23.7.2010 EN Official Journal of the European Union L 191/28 COUNCIL RECOMMENDATION of 13 July 2010 on broad guidelines for the economic policies of the Member States and of the Union (2010/410/EU) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 121(2) thereof, Having regard to the recommendation from the European Commission, Having regard to the conclusions of the European Council, Whereas: (1) The Treaty provides that Member States are to regard their economic policies as a matter of common concern and to coordinate them within the Council. In accordance with Treaty provisions, the European Union has developed and implemented policy coordination instruments for fiscal policy (the Stability and Growth Pact) and macro-structural policies. (2) The Treaty provides that employment guidelines and broad economic policy guidelines are to be adopted by the Council to guide Member States’ policies. (3) The Lisbon Strategy, launched in 2000, was based on an acknowledgement of the European Union’s need to increase employment, productivity and competitiveness, while enhancing social cohesion, in the face of global competition, technological change, environmental challenges and an ageing population. The Lisbon Strategy was re-launched in 2005, after a mid-term review which led to greater focus on growth, more and better jobs. (4) The Lisbon strategy for growth and jobs helped forge consensus around the broad direction of the Union’s economic and employment policies. Under the strategy, both broad economic policy guidelines and employment guidelines were adopted by the Council in 2005 (1) and revised in 2008 (2). The 24 guidelines laid the foundations for the national reform programmes, outlining the key macroeconomic, microeconomic and labour-market reform priorities for the Union as a whole. However, experience shows that the guidelines did not set clear enough priorities and that links between them could have been stronger. This limited their impact on national policy-making. (5) The financial and economic crisis that started in 2008 resulted in a significant loss in jobs and potential output and has led to a dramatic deterioration in public finances. The European Economic Recovery Plan (3) has nevertheless helped Member States to deal with the crisis, partly through a coordinated fiscal stimulus, with the euro providing an anchor for macroeconomic stability. The crisis therefore showed that economic policy coordination at the level of the Union can deliver significant results if it is strengthened and rendered effective. The crisis also underscored the close interdependence of the Member States’ economies and labour markets. (6) The Commission proposed setting up a new strategy for the next decade, the Europe 2020 Strategy (4), to enable the Union to emerge stronger from the crisis, and to turn its economy towards smart, sustainable and inclusive growth. Five headline targets, listed under the relevant guidelines, constitute shared objectives guiding the action of the Member States, taking account of their relative starting positions and national circumstances, and of the Union. Member States should make every effort to meet the national targets and to remove the bottlenecks that constrain growth. (7) As part of comprehensive ‘exit strategies’ for the economic crisis, Member States should carry out ambitious reform programmes to ensure macroeconomic stability and the sustainability of public finance, improve competitiveness, and reduce macroeconomic imbalances and enhance labour market performance. Temporary measures introduced in response to the crisis should be withdrawn in a coordinated manner as appropriate when the recovery is secure. The withdrawal of the fiscal stimulus should be implemented and coordinated within the framework of the Stability and Growth Pact. (8) Within the Europe 2020 strategy, Member States and the Union should implement reforms aimed at ‘smart growth’, i.e. growth driven by knowledge and innovation. Reforms should aim at improving the quality of education, ensuring access for all, strengthening research and business performance, and further improving the regulatory framework in order to promote innovation and knowledge transfer throughout the Union. They should encourage entrepreneurship and help to turn creative ideas into innovative products, services and processes that can create growth, quality jobs, territorial, economic and social cohesion, and address more efficiently European and global societal challenges. Making the most of information and communication technologies is essential in this context. (9) The policies of the Union and of Member States, including through their reform programmes, should aim at ‘sustainable growth’. Sustainable growth means decoupling economic growth from the use of resources, building an energy and resource-efficient, sustainable and competitive economy, a fair distribution of the cost and benefits and exploiting Europe’s leadership in the race to develop new processes and technologies, including green technologies. Member States and the Union should implement the necessary reforms to reduce greenhouse gases emissions and use resources efficiently, which will also assist in preventing environmental degradation and biodiversity loss. They should also improve the business environment, stimulate creation of green jobs and help enterprises modernising their industrial base. (10) The policies of the Union, and Member States’ reform programmes should finally also aim at ‘inclusive growth’. Inclusive growth means building a cohesive society in which people are empowered to anticipate and manage change, thus to actively participate in society and the economy. Member States’ reforms should therefore ensure access and opportunities for all throughout the lifecycle, thus reducing poverty and social exclusion, through removing barriers to labour market participation especially for women, older workers, young people, the disabled and legal migrants. They should take into account the gender perspective in all these policies. They should also make sure that the benefits of economic growth reach all citizens and all regions. Ensuring effective functioning of the labour markets through investing in successful transitions, appropriate skills development, rising job quality and fighting segmentation, structural unemployment and inactivity while ensuring adequate and sustainable social protection and active inclusion to reduce poverty, while at the same time adhering to agreed fiscal consolidation, should therefore be at the heart of Member States’ reform programmes. (11) As an essential element, Member States and the Union should continue and expand their efforts to further improve their regulatory framework, especially for European enterprises. By strengthening their smart regulation instruments, Member States and the Union should guarantee that legislation is well-designed, proportionate, regularly reviewed and does not cause unnecessary burdens. Achievement of the administrative burdens reduction targets remains a priority. (12) The Union’s and the Member States’ structural reforms can effectively contribute to growth and jobs if they enhance the Union’s competitiveness in the global economy, open up new opportunities for Europe’s exporters and provide competitive access to vital imports. Reforms should therefore take into account their external competitiveness implications to foster European growth and participation in open and fair markets worldwide. (13) The Europe 2020 strategy has to be underpinned by an integrated set of European and national policies, which Member States and the Union should implement fully and at a similar pace, in order to achieve the positive spill-over effects of coordinated structural reforms, and more consistent contribution from European policies to the Strategy’s objectives, taking into account national starting positions. (14) While these guidelines are addressed to Member States and the European Union, the Europe 2020 strategy should be implemented in partnership with all national, regional and local authorities, closely associating parliaments, as well as social partners and representatives of civil society, who shall contribute to the elaboration of national reform programmes, to their implementation and to the overall communication on the strategy. (15) The Europe 2020 strategy is underpinned by a smaller set of guidelines, replacing the previous set of 24 and addressing employment and broad economic policy issues in a coherent manner. The guidelines for the economic policies of the Member States and of the Union, annexed to this Recommendation, are intrinsically linked with the relevant guidelines for employment policies. Together, they form the ‘Europe 2020 integrated guidelines’. (16) These new integrated guidelines are in line with the conclusions of the European Council. They give precise guidance to the Member