Commission urges candidates to improve macroeconomic stability

The Commission has urged the candidate countries
to strengthen their macroeconomic stability and financial
sector capacity in order to cope with
development.

In a new report on Macroeconomic and Financial Sector
Stability Developments in the Candidate Countries, the
Commission recognises that the candidates “are succeeding
in achieving macroeconomic stabilisation and are making
great strides in advancing structural reforms, including in
the financial sector”. However, EU Commissioner for
Economic and Monetary Affairs, Pedro Solbes, warns that
they should “develop their own capacity for implementing
permanent and continuous system-wide risk monitoring as
their economies dynamically expand”.

The Commission underlines that the
candidate countries’ real convergence with the current
Member States has so far been relatively modest and the
performance has been mixed. Average GDP per capita on a
purchasing power standards (PPS) basis for all 13 candidate
countries reached only 35.2 percent of the EU average in
2000.

The report also warns that the banking
sectors in the candidate countries are still relatively
small, and that a relatively high share of non-performing
loans is still prevalent in some countries. It forecasts
that post-restructuring and post-privatisation financial
sector expansion and development may lead to new stability
challenges.

The Commission proposes several measures
to improve the macroeconomic stability of the candidate
countries:

  • Fiscal policy should create a growth-enhancing
    environment while containing macroeconomic
    imbalances.
  • A reassessment of the structure and of the components
    of budget revenues and expenditures is required.
  • A medium-term fiscal framework should be adopted to
    set clear priorities for spending, tax reforms, and the
    most effective use of available EU financial resources
    before and after accession.
  • Fiscal policy needs to contain macroeconomic
    imbalances, in particular current account deficits.

 

The Ecofin Council proposed in November 2000 that the
Member States should assist the candidate countries by
fostering a regular in-depth dialogue on macroeconomic
policy and financial stability issues. That should help
them prepare for a successful integration into the economic
multilateral surveillance mechanisms of Economic and
Monetary Union.

 

The Commission will present the report at the 26 March
high-level meeting between members of the Economic and
Financial Committee and their counterparts in candidate
countries.

The report and conclusions of the
dialogue will be presented to the Ecofin Council in
November 2002.

 

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