pursuant to Article 126(9) TFEU.

(6) According to the Commission services’ autumn 2009 forecasts, which provided the basis for the initial notice addressed to Greece, GDP was expected to contract by ¼ % in 2010, and recover as from 2011, when the economy was forecast to grow by 0,7 %. A deeper contraction in real GDP took place in 2010 and this contraction is expected to continue in 2011. A gradual resumption of growth is expected thereafter. This marked worsening of the economic scenario implies a corresponding deterioration of the outlook for public finances at unchanged policy. To this should be added the upward revision of the government deficit outcome for 2009 (from an estimated 12,7 % of GDP at the time of the Council Decision pursuant to Article 126(9) to 13,6 % of GDP according to the fiscal notification submitted by Greece on 1 April 2010)(4) and later on to 15,4 % of GDP following completion of the investigations that Eurostat undertook with the Greek Statistical Authorities(5). Lastly, concerns in the markets for the public finances outlook have been reflected in a sharp rise in risk premiums on government debt, compounding the difficulties in controlling the path of government deficit and debt.

(7) Gross government debt at the end of 2009 stood at 127,1 % of GDP. This is the highest debt ratio in the EU, and is considerably higher than the 60 %-of-GDP reference value of the Treaty. Achieving the deficit reduction path that is considered necessary and feasible in the light of the circumstances would imply that the increase in debt would be reversed from 2013. In addition to persistently high government deficits, certain financial operations have further increased debt. These factors have contributed to undermining market confidence in the ability of the Greek Government to service the debt going forward. There is an urgent need for Greece to take decisive action, on an unprecedented scale, on its deficit and on other factors contributing to the increase in debt, in order to reverse the increase in the debt-to-GDP ratio and allow it to return as soon as possible to market financing.

(8) The very severe deterioration of the financial situation of the Greek Government has led the other euro area Member States to decide to provide stability support to Greece, with a view to safeguarding the financial stability of the euro area as a whole, in conjunction with multilateral assistance provided by the International Monetary Fund. Support provided by the euro area Member States will take the form of a pooling of bilateral loans, coordinated by the Commission. The lenders have decided that their support shall be conditional on Greece respecting this Decision. In particular, Greece is expected to carry out the measures specified in this Decision in accordance with the calendar set out herein.

(9) In June 2011, it became evident that, taking into account the 2010 budgetary slippage and budgetary execution until May, with unchanged policies, the 2011 target for the deficit would be missed by a significant amount which would jeopardise the overall credibility of the programme. Therefore, there has been a need to update specific budgetary measures to allow Greece to stick to the deficit target in 2011 and respect the deficit ceilings for the following years established by Decision 2010/320/EU. These measures have been extensively discussed with the Greek government and commonly agreed by the European Commission, the European Central Bank and the International Monetary Fund.

(10) In the light of the above considerations, it appears appropriate to amend Decision 2010/320/EU in a number of respects, while keeping unchanged the deadline for the correction of the excessive deficit,

HAS ADOPTED THIS DECISION:

(1)

OJ L 145, 11.6.2010, p. 6.

(2)

See Annex I.

(3)

OJ L 209, 2.8.1997, p. 6.

(4)

Eurostat news release 55/2010, 22 April 2010.

(5)

Eurostat news release 60/2011, 26 April 2011.