States on defining their national reform programmes and implementing reforms, reflecting interdependence and are in line with the Stability and Growth Pact. The guidelines will form the basis for any country-specific recommendations that the Council may address to the Member States, or, in the case of the broad guidelines on economic policies, for policy warnings that the Commission may issue in cases of insufficient follow-up to the respective country-specific recommendations. (17) These guidelines should remain stable until 2014 to ensure a focus on implementation, HAS ADOPTED THIS RECOMMENDATION: (1) Member States and, where relevant, the European Union should take into account in their economic policies the guidelines set out in the Annex. (2) Member States should design national reform programmes consistent with the objectives set out in the ‘Europe 2020 integrated guidelines’. Done at Brussels, 13 July 2010. For the Council The President D. REYNDERS (1) COM(2005) 141. (2) COM(2007) 803. (3) COM(2009) 615, 19.11.2009. (4) COM(2010) 2020, 3.3.2010. ANNEX Broad guidelines for the economic policies of the Member States and of the Union Guideline 1: Ensuring the quality and the sustainability of public finances Member States should vigorously implement budgetary consolidation strategies under the Stability and Growth Pact (SGP) and, in particular, recommendations addressed to Member States under the excessive deficit procedure, and/or in memoranda of understanding, in the case of balance-of-payments support. In particular, Member States should achieve consolidation in line with the Council’s recommendations and meet their medium-term objectives in line with the SGP. Without prejudice to the legal framework of the SGP, this implies for most Member States achieving a consolidation well beyond the benchmark of 0,5 % of gross domestic product (GDP) per year in structural terms until debt ratios are on a solid declining path. Fiscal consolidation should start in 2011 at the latest, earlier in some Member States where economic circumstances make this appropriate, provided that the Commission’s forecasts continue to indicate that the recovery is strengthening and becoming self-sustaining. In designing and implementing budgetary consolidation, strategies should focus on expenditure restraint and prioritise growth-enhancing expenditure items within areas such as education, skills and employability, research and development (R & D) and innovation and investment in networks with positive impacts on productivity, where appropriate for example high-speed Internet, energy and transport interconnections and infrastructure. Where taxes may have to rise, this should, where possible, be done in conjunction with measures to make tax systems more employment, environment and growth-friendly, for example by shifting the tax burden towards environmentally harmful activities. Tax and benefits systems should provide better incentives to make work pay. Furthermore, Member States should strengthen national budgetary frameworks, enhance the quality of public expenditure and improve the sustainability of public finances, pursuing in particular determined debt reduction, reform of age-related public expenditure, such as pensions and health spending, and policies contributing to raising employment and effective retirement ages to ensure that age-related public expenditure and social well-fare systems are financially sustainable. Budget efficiency and quality of public finances are also important at the level of the Union. Guideline 2: Addressing macroeconomic imbalances Member States should avoid unsustainable macroeconomic imbalances, arising notably from developments in current accounts, asset markets and the balance sheets of the household and corporate sectors. Member States with large current account imbalances rooted in a persistent lack of competitiveness or due to other reasons should address the underlying causes by acting, for example, on fiscal policy, on wage developments, on structural reforms relating to product and financial services markets (including the flow of productivity enhancing capital), on labour markets, in line with the employment guidelines, or on any other relevant policy area. In this context, Member States should encourage the right framework conditions for wage bargaining systems and labour cost developments consistent with price stability, productivity trends over the medium-term and the need to reduce macroeconomic imbalances. Where appropriate, adequate wage setting in the public sector should be regarded as an important signal to ensure wage moderation in the private sector in line with the need to improve competitiveness. Wage setting frameworks, including minimum wages, should allow for wage formation processes that take into account differences in skills and local labour market conditions and respond to large divergences in economic performance across regions, sectors and companies within a country. The social partners have an important role to play in this context. Member States with large current account surpluses should pursue measures aimed at implementing structural reforms conducive to strengthening potential growth and thereby also underpinning domestic demand. Addressing macroeconomic imbalances, including among Member States, would also help in achieving economic cohesion. Guideline 3: Reducing imbalances within the euro area Member States whose currency is the euro should regard large and persistent divergences in current account positions and other macroeconomic imbalances as a matter of common concern and take urgent action to reduce the imbalances where necessary. Action is required in all euro area Member States, but the nature, importance and urgency of the policy challenges differ significantly depending on the countries considered. Given the vulnerabilities and the magnitude of the adjustment required, the need for policy action is particularly pressing in Member States showing persistently large current account deficits and large competitiveness losses. They should achieve a significant permanent reduction of the current account deficit. These euro area Member States should also aim to reduce unit labour costs taking into account productivity developments at regional, sector and company level, and enhance competition in product markets. Euro area Member States with large current account surpluses should pursue measures aimed at implementing structural reforms conducive to strengthening potential growth and thereby also underpinning domestic demand. Similarly, the euro area Member States should act on any other macroeconomic imbalances such as excessive private debt accumulation and inflation divergence. Institutional barriers to flexible adjustments of prices and wages to market conditions should be removed. Macroeconomic imbalances should be closely monitored within the Eurogroup, which should propose remedial actions when needed. Guideline 4: Optimising support for R & D and innovation, strengthening the knowledge triangle and unleashing the potential of the digital economy Member States should review national (and regional) R & D and innovation systems, ensuring effective and adequate framework conditions for public investment within the budgetary consolidation strategies under the Stability and Growth Pact (guideline 1), and orienting them towards higher growth while addressing, where appropriate, major societal challenges (including energy, resource efficiency, climate change, biodiversity, social and territorial cohesion, ageing, health, and security) cost-effectively. In particular, public investment should serve to leverage private R & D financing. The reforms should foster excellence and smart specialisation, promote scientific integrity, reinforce cooperation between universities, research institutes, public, private and third sector players, both domestically and internationally and ensure the development of infrastructures and networks that enable knowledge diffusion. The governance of research institutions should be improved to make national research systems more cost-effective and productive. To this end, university-based research should be modernised, world-class infrastructures developed and made accessible, attractive careers and the mobility of researchers and students promoted. Funding and procurement schemes should be adapted and simplified, helping where appropriate to facilitate cross-border cooperation, knowledge transfer and merit-based competition, building on synergies and achieving grater value. Member States’ R & D and innovation policies should directly address national opportunities and challenges and should take into account the context of the Union in order to enhance opportunities for pooling public and private resources in areas where the Union adds value, exploiting synergies with Union funds, thus achieving sufficient scale and avoiding