13.7.2007 EN Official Journal…

13.7.2007             EN                            Official Journal of the European Union                                            L 183/23


                                                                         II
                             (Acts adopted under the EC Treaty/Euratom Treaty whose publication is not obligatory)




                                                                 DECISIONS


                                                               COUNCIL

                                                            COUNCIL DECISION
                                                                of 5 June 2007
                      abrogating Decision 2003/89/EC on the existence of an excessive deficit in Germany
                                                                 (2007/490/EC)


THE COUNCIL OF THE EUROPEAN UNION,                                                   provides the data for the implementation of the
                                                                                     procedure. As part of the application of the Protocol,
Having regard to the Treaty establishing the European                                Member States are to notify data on government
Community, and in particular Article 104(12) thereof,                                deficits and debt and other associated variables twice a
                                                                                     year, namely before 1 April and before 1 October, in
                                                                                     accordance with Article 4 of Council Regulation (EC)
Having regard to the recommendation from the Commission,                             No 3605/93 of 22 November 1993 on the application
                                                                                     of the Protocol on the excessive deficit procedure
Whereas:                                                                             annexed to the Treaty establishing the European
                                                                                     Community (4).
(1)    By Council Decision 2003/89/EC (1), following a recom-
       mendation from the Commission in accordance with
       Article 104(6) of the Treaty, it was decided that an
       excessive deficit existed in Germany. The Council noted                (4)    Following a provisional notification by Germany in
       that the general government deficit was 3,7 % of GDP in                       February 2006, actual data provided by the Commission
       2002, significantly exceeding the 3 % of GDP Treaty                           (Eurostat) indicated that the excessive deficit had not
       reference value, while general government gross debt                          been corrected by 2005. Acting in accordance with
       was expected to reach 60,9 % of GDP, slightly above                           Article 10(3) of Regulation (EC) No 1467/97, and
       the 60 % of GDP Treaty reference value.                                       based on a recommendation from the Commission, the
                                                                                     Council on 14 March 2006 immediately took a Decision
(2)    On 21 January 2003, in accordance with Article 104(7)                         under Article 104(9) of the Treaty giving notice to
       of the Treaty and Article 3(4) of Council Regulation (EC)                     Germany to take measures for the deficit reduction
       No 1467/97 of 7 July 1997 on speeding up and clar-                            judged necessary in order to remedy the situation of
       ifying the implementation of the excessive deficit                            excessive deficit as rapidly as possible and at the latest
       procedure (2), the Council addressed a recommendation                         by 2007 (5). Specifically, the Council decided that in
       to Germany with a view to bringing the excessive deficit                      2006 and 2007 Germany should ensure a cumulative
       situation to an end as rapidly as possible and by 2004 at                     improvement in its cyclically-adjusted balance net of
       the latest. The recommendation was made public. In view                       one-off and temporary measures by at least one
       of the unique circumstances created by the Council                            percentage point.
       conclusions of 25 November 2003 and of the ruling
       of the European Court of Justice of 13 July 2004 (3),
       the year 2005 should be considered to be the relevant
       deadline for the correction of the excessive deficit.                  (5)    In accordance with Article 104(12) of the Treaty, a
                                                                                     Council Decision on the existence of an excessive
(3)    In accordance with the Protocol on the excessive deficit                      deficit is to be abrogated when the excessive deficit in
       procedure annexed to the Treaty, the Commission                               the Member State concerned has, in the view of the
                                                                                     Council, been corrected.
(1) OJ L 34, 11.2.2003, p. 16.
(2) OJ L 209, 2.8.1997, p. 6. Regulation as amended by Regulation (EC)        (4) OJ L 332, 31.12.1993, p. 7. Regulation as last amended by Regu-
    No 1056/2005 (OJ L 174, 7.7.2005, p. 5).                                      lation (EC) No 2103/2005 (OJ L 337, 22.12.2005, p. 1).
(3) Case C-27/04, Commission v Council, [2004] ECR I-6649.                    (5) Council Decision 2006/344/EC (OJ L 126, 13.5.2006, p. 20).
L 183/24           EN                          Official Journal of the European Union                                     13.7.2007


