We have been asked to brief the committee on three of the work items on the programme for the Presidency of the ECOFIN Council. These are: the examination, stability and convergence programme; the integration of the new member states - the accession states - into the economic policy co-ordination process; and preliminary consideration of the 2006 financial perspectives. I will brief the committee on the first two of these items and Mr. O' Sullivan will deal with the financial perspectives element.
Given the timing of our Presidency, the examination of the stability programmes falls across the first three ECOFIN meetings. All 15 of the convergence and stability programmes have been considered at the January and February ECOFIN meetings and the final batch was considered yesterday. It is a major element of the Presidency work programme over the first six months of 2004. Regarding process, there is a significant involvement of expertise across the European Union. Four broad steps are involved. The first part is the preparation by each of the member states of their stability programmes if they are in the EMU, and their convergence programmes if they are not. These states must meet quite rigorous standards in terms of the data and analysis provided, and there is a consistency across all 15 programmes.
The second stage is a detailed technical examination of those programmes to assess the economic and budgetary projects. This is done by the Commission which, in the interests of transparency, makes its assessment public. It also drafts an opinion for the European Council, which it sends forward.
The third element in the examination of each of the programmes is something of a pure review by the economic and financial committee. There is a close examination which involves all the member states, the ECB and the Commission itself. At this stage there may be amendments to the draft opinion prepared by the Commission.
The final or public phase of this element, which was completed at the ECOFIN meeting yesterday, is the consideration by the European Council. At that stage the opinions are adopted in respect of each of the member states' convergence or stability programmes. I am pleased to say that in terms of the Presidency agenda, all 15 opinions have now been adopted. The consideration and examination of the stability and convergence programmes has run quite smoothly over the three months. To a certain extent it brings to an end a particular phase of the Irish Presidency. There is just one qualification, namely, that the accession states will be obliged to prepare convergence programmes on accession, and these may fall to be considered during the Irish Presidency, or at least during June.
Regarding the outcomes of those examinations, there has been a good deal of variability and difference in budgetary performance across the 15 countries. Without getting into the details of numbers, I would say that of the 15, seven meet the medium-term objective of close to balance or surplus on budgetary terms, and one of those countries is Ireland. Four member states, while running fairly sizeable deficits, are, in the opinion of the European Council, not at risk of breaching the 3% ceiling. There is a final group of about four states which are either in an excessive deficit position or at risk of being so. They are the fairly high profile examples - France, Germany, Portugal and the Netherlands.
In general, the programmes adopted by the various countries contain within them a commitment to return close to balance over a relatively short space of time. Even in those cases where an excessive deficit situation exists, the countries involved are committed to getting down below the 3% figure in the first instance, and towards the benchmark of close to balance over a longer period.
The Irish stability programme was well received at ECOFIN, and as I have indicated, it would be in the category of those adhering close to balance. The Council opinion was that we should achieve the close to balance criteria, that we have a good safety margin, and below the 3% deficit limit, and that within existing policies we seem to be on a sustainable budgetary path.
The second item is the integration of the accession states into the economic policy co-ordination process. Essentially there are four processes involved - the excessive deficits procedure, the CARDA process, the broad economic policy guidelines and across all of that, the Lisbon strategy itself. In terms of the excessive deficits procedure, which is essentially the Stability and Growth Pact, on which I have spoken up to now, new member states will be subject to the fiscal rules immediately from accession. They will be obliged during May to produce convergence programmes which, depending on how quickly the assessment is turned around, may fall to be examined in June while Ireland still holds the Presidency. By way of preparation, they have been obliged to submit their fiscal notifications on 1 March. These are the returns on their current debt and deficit positions which will be used in the assessment. The CARDA process deals with structural reforms, particularly of product and capital markets. The accession states are already fully within the process. Each country produces a report each year which is subject to peer review at the economic policy committee. The ten countries participated in that process in January and will take full part from this point on. The broad economic policy guidelines which set the medium-term strategy for achieving the Lisbon agenda will have to be amended over the coming months to take account of the accession countries.
At yesterday's ECOFIN meeting, the Council adopted the key issues paper, which is the key economic message it sends to the spring European Council. In this document, it acknowledges that while the objectives of Lisbon are relevant to existing and accession states, there is a significant variation in the level of challenge. The objectives could be far more demanding for the accession states and that would have to be reflected in any redrafting or updating of the broad economic policy guidelines.
In the context of bringing the committee up to date on progress on the various fronts, my colleague, Mr. Stephen O'Sullivan, will continue.