fragmentation. Member States and the Union should integrate innovation in all relevant policies and promote innovation in a broad sense (including non-technological innovation). With a view to promoting private investment in research and innovation, Member States and the Union should improve framework conditions — notably with regard to the business environment, competitive and open markets, and the high economic potential of the cultural and creative industries — combine, as appropriate, cost-effective fiscal incentives, depending on each Member State’s fiscal room for manoeuvre, and other financial instruments with measures to facilitate access to private finance (including risk-capital) and simplify access for SMEs, boost demand, in particular in eco-innovation, (where appropriate through green public procurement and interoperable standards), promote innovation-friendly markets and regulations, and provide efficient, affordable and effective protection and management of intellectual property. All three sides of the triangle (education-research-innovation) should mutually support and feed into each other. In line with guidelines 8 and 9, Member States should equip people with a broad range of skills needed for innovation in all its forms, including eco-innovation, and should seek to ensure a sufficient supply of science, mathematics and technology graduates. Member States and the Union should put in place appropriate framework conditions for the rapid development of a digital single market offering widely accessible online contents and services. Member States should promote the roll-out and take up of high-speed Internet as an essential means for acceding to knowledge and participating in its creation. Public funding should be cost-efficient and targeted to address market failures. Policies should respect the principle of technological neutrality. Member States should seek to reduce the costs of network roll-out, in particular by enhancing the coordination of public works. Member States and the Union should promote the deployment and use of modern accessible online services, including by further developing e-government, e-signature, e-identity and e-payment; support active participation in the digital society, in particular by promoting access to cultural content and services including through media and digital literacy; and promote a climate of security and trust. The European Union headline target, on the basis of which Member States will set their national targets, is to improve the conditions for research and development, in particular with the aim of bringing combined public and private investment levels in this sector to 3 % of GDP by 2020. The Commission will elaborate an indicator reflecting R & D and innovation intensity. Guideline 5: Improving resource efficiency and reducing greenhouse gases Member States and the Union should put measures in place to promote the decoupling of economic growth from resource use, turning environmental challenges into growth opportunities and making more efficient use of their natural resources, which also assists in preventing environmental degradation and ensuring biodiversity. They should implement the necessary structural reforms to be successful under increasing global carbon and resource constraints in creating new business and employment opportunities. The Union and Member States should make further efforts to speed up the creation of an integrated and fully functioning internal energy market to enable gas and electricity flows without bottlenecks. In order to reduce emissions and improve energy efficiency, Member States should make extensive use of market-based instruments, supporting the principle of internalisation of external costs, including taxation, and other effective support instruments in order to reduce emissions and better adapt to climate change, support sustainable growth and jobs and resource efficiency in a cost-effective manner, incentivise the use of renewable energy and low-carbon climate-resilient technologies, a shift to more environmentally-friendly and interconnected modes of transport and promote energy savings and eco-innovation. Member States should phase out environmentally harmful subsidies and ensure fair distribution of their costs and benefits. Member States and the Union should use regulatory, non-regulatory and fiscal instruments, for example Union-wide energy performance standards for products and buildings, labelling, and ‘green procurement’, to incentivise cost-effective transition of production and consumption patterns, promote recycling, make the transition to energy- and resource-efficiency and a safe and sustainable low-carbon economy, and ensure progress towards more sustainable transport and safe and clean energy production while maximising European synergies in this respect and take into account the contribution of sustainable agriculture. Member States should decisively work towards smart, upgraded and fully interconnected transport and energy infrastructures, use Information and Communication Technologies, in line with guideline 4, to secure productivity gains, ensure coordinated implementation of infrastructure projects and support the development of open, competitive and integrated network markets. The European Union headline target, on the basis of which Member States will set their national targets, is to reduce by 2020 greenhouse gas emissions by 20 % compared to 1990 levels; to increase the share of renewable energy sources in our final energy consumption to 20 %; and moving towards a 20 % increase in energy efficiency; the Union is committed to take a decision to move to a 30 % reduction by 2020 compared to 1990 levels as its conditional offer with a view to a global and comprehensive agreement for the period beyond 2012, provided that other developed countries commit themselves to comparable emission reductions and developing countries contribute adequately according to their responsibilities and respective capabilities. Guideline 6: improving the business and consumer environment, and modernising and developing the industrial base in order to ensure the full functioning of the internal market Member States should ensure that markets work for citizens, consumers and businesses. While ensuring the protection of consumers, Member States and the Union should put in place predictable framework conditions and ensure well-functioning, open and competitive goods and services markets. In particular, these actions should aim for the deepening the single market and regulation system, notably in the financial sector, as well as the promotion of a level playing field in financial markets at global level, the effective implementation and enforcement of single market and competition rules, and developing the necessary physical infrastructure, also with a view to reducing regional disparities. The external dimension of the internal market should be further developed with the aim of enhanced trade and investment. In the context of the single market due attention must be paid to respecting the adequate provision of services of general interest. Member States should continue to improve the business environment by modernising public administrations, improving corporate governance, removing remaining barriers to the internal market, eliminating unnecessary administrative burdens and avoid unnecessary new burdens by applying smart regulation instruments, including by developing further interoperable e-government services, removing tax obstacles, supporting small and medium-sized enterprises (SMEs), improving their access to the Single Market in line with the ‘Small Business Act for Europe’ and the ‘Think Small First’ principle, ensuring stable and integrated financial services markets, facilitating access to finance, improving conditions for promoting access to and protecting intellectual property rights, supporting internationalisation of SMEs and promoting entrepreneurship, including female entrepreneurship. Public procurement should encourage innovation, particularly for SMEs, and support the transition toward a resource- and energy-efficient economy (in line with guideline 5), while respecting the principles of market-openness, transparency and effective competition. Member States should support a modern, innovative, diversified, competitive, low-carbon, resource- and energy-efficient industrial base, partly by facilitating any necessary restructuring in a cost-effective manner and in full compliance with the Union’s competition rules and other relevant rules. The Union’s funds should be reprioritised by Member States in this context. Member States should work closely with industry and stakeholders to contribute to the Union’s leadership and competitiveness in global sustainable and inclusive development, particularly by encouraging corporate social responsibility, identifying bottlenecks and enabling change.

