European Union News - 2008

The case concerned the proposed acquisition by the Irish-based airline Ryanair of its competitor Aer Lingus. Both companies offer scheduled air transport services. Their operations overlap in particular at Dublin airport. The proposed acquisition, whereby Ryanair acquires sole control over Aer Lingus. The Commission's investigation confirmed that there are substantial barriers to entry which would make difficult any new entry to the routes where the activities of the merging parties overlap.

The European Commission, the European Central Bank and the European Payments Council officially launched, on 28th January, the first SEPA (Single Euro Payment Area) payment instruments for credit transfers in euros. To commemorate such an event the Internal Market and Services Commissioner, Charlie Mc Creevy, Gertrude Tumpel-Gugerell, member of the Administrations Council of the ECB and Gerard Hartsink, President of the European Payments Council organised "SEPA goes live", an event which took place in Brussels and attended by various distinguished guests from the European Payments Market.

On 12 February 2008, the Council examined the updated stability programme of Finland, which covers the period 2007 to 2011. Finland's macroeconomic performance has been strong and balanced over the last years, with growth in the recent years significantly exceeding earlier expectations. The present cyclical upswing in economic activity has been appropriately used to build up budgetary surpluses and to prepare for the effects of population ageing, reducing considerably the risks to the sustainability of public finances. However, the imminent demographic shift is predicted to dampen economic growth already at the end of the programme period and lead to a smaller fiscal surplus, thereby calling for sustained control over public spending.

On 12 February 2008, the Council examined the updated stability programme of the Netherlands, which covers the period 2007 to 2010. Since 2006, Dutch GDP growth again significantly outpaces potential growth. The current upturn is generally assessed to be a regular cyclical upturn and is not widely mistaken for higher potential growth, as was the case during the rather long boom period at the end of the 1990s. Furthermore, it is more broadly based on both domestic and external sources of growth. However, given the good starting position, the tightness of the labour market may exert upward pressures on wages and prices rather early.

On 12 February 2008, the Council examined the updated stability programme of Germany, which covers the period 2007 to 2011. Economic growth in Germany was significantly stronger in 2006 and 2007 compared with the first half of the decade. Sustained wage restraint as well as structural reforms helped to regain competitiveness and stimulate employment growth. The marked improvement on the labour market supports the projection of a steady recovery of domestic demand, helping to balance an expected lower growth contribution from net external demand.

On 12 February 2008, the Council examined the updated convergence programme of Sweden, which covers the period 2007 to 2010. The Swedish economy has performed well in recent years. In 2007, the economy has entered into a more mature phase that is reflected by a solid domestic demand boosted by buoyant investment and private consumption growth. Against this background, Swedish public finances have also been strong with consistent and sizable general government surpluses.

On 12 February 2008, the Council examined the updated convergence programme of Hungary, which covers the period 2007 to 2011. Over the last several years, Hungary has fallen behind in the catching-up process compared to its neighbours. This has been coupled with increasing fiscal laxity, which contributed to considerable internal and external imbalances and relatively tight monetary policy. Since mid-2006, the Government has taken comprehensive measures to consolidate public finances. These have set the budget deficit on a decreasing trend from a peak of over 9 % of GDP in 2006 to around 6 % (and possibly below, according to the most recent estimates) in 2007 and have started to lead to an improvement of the external balance. At the same time, the indirect tax increases and hikes in regulated prices have temporarily put upward pressure on inflation, which should decelerate again from 2008.

On 12 February 2008, the Council examined the updated convergence programme of the United Kingdom, which covers the period from financial year 2007/2008 to financial year 2012/2013. The United Kingdom economy has displayed robust and remarkably stable growth over the last ten years and in 2007 grew at a rate above potential, though with building imbalances including low household saving and a wider external deficit. Favourable growth conditions have, however, been accompanied by a deterioration in the general government deficit in the current financial year, 2007/2008. After a general government deficit in 2006/2007 of 2,6 % of GDP, the deficit is  envisaged in the programme to reach around 3 % of GDP in 2007/2008, with no margin to the reference value.

On 12 February 2008, the Council examined the updated stability programme of France which covers the period 2007 to 2012, one year more than the required reference period to coincide with the government programme. Between 2001 and 2005, annual real GDP grew by just above 1,5 % on average. This was in line with average growth in the euro area, while inflation was marginally below the euro average. Since 2006, GDP growth in France has fallen below the euro area average, with evidence of structural problems and a related deterioration in competitiveness. Although the unemployment rate has improved since 2005, it remains well above the euro area average, and the employment rate and the hours worked are still low.

On 12 February 2008, the Council examined the updated convergence programme of Romania, which covers the period 2007 to 2010. Romania has experienced strong economic growth averaging 6,5 % annually between 2003 and 2006. However, the strongly performing economy is showing clear signs of overheating with a high and growing external account deficit (projected at close to 13 % of GDP in 2007) with a smaller coverage of FDI financing-despite sustained non-privatization related investment in 2007 — but still mitigated by a larger share of medium and long term capital inflows based on so far available 2007 data.

On 12 February 2008, the Council examined the updated stability programme of Luxembourg, which covers the period 2007 to 2010. Since the end of the 2001-2003 slowdown, Luxembourg is experiencing a new period of strong growth. On average, real GDP grew by 5,25 % and domestic employment by over 3 % a year in 2004-2007. In this context, Luxembourg has been able to bring its public finances back to surplus. Growth should remain strong during the period covered, even if it is forecast to slow down slightly in the coming years. However, despite the currently good condition of the economy and especially of public finances, the problem of population ageing will be particularly severe in Luxembourg and long-term sustainability is therefore a serious challenge.

On 12 February 2008, the Council examined the updated convergence programme of Slovakia, which covers the period 2007 to 2010. Slovakia is currently experiencing a period of strong growth induced by wide-range structural reforms introduced in previous years combined with substantial inflows of FDI, especially into the manufacturing sector. Although consequential to growth employment picked up as well and the unemployment rate fell substantially, certain segments of the population concentrated in eastern regions do not seem to take part in this economic expansion.