(6)   Based on data provided by the Commission (Eurostat) in                   with the recommended improvement in the structural
      accordance with Article 8g(1) of Regulation (EC) No                      balance of at least one percentage point in 2006 and
      3605/93 following the notification by Germany before                     2007 in cumulative terms. For 2008, the spring
      1 April 2007 and on the Commission services' spring                      forecast projects, with unchanged policies, a further
      2007 forecast, the following conclusions are warranted:                  decline in the deficit to 0,3 % of GDP. This indicates
                                                                               that the deficit has been brought below the 3 % of
                                                                               GDP ceiling in a credible and sustainable manner.
      -- the general government deficit, after rising from                     With unchanged policies, the structural deficit is
         3,7 % of GDP in 2002 to 4,0 % of GDP in 2003,                         expected to decline only marginally in 2008. This
         was reduced to 3,7 % of GDP in 2004, to 3,2 % of                      should be seen against the need to make progress
         GDP in 2005, and finally to 1,7 % of GDP in 2006.                     towards the medium-term objective for the
         This is lower than the target of 3,3 % of GDP set in                  budgetary position, which for Germany is a
         the February 2006 update of the stability programme                   balanced budget in structural terms,
         and well below the 3 % of GDP deficit reference value
         one year before the time limit set by the Council,
                                                                            -- after rising from 60,3 % of GDP in 2002 to a peak of
                                                                               67,9 % of GDP in 2005, the debt ratio stabilised in
      -- in previous years of favourable cyclical conditions,
                                                                               2006 and is projected to decline to 65,4 % of GDP in
         Germany had not created enough budgetary leeway
                                                                               2007 and to about 63½ % by 2008 on a no-policy
         to accommodate the extended slow growth period
                                                                               change basis according to the Commission services'
         between 2002 and 2005 with average real GDP
                                                                               spring 2007 forecast, thus coming closer to the
         growth at 0,5 % per year. A series of tax cuts,
                                                                               reference value more rapidly than projected in the
         carried out until 2005, burdened the budget further,
                                                                               most recent update of the stability programme.
         while offsetting measures on the expenditure side
         were implemented only with some delay. Consoli-
         dation measures included restraint in public sector         (7)    In the view of the Council, the excessive deficit in
         wages, accompanied by a reduction in staff levels,                 Germany has been corrected and Decision 2003/89/EC
         the reform of the public health system in 2004, a                  should therefore be abrogated,
         reduction of subsidies and public investment, but also
         the fact that low wage growth in the private sector
         dampened pension outlays. Furthermore, in 2006,             HAS ADOPTED THIS DECISION:
         direct taxes, especially those related to profits,
         yielded stronger revenues than economic devel-
                                                                                                Article 1
         opments would have suggested. The cyclically-
         adjusted balance improved from 2002 onwards,                From an overall assessment it follows that the excessive deficit
         without recourse to significant one-off measures. Par-      situation in Germany has been corrected.
         ticularly in 2006, the estimated structural balance,
         excluding one-off and other temporary measures, as
         a percentage of GDP improved by close to one                                           Article 2
         percentage point,                                           Decision 2003/89/EC is hereby abrogated.

      -- for 2007, the Commission services' spring 2007
                                                                                                Article 3
         forecast projects that the deficit will be reduced
         further to 0,6 % of GDP, driven by continuing high          This Decision is addressed to the Federal Republic of Germany.
         GDP growth and, in particular, the increase in the
         standard VAT rate from 16 % to 19 % as of
         January 2007. No one-offs are envisaged. In the
                                                                     Done at Luxembourg, 5 June 2007.
         spring 2007 notification, the German authorities
         estimated the 2007 deficit at 1,2 % of GDP.
         Moreover, the Commission services project an                                                  For the Council
         improvement in the structural balance as a
         percentage of GDP amounting to ¾ percentage                                                    The President
         point in 2007. Thus, Germany appears to comply                                                P. STEINBRÜCK