Summary: Broad guidelines for economic policies Broad guidelines for economic policies The aim of these broad guidelines is to coordinate the economic policies of Member States. They also aim at creating smart, sustainable and inclusive growth throughout the European Union. ACT Council Recommendation 2010/410/EU of 13 July 2010 on broad guidelines for the economic policies of the Member States and of the Union [Official Journal L 191 of 23.7.2010]. SUMMARY Council recommendations on overall economic policy guidance take the form of guidelines addressed to Member States. These guidelines enable the economic policies of the Member States to be coordinated in order to achieve joint objectives. The current Council guidelines support the Europe 2020 Strategy. This strategy should enable the EU to achieve smart, sustainable and inclusive growth in the next ten years. In this Recommendation, the Council also notes the importance of the sustainability of Member States’ public finances and their macroeconomic stability. These guidelines should be taken into account by Member States in the implementation of their economic policies and the development of national reform programmes. Sustainability of public finances and macroeconomic stability In the implementation of their economic policies, Member States must comply with the Stability and Growth Pact. Through this pact, Member States have committed to controlling their public deficit in order to avoid budget imbalances. Member States must therefore consolidate their budgets by ensuring that the level of their public debts, in particular, is reduced. The Council encourages Member States to take measures to address macroeconomic imbalances, by paying specific attention to asset markets and household and corporate balance sheets. In addition, it encourages Member States who have adopted the euro as a single currency to reduce macroeconomic imbalances within the euro area. They should also consider the large and persistent divergences in current account positions and other macroeconomic imbalances as a matter of common concern and take urgent action to reduce the imbalances where necessary. Smart growth The objective is to create an economy based on knowledge and creativity. The Council therefore recommends that Member States stimulate economic growth by investing in the fields of research and technology, and by fostering innovation. Reforms should, for example, develop effective research infrastructures and encourage cooperation between universities. Sustainable growth Sustainable growth is based on efficient use of energy and resources. Member States must therefore take environmental challenges into account in the implementation of their economic policies. For example, they are encouraged to promote renewable energies, low-carbon technologies and more environmentally-friendly modes of transport. Inclusive growth Member States should guarantee all citizens equal access to the economy. Inclusive growth should therefore contribute to creating a society in which all citizens participate in the labour market and profit from economic benefits. To this end, Member States must particularly ensure compliance with the single market and competition rules. Better regulation of financial markets is also a priority objective: Member States should ensure predictable framework conditions and well-functioning, open and competitive goods and capital markets. Context The Council adopts broad guidelines for economic policies on the basis of Article 121 of the Treaty on the Functioning of the EU. This Article states that the economic policies of Member States are of common interest and that they should be coordinated within the Council. The Council therefore develops broad guidelines for economic policies in collaboration with the European Council and the Commission. References Act Entry into force Deadline for transposition in the Member States Official Journal Recommendation 2010/410/EU - - OJ L 191 of 23.7.2010 Last updated: 10.09.2010


12.5.2010 EN Official Journal of the European Union L 118/1 COUNCIL REGULATION (EU) No 407/2010 of 11 May 2010 establishing a European financial stabilisation mechanism THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union (TFEU), and in particular Article 122(2) thereof, Having regard to the proposal from the European Commission, Whereas: (1) Article 122(2) of the Treaty foresees the possibility of granting Union financial assistance to a Member State in difficulties or seriously threatened with severe difficulties caused by exceptional occurrences beyond its control. (2) Such difficulties may be caused by a serious deterioration in the international economic and financial environment. (3) The unprecedented global financial crisis and economic downturn that have hit the world over the last two years have seriously damaged economic growth and financial stability and provoked a strong deterioration in the deficit and debt positions of the Member States. (4) The deepening of the financial crisis has led to a severe deterioration of the borrowing conditions of several Member States beyond what can be explained by economic fundamentals. At this point, this situation, if not addressed as a matter of urgency, could present a serious threat to the financial stability of the European Union as a whole. (5) In order to address this exceptional situation beyond the control of the Member States, it appears necessary to put in place immediately a Union stabilisation mechanism to preserve financial stability in the European Union. Such a mechanism should allow the Union to respond in a coordinated, rapid and effective manner to acute difficulties in a particular Member State. Its activation will be in the context of a joint EU/International Monetary Fund (IMF) support. (6) Given their particular financial implications, the decisions to grant Union financial assistance pursuant to this Regulation require the exercise of implementing powers, which should be conferred on the Council. (7) Strong economic policy conditions should be imposed in case of activation of this mechanism with a view to preserving the sustainability of the public finances of the beneficiary Member State and restoring its capacity to finance itself on the financial markets. (8) The Commission should regularly review whether the exceptional circumstances threatening the financial stability of the European Union as a whole still exist. (9) The existing facility providing medium-term financial assistance for non-euro-area Member States, as established by Council Regulation (EC) No 332/2002 (1), should remain in place, HAS ADOPTED THIS REGULATION: Article 1 Aim and scope With a view to preserving the financial stability of the European Union, this Regulation establishes the conditions and procedures under which Union financial assistance may be granted to a Member State which is experiencing, or is seriously threatened with, a severe economic or financial disturbance caused by exceptional occurrences beyond its control, taking into account the possible application of the existing facility providing medium-term financial assistance for non-euro-area Member States’ balances of payments, as established by Regulation (EC) No 332/2002. Article 2 Form of the Union financial assistance 1. Union financial assistance for the purposes of this Regulation shall take the form of a loan or of a credit line granted to the Member State concerned. To this end, in accordance with a Council decision pursuant to Article 3, the Commission shall be empowered on behalf of the European Union to contract borrowings on the capital markets or with financial institutions. 2. The outstanding amount of loans or credit lines to be granted to Member States under this Regulation shall be limited to the margin available under the own resources ceiling for payment appropriations. Article 3 Procedure 1. The Member State seeking Union financial assistance shall discuss with the Commission, in liaison with the European Central Bank (ECB), an assessment of its financial needs and submit a draft economic and financial adjustment programme to the Commission and the Economic and Financial Committee. 