PURPOSE: draft
recommendation for a COUNCIL RECOMMENDATION on Spains 2012
national reform programme and delivering a Council opinion on
Spains convergence programme for 2012-2015.
BACKGROUND: the
European Commission has adopted a package of recommendations for
budgetary measures and economic reforms to enhance financial
stability, boost growth and create employment across the EU.
The recommendations
are country-specific, taking account of the individual
situation of each Member State. The Commission has also issued
recommendations for the euro area as a whole. The country-specific
recommendations put forward by the Commission give operational
guidance for Member States while preparing their budgetary policies
and for economic reforms that should be enacted over the coming
twelve months to boost competitiveness and facilitate job
creation.
The adoption of the
recommendations marks the concluding of the second phase of the
European Semester of economic policy coordination, which was
launched with the Commissions Annual Growth Survey on 23
November 2011.
The basis for these
recommendations is a thorough assessment of the implementation of
those adopted in 2011, combined with a detailed analysis of the
national reform programmes and stability or convergence programmes
that Member States submitted by 30 April 2012. The analysis
underpinning the recommendations is presented in 28 Commission
staff working documents.
CONTENT: on 30 April 2012, Spain submitted its
stability programme covering the period 2012-2015 and its 2012
national reform programme. The two programmes have been assessed at
the same time.
Based on the assessment of the stability programme,
the Council is of the opinion that the macroeconomic scenario
underlying the programme is broadly plausible for 2012 and
optimistic thereafter. The Commission's 2012 spring forecast
projected GDP growth to reach -1.8% in 2012 and -0.3% in 2013,
against -1.7% and 0.2%, respectively, in the programme. In
compliance with the Excessive Deficit Procedure, the objective of
the budgetary strategy outlined in the programme is to bring the
general government deficit below 3% of the GDP reference value by
2013, based mainly on expenditure restraint, but also on some
revenue-increasing measures. The programme projects the government
debt ratio to peak in 2013 and to start declining thereafter.
The Commission considers that the deficit and debt adjustment
paths are subject to important downside risks. Macroeconomic
developments could turn out less favourable than expected.
Moreover, measures are not sufficiently specified from 2013
onwards.
The Commission states that the main challenges
facing Spain are as follows:
- In 2011, Spain
adopted reform of its pension system. However, the worsening of the
economic prospects in Spain is limiting the impact of the reform on
the projected age-related public expenditure. In addition, the
reform still needs to be complemented by concrete measures to
underpin the Global Employment Strategy for Older Workers for
2012-2014.
- The efficiency of
the tax system can be improved by increasing the share of more
growth-friendly indirect taxes.
- Spain has made
considerable progress regarding the restructuring of its financial
sector. The restructuring needs to continue, to ensure that
unviable banks are resolved. Given the weakening of macroeconomic
prospects, further strengthening of the banks' capital base may be
required.
- In February 2012,
the Spanish government adopted a comprehensive reform of the
employment protection and collective bargaining system. The effects
need to be monitored, in particular as regards wage developments
and reduction of segmentation.
- To tackle
Spains high youth unemployment, the Youth Action Plan should
be implemented without delay, including for apprenticeship and
training contracts.
- Although Spain has
taken measures to combat early school leaving, the rate remains
high and conceals significant disparities across regions.
- Poverty has
increased with 1.1 million more people at risk in 2010 and child
poverty is at an alarming high of 26.2%. The in-work poverty rate
for temporary workers is more than twice as high as the one for
permanent workers.
- Professional
services in Spain remain protected from competition (e.g. notaries,
property registry agents, court officers). In addition, in Spain it
takes the longest in the EU to obtain a business licence.
Recommandations proposed for Spain
(2012-2013):
Budgetary measures:
- deliver an annual
average structural fiscal effort of above 1.5% of GDP over the
period 2010-13 by implementing the measures adopted in the 2012
budget and adopting the announced multi-annual budget plan for
2013-14 by the end of July ;
- adopt and
implement measures at regional level and strictly apply the new
provisions of the Budgetary Stability Law regarding transparency
and control of budget execution;
- establish an
independent fiscal institution to provide analysis, advice and monitor fiscal policy, as
well as to estimate the budgetary impact of proposed
legislation.
Pension system:
- accelerate the
increase in the statutory retirement age and the introduction of
the sustainability factor provided for in the recent pension
reform ;
- underpin the
Global Employment Strategy for Older Workers with concrete measures
to develop lifelong learning further, improve working
conditions and foster the reincorporation of this group in the job market.
Taxation:
- introduce a
taxation system more supportive to growth, including a shift away
from labour towards consumption and environmental taxation;
- address the low
VAT revenue ratio by broadening the tax base for VAT;
- ensure less
tax-induced bias towards indebtedness and
home-ownership (as opposed to renting).
Financial sector:
- implement the
reform of the financial sector, in particular complement the
on-going restructuring of the banking sector by addressing the
situation of remaining weak institutions ;
- put forward a
comprehensive strategy to deal effectively with the legacy assets
on the banks' balance sheets, and define a clear stance on the
funding and use of backstop facilities.
Labour market:
- implement the
labour market reforms and take additional measures to increase the
effectiveness of active labour market policies by increasing the
use of training, advisory and job matching services, sharing
information about job vacancies;
- youth employment,
fight against poverty;
- review spending
priorities and reallocate funds to support access to finance for
SMEs, research, innovation and young people;
- implement the
Youth Action Plan, in particular as regards the quality and labour
market relevance of vocational training and education;
- reinforce efforts
to reduce early school-leaving and increase participation in
vocational education and training through prevention, intervention
and compensation measures;
- take specific
measures to counter poverty, by making child
support more effective and improving the employability of
vulnerable groups.
Services:
- take additional
measures to open up professional services, including highly
regulated professions, reduce delays in obtaining business
licences;
- complete the
electricity and gas interconnections with neighbouring
countries and address the electricity tariff deficit in a
comprehensive way, in particular by improving the cost efficiency
of the electricity supply chain.
The recommendations are to be endorsed by the European
Council on 28-29 June and formally adopted by the Council in July
2012.