Decision 2009/591 - 2009/591/EC: Council Decision of 7 July 2009 on the existence of an excessive deficit in Latvia - Main contents

EN

Official Journal of the European Union

L 202/50

According to Article 104 of the Treaty, Member States shall avoid excessive government deficits.

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 excessive deficit procedure (EDP) under Article 104 of the Treaty, as clarified by Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit procedure (1), which is part of the Stability and Growth Pact, provides for a decision on the existence of an excessive deficit. The Protocol on the excessive deficit procedure annexed to the Treaty sets out further provisions relating to the implementation of the EDP. Council Regulation (EC) No 3605/93 (2) lays down detailed rules and definitions for the application of the provisions of that Protocol.

The 2005 reform of the Stability and Growth Pact in 2005 sought to strengthen its effectiveness and economic underpinnings as well as to safeguard the sustainability of public finances in the long run. It aimed at ensuring that, in particular, the economic and budgetary background was taken into account fully in all steps in the EDP. In this way, the Stability and Growth Pact provides the framework supporting government policies for a prompt return to sound budgetary positions taking account of the economic situation.

Article 104(5) of the Treaty requires the Commission to address an opinion to the Council if the Commission considers that an excessive deficit in a Member State exists or may occur. Having taken into account its report in accordance with Article 104(3) of the Treaty and having regard to the opinion of the Economic and Financial Committee in accordance with Article 104(4) of the Treaty, the Commission concluded that an excessive deficit exists in Latvia. The Commission therefore addressed such an opinion to the Council in respect of Latvia on 2 July 2009 (3).

Article 104(6) of the Treaty states that the Council should consider any observations which the Member State concerned may wish to make before deciding, after an overall assessment, whether an excessive deficit exists. In the case of Latvia, this overall assessment leads to the conclusion set out in this Decision.

According to the April 2009 EDP notification, the general government deficit in Latvia reached 4 % of GDP in 2008, thus exceeding the 3 % of GDP reference value. Furthermore, the deficit was not close to the 3 % of GDP reference value. The excess over the reference value can, however, be qualified as exceptional within the meaning of the Treaty and of the Stability and Growth Pact. In particular, it results from a severe economic downturn in the sense of the Treaty and of the Stability and Growth Pact. According to the Commission services′ spring 2009 forecast, real GDP growth in Latvia is projected to be strongly negative in 2009, with output 13,1 % after falling by 4,6 % in 2008; more recent indicators point to an even larger contraction in 2009, of the order of 18 %.

Consequently, the targets set in December 2008 under the framework of the Community balance of payments assistance programme — namely 5,3 % of GDP in 2009, 4,9 % of GDP in 2010 and below 3 % in 2011 — have become...