2. Union financial assistance shall be granted by a decision adopted by the Council, acting by a qualified majority on a proposal from the Commission. 3. The decision to grant a loan shall contain: (a) the amount, the average maturity, the pricing formula, the maximum number of instalments, the availability period of the Union financial assistance and the other detailed rules needed for the implementation of the assistance; (b) the general economic policy conditions which are attached to the Union financial assistance with a view to re-establishing a sound economic or financial situation in the beneficiary Member State and to restoring its capacity to finance itself on the financial markets; these conditions will be defined by the Commission, in consultation with the ECB; and (c) an approval of the adjustment programme prepared by the beneficiary Member State to meet the economic conditions attached to the Union financial assistance. 4. The decision to grant a credit line shall contain: (a) the amount, the fee for the availability of the credit line, the pricing formula applicable for the release of funds and the availability period of the Union financial assistance and the other detailed rules needed for the implementation of the assistance; (b) the general economic policy conditions which are attached to the Union financial assistance with a view to re-establishing a sound economic or financial situation in the beneficiary Member State; these conditions will be defined by the Commission, in consultation with the ECB; and (c) an approval of the adjustment programme prepared by the beneficiary Member State to meet the economic conditions attached to the Union financial assistance. 5. The Commission and the beneficiary Member State shall conclude a Memorandum of Understanding detailing the general economic policy conditions laid down by the Council. The Commission shall communicate the Memorandum of Understanding to the European Parliament and to the Council. 6. The Commission shall re-examine, in consultation with the ECB, the general economic policy conditions referred to in paragraphs 3(b) and 4(b) at least every six months and discuss with the beneficiary Member State the changes that may be needed to its adjustment programme. 7. The Council, acting by a qualified majority on a proposal from the Commission, shall decide on any adjustments to be made to the initial general economic policy conditions and shall approve the revised adjustment programme as prepared by the beneficiary Member State. 8. If a financing outside the Union subject to economic policy conditions is envisaged, notably from the IMF, the Member State concerned shall first consult the Commission. The Commission shall examine the possibilities available under the Union financial assistance facility and the compatibility of the envisaged economic policy conditions with the commitments taken by the Member State concerned for the implementation of the Council recommendations and Council decisions adopted on the basis of Article 121, Article 126 and Article 136 of the TFEU. The Commission shall inform the Economic and Financial Committee. Article 4 Disbursement of the loan 1. The loan shall, as a rule, be disbursed in instalments. 2. The Commission shall verify at regular intervals whether the economic policy of the beneficiary Member State accords with its adjustment programme and with the conditions laid down by the Council pursuant to Article 3(3)(b). To this end, that Member State shall provide all the necessary information to the Commission and give the latter its full cooperation. 3. On the basis of the findings of such verification, the Commission shall decide on the release of further instalments. Article 5 Release of funds 1. The beneficiary Member State shall inform the Commission in advance of its intention to draw down funds from its credit line. Detailed rules shall be laid down in the decision referred to in Article 3(4). 2. The Commission shall verify at regular intervals whether the economic policy of the beneficiary Member State accords with its adjustment programme and with the conditions laid down by the Council pursuant to Article 3(4)(b). To this end, that Member State shall provide all the necessary information to the Commission and give the latter its full cooperation. 3. On the basis of the findings of such verification, the Commission shall decide on the release of the funds. Article 6 Borrowing and lending operations 1. The borrowing and lending operations referred to in Article 2 shall be carried out in euro. 2. The characteristics of the successive instalments released by the Union under the financial assistance facility shall be negotiated between the beneficiary Member State and the Commission. 3. Once the decision on a loan has been made by the Council, the Commission shall be authorised to borrow on the capital markets or from financial institutions at the most appropriate time in between planned disbursements so as to optimise the cost of funding and preserve its reputation as the Union's issuer in the markets. Funds raised but not yet disbursed shall be kept at all times on dedicated cash or securities account which are handled in accordance with rules applying to off-budget operations and cannot be used for any other goal than to provide financial assistance to Member States under the present mechanism. 4. Where a Member State receives a loan carrying an early repayment clause and decides to exercise this option, the Commission shall take the necessary steps. 5. At the request of the beneficiary Member State and where circumstances permit an improvement in the interest rate on the loan, the Commission may refinance all or part of its initial borrowing or restructure the corresponding financial conditions. 6. The Economic and Financial Committee shall be kept informed of the developments in the operations referred to in paragraph 5. Article 7 Costs The costs incurred by the Union in concluding and carrying out each operation shall be borne by the beneficiary Member State. Article 8 Administration of the loans 1. The Commission shall establish the necessary arrangements for the administration of the loans with the ECB. 2. The beneficiary Member State shall open a special account with its National Central Bank for the management of the Union financial assistance received. It shall also transfer the principal and the interest due under the loan to an account with the ECB fourteen TARGET2 business days prior to the corresponding due date. 3. Without prejudice to Article 27 of the Statute of the European System of Central Banks and of the European Central Bank, the European Court of Auditors shall have the right to carry out in the beneficiary Member State any financial controls or audits that it considers necessary in relation to the management of that assistance. The Commission, including the European Anti-Fraud office, shall in particular have the right to send its officials or duly authorised representatives to carry out in the beneficiary Member State any technical or financial controls or audits that it considers necessary in relation to that assistance. Article 9 Review and adaptation 1. The Commission shall forward to the Economic and Financial Committee and to the Council, within six months following the entry into force of this Regulation and where appropriate every six months thereafter, a report on the implementation of this Regulation and on the continuation of the exceptional occurrences that justify the adoption of this Regulation. 2. Where appropriate, the report shall be accompanied by a proposal for amendments to this Regulation with a view to adapting the possibility of granting financial assistance without affecting the validity of decisions already adopted. Article 10 Entry into force This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union. This Regulation shall be binding in its entirety and directly applicable in all Member States. Done at Brussels, 11 May 2010. For the Council The President Á. GONZÁLEZ-SINDE REIG (1) Council Regulation (EC) No 332/2002 of 18 February 2002 establishing a facility providing medium-term financial assistance for Member States’ balances of payments (OJ L 53, 23.2.2002, p. 1).

Summary: European financial stabilisation mechanism European financial stabilisation mechanism The financial crisis that hit the global economy at the end of 2008 required the creation of a European financial stabilisation mechanism (EFSM), to help European Union countries in difficulty, thereby preserving the EU's financial stability. ACT Council Regulation (EU) No 407/2010 of 11 May 2010 establishing a European financial stabilisation mechanism SUMMARY WHAT DOES THIS REGULATION DO? It lays down the conditions and procedures for granting EU financial assistance to an EU country that, due to events beyond its control, is experiencing severe economic or financial disturbance or the threat thereof. KEY POINTS Financial assistance Assistance is granted in the form of a loan or a credit line* granted to the EU country concerned. To this end, the European Commission may contract, on behalf of the EU, loans on capital markets or from financial institutions, in line with a decision adopted by the Council of the EU acting by qualified majority. Procedure With the Commission, and in liaison with the European Central Bank (ECB), the EU country seeking aid proceeds with an assessment of its financial needs. It then submits to the Commission a draft programme for economic and financial recovery. The decision to grant a credit line contains the following information: the terms of the financial assistance, general economic policy conditions attached to the EU’s financial assistance (for example, fiscal consolidation measures to reduce public debt), the approval of the adjustment programme prepared by the recipient country. The Commission verifies at regular intervals whether the beneficiary country’s economic policy is consistent with its adjustment programme and with the conditions established by the Council to continue to receive financial aid, which is granted in instalments. Compatibility with other financial support mechanisms The European financial stabilisation mechanism is compatible with the medium-term facility providing financial assistance for balances of payments. Moreover, it does not preclude the use of funds from outside the EU, such as from the International Monetary Fund. EFSM budget The EFSM is funded by the EU budget. The Commission is allowed to borrow up to a total of €60 billion in financial markets on behalf of the EU. The loans are guaranteed by the EU budget. The EFSM was activated for Ireland and Portugal, for a total amount of €46.8 billion (€22.5 billion for Ireland and €24.3 billion for Portugal), disbursed over 3 years (2011-2014). In July 2015, EFSM has been used to provide short-term assistance (bridge loan) of €7.16 billion to Greece. Specific arrangements concerning exposure of non-euro-area countries are in place. BACKGROUND The European Stability Mechanism (ESM) consolidates and merges the EFSM and the European Financial Stability Facility (EFSF), the 2 instruments set in place temporarily in the wake of the sovereign debt crisis, and with which it coexists today. In time, the ESM will become the main support mechanism for euro area countries experiencing temporary difficulties in borrowing money on financial markets because of their debt levels. Its initial maximum lending capacity was €500 billion on the basis of a capital of €704.8 billion. The ESM is financed by the EU countries according to the ECB contribution key*. The loans are financed by ESM borrowing on financial markets, and are guaranteed by its shareholders (euro area countries). Loans are on the basis of strict conditions, including the return of public finances to sustainable levels. SINCE WHEN DOES THE REGULATION APPLY? 13 May 2010. More information: European Commission European Financial Stabilisation Mechanism (EFSM) website European Stability Mechanism (ESM) website KEY TERMS * Credit line: an authorisation given by the Council, on the proposal of the Commission, to an EU country to draw funds from the EFSM up to a specified ceiling for a given period of time. * The ECB contribution key: this key is calculated to reflect the respective country’s share in the total population and gross domestic product of the EU. These 2 determinants have equal weighting. REFERENCES Act Entry into force Deadline for transposition in the Member States Official Journal Regulation (EU) No 407/2010 13.5.2010 - OJ L 118, 12.5.2010, pp. 1-4 Act Entry into force Deadline for transposition in the Member States Official Journal Regulation (EU) 2015/1360 8.8.2015 - OJ L 210, 7.8.2015, pp. 1-2 last update 14.09.2015


4.2.2011 EN Official Journal of the European Union L 30/34 COUNCIL IMPLEMENTING DECISION of 7 December 2010 on granting Union financial assistance to Ireland (2011/77/EU) THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, Having regard to Council Regulation (EU) No 407/2010 of 11 May 2010 establishing a European financial stabilisation mechanism (1), and in particular Article 3(3) thereof, Whereas: (1) Ireland has recently come under increasing pressure in financial markets, reflecting rising concerns about the sustainability of the Irish public finances in view of comprehensive public support measures to the weakened financial sector. Due to its excessive exposure to real estate and construction projects, the domestic banking system has experienced large losses in the aftermath of the collapse of those sectors. The current crisis in the economic and banking sectors has also had a dramatic impact on Ireland’s public finances, compounding the impact of the recession. Falling tax revenue and an increase in cyclical expenditure, in particular due to rising unemployment, have contributed to a high general government deficit and a steep increase in debt, compared to the favourable pre-crisis positions and despite the implementation of five important fiscal consolidation packages since mid-2008. Support measures for the banking sector, including significant capital injections, have added greatly to the deterioration in the public finance position. Current market concerns primarily reflect the fact that the solvency of the Irish sovereign and the banking system have become inextricably linked in the crisis; they have led to a steep increase in Irish sovereign bond yields, while the domestic banking system is effectively cut off from international market funding. (2) In view of this severe economic and financial disturbance caused by exceptional occurrences beyond the control of the government, the Irish authorities officially requested financial assistance from the European Union, the Member States whose currency is the euro and the International Monetary Fund (IMF) on 21 November 2010 with a view to supporting the return of the economy to sustainable growth, ensuring a properly-functioning banking system and safeguarding financial stability in the Union and in the euro zone. On 28 November 2010, an agreement at technical level was reached in respect of a comprehensive policy package for the period 2010-2013. (3) The draft economic and financial adjustment programme (the ‘Programme’) submitted to the Council and the Commission aims at restoring financial market confidence in the Irish banking sector and the sovereign, enabling the economy to return to sustainable growth. To achieve these goals, the Programme contains three main elements. First, a financial sector strategy which comprises fundamental downsizing, deleveraging and reorganisation of the banking sector, complemented by appropriate recapitalisation to the extent needed. Second, an ambitious fiscal consolidation strategy, building on the National Recovery Plan 2011-2014 published by the Irish authorities on 24 November 2010. The plan sets out detailed fiscal consolidation measures aiming at putting gross public debt on a firm downward path in the medium term. The authorities are committed to reducing the deficit to below 3 % of GDP by 2015, the revised deadline set by the Council on 7 December 2010. Third, also building on the National Recovery Plan, the Programme sets out an ambitious structural reform agenda, notably in the labour market, with a view to facilitating adjustment and strengthening the economy’s growth potential. In support of this ambitious policy package, the Irish authorities are requesting financial assistance from the Union and the Member States whose currency is the euro, and bilateral loans from the United Kingdom, Sweden, Denmark and the IMF. (4) Under the Commission’s current projections for nominal GDP growth (1,4 % in 2011, 2,7 % in 2012 and 3,8 % in 2013), the fiscal adjustment path specified in Council Recommendation of 7 December 2010 with a view to bringing to an end the situation of an excessive deficit in Ireland is consistent with a path for the debt-to-GDP ratio of 98,9 % in 2010, 113,5 % in 2011, 120,0 % in 2012 and 121,8 % in 2013. The debt-to-GDP ratio would therefore be stabilised in 2013 and be placed on a declining path thereafter, assuming further progress in the reduction of the deficit. Debt dynamics are affected by several below-the-line operations, which are projected to increase the debt-to-GDP ratio by 5,3 percentage points (pps.) of GDP in 2011 and 0,8 pps. of GDP in 2012, and to reduce it by 1,3 pps. of GDP in 2013. These include projected capital injections into banks in 2011, reductions in cash reserves, and differences between accrued and cash interest payments. (5) The assessment by the Commission, in liaison with the European Central Bank (ECB), is that Ireland needs financing of a total amount of EUR 85 billion (85 000 million) over the period from December 2010 to the end of 2013. Notwithstanding the significant fiscal adjustment, the financing gap for the sovereign may amount to EUR 50 billion over the period of the Programme. This assumes roll-over rates for maturing long-term debt of 0 % until the end of 2011, 20 % in 2012, and 80 % in 2013. Conservative roll-over assumptions are also made regarding short-term debt. The financial sector strategy contained in the Programme to restore confidence in the Irish banking system on a sustainable basis contains a banking support scheme of up to EUR 35 billion. This comprises an immediate capital injection of up to EUR 10 billion into selected banks to bring their core tier 1 capital ratio to 12 %, while also funding early measures to support deleveraging and taking account of haircuts on the additional loans to be transferred to the National Asset Management Agency (NAMA). Further provisions of contingency capital of EUR 25 billion should provide assurance that banks are able to meet current and future capital requirements. Actual funding needs may, however, be substantially lower, in particular if market conditions improve significantly and no severe unexpected banking losses materialise during the period of the Programme. (6) The Programme would be financed through contributions from external sources and the use of Irish financial buffers. The Union’s assistance to Ireland would reach up to EUR 22,5 billion under the European financial stabilisation mechanism (EFSM) established by Regulation (EU) No 407/2010. This would be part of total support provided by Ireland’s European partners amounting to EUR 45 billion. Further to the support from the EFSM, loans from Ireland’s partner countries in the Union would include contributions from the European Financial Stability Facility (EUR 17,7 billion), and bilateral lending support from the United Kingdom, Sweden, and Denmark (EUR 4,8 billion in total). In addition, Ireland has requested a loan from the IMF of 19,5 billion Special Drawing Rights (equivalent to around EUR 22,5 billion) under an Extended Fund Facility. The Irish contribution would be EUR 17,5 billion, and would come from the use of the existing Treasury cash reserve and contributions from the National Pensions Reserve Fund. The support from the EFSM needs to be supplied on terms and conditions similar to those of the IMF. (7) The Council should review on a regular basis the economic policies implemented by Ireland, in particular in the context of the annual reviews of Ireland’s update of the stability programme and implementation of the National Reform Programme, as well as under the excessive deficit procedure. (8) The Union financial assistance should be managed by the Commission. The specific economic policy conditions agreed with Ireland should be laid down in a Memorandum of Understanding on Specific Economic Conditionality (the ‘Memorandum of Understanding’). The detailed financial terms should be laid down in a Loan Facility Agreement. (9) The Commission, in consultation with the ECB, should verify at regular intervals that the economic policy conditions attached to the assistance are fulfilled, through missions and regular reporting by the Irish authorities, on a quarterly basis. (10) Throughout the implementation of the Programme, the Commission should provide additional policy advice and technical assistance in specific areas. (11) The operations which the Union financial assistance helps to finance must be compatible with Union policies and comply with the law of the Union. Interventions in support of financial institutions must be carried out in accordance with the Union’s rules on competition. The Commission, working together with the ECB and the IMF, intends to involve Member States as appropriate in the design and implementation of the prudential liquidity assessment (PLAR) and in the development of the strategy for the future structure, functioning and viability of Irish credit institutions. (12) The assistance should be provided with a view to supporting the successful implementation of the Programme, HAS ADOPTED THIS DECISION: Article 1 1. The Union shall make available to Ireland a loan amounting to a maximum of EUR 22,5 billion, with a maximum average maturity of 7½ years. 2. The financial assistance shall be made available during 3 years starting from the first day after the entry into force of this Decision. 3. The Union financial assistance shall be made available by the Commission to Ireland in a maximum of 13 instalments. An instalment may be disbursed in one or several tranches. The maturities of the tranches under the first instalment may be longer than the maximum average maturity referred to in paragraph 1. In such cases, the maturities of further tranches shall be set so that the maximum average maturity referred to in paragraph 1 be achieved once all instalments have been disbursed. 4. The first instalment shall be released subject to the entry into force of the Loan Agreement and the Memorandum of Understanding. Any subsequent loan releases shall be conditional upon a favourable quarterly assessment by the Commission, in consultation with the ECB, of Ireland’s compliance with the general economic policy conditions as defined by this Decision and the Memorandum of Understanding. 5. Ireland shall pay the actual cost of funding of the Union for each tranche plus a margin of 292,5 basis points, which results in conditions similar to those of the IMF support. 6. In addition, costs referred to in Article 7 of Regulation (EU) No 407/2010 shall be charged to Ireland. 7. If required in order to finance the loan, the prudent use of interest rate swaps with counterparties of the highest credit quality shall be permitted. 8. The Commission shall decide on the size and release of further instalments. The Commission shall decide on the size of the tranches. Article 2 1. The assistance shall be managed by the Commission in a manner consistent with Ireland’s undertakings and with recommendations by the Council, in particular the Recommendations addressed to Ireland in the context of the implementation of its National Reform Programme as well as in the context of the implementation of the Stability and Growth Pact. 2. The Commission, in consultation with the ECB, shall agree with the Irish authorities the specific economic policy conditions attached to the financial assistance as set out in Article 3. Those conditions shall be laid down in a Memorandum of Understanding to be signed by the Commission and the Irish authorities consistent with the undertakings and recommendations referred to in paragraph 1. The detailed financial terms shall be laid down in a Loan Facility Agreement to be concluded with the Commission. 3. The Commission, in consultation with the ECB, shall verify at regular intervals that the economic policy conditions attached to the assistance are fulfilled, and report to the Economic and Financial Committee before disbursement of each instalment. To this end, the Irish authorities shall cooperate in full with the Commission and the ECB, and shall place all the necessary information at their disposal. The Commission shall keep the Economic and Financial Committee informed of possible refinancing of the borrowings, or restructuring of the financial conditions. 4. Ireland shall adopt and implement additional consolidation measures to ensure macro-financial stability, in case such measures will be necessary during the programme of assistance. The Irish authorities shall consult the Commission and the ECB in advance of the adoption of any such additional measures. Article 3 1. The economic and financial adjustment programme (the ‘Programme’) prepared by the Irish authorities is hereby approved. 2. The disbursement of each further instalment shall be made on the basis of a satisfactory implementation of the Programme to be included in the Stability Programme of Ireland, in the National Reform Programme and, more particularly, the specific economic policy conditions laid down in the Memorandum of Understanding. These shall include, inter alia, the measures provided for in paragraphs 4 to 9 of this Article. 3. The general government deficit shall not exceed 10,6 % of projected GDP in 2011, 8,6 % of GDP in 2012 and 7,5 % of GDP in 2013, in order to place Ireland on track to reduce the deficit to below 3 % of GDP by 2015. The projected annual deficit path does not incorporate the possible direct effect of potential bank support measures in the context of the government’s financial sector strategy as set out in the Memorandum of Economic and Financial Polices and specified in the Memorandum of Understanding. Further, this path is consistent with the preliminary view of the Commission (Eurostat) on the ESA95 accounting treatment of time of recording of interest payments on promissory notes payable to Anglo Irish Bank (2), such that a revision of that view would result in a revision of the deficit path. 4. Ireland shall adopt the measures specified in paragraphs 7 to 9 before the end of the indicated year, with exact deadlines for the years 2011-2013 being specified in the Memorandum of Understanding. Ireland shall stand ready to take additional consolidation measures to reduce the deficit to below 3 % of GDP by 2015 in case downside risks to the deficit targets specified in paragraph 3 of this Article materialise. 5. With a view to restoring confidence in the financial sector, Ireland shall adequately recapitalise, rapidly deleverage and thoroughly restructure the banking system as set out in the Memorandum of Understanding. In that regard, Ireland shall develop and agree with the European Commission, the ECB and the IMF a strategy for the future structure, functioning and viability of the Irish credit institutions which will identify how to ensure that they are able to operate without further state support. In particular, Ireland shall: (a) take action to ensure that Allied Irish Banks, Bank of Ireland, Educational Building Society and Irish Life and Permanent are recapitalised in the form of equity, if needed, so as to ensure that the minimum capital requirement of 10,5 % core tier 1 capital will be maintained, depending on the results of the Prudential Capital Adequacy Review for 2011; (b) implement the divestiture of participations in banks acquired during the crisis within the shortest timeframe possible, in a manner compatible with financial stability and public finance considerations; (c) implement a specific plan for the resolution of Anglo Irish Bank and Irish Nationwide Building Society, which will seek to minimise capital losses arising from the working out of these non-viable credit institutions; (d) by the end of 2010, submit draft legislation to the Oireachtas (Parliament) on financial stabilisation and restructuring of credit institutions which will, inter alia, address burden sharing by subordinated debt bond holders; (e) by the end of March 2011, submit draft legislation to the Oireachtas on a special resolution regime for banks and building societies, and improved procedures for early intervention in distressed banks by the Central Bank of Ireland. 6. Ireland shall adopt the following measures before the end of 2010: Adoption of a budget for 2011 including fiscal consolidation measures in a total amount of EUR 6 billion aiming at a reduction of the general government deficit within the timeframe referred to in paragraph 3. The budget shall include revenue measures to raise at least EUR 1,4 billion in 2011, including a lowering of personal income tax bands and credits or equivalent measures to yield EUR 945 000 000 in 2011; a reduction in pension tax relief and pension related deductions to yield EUR 155 000 000 in 2011; a reduction in general tax expenditures to yield EUR 220 000 000 in 2011; increases in excises and miscellaneous tax measures to raise EUR 80 000 000 in 2011. In addition, the budget shall specify that the government will outline methods to raise at least EUR 700 000 000 in one-off and other measures in 2011. The budget shall also include a reduction of current expenditure in 2011 of at least EUR 2,09 billion, including: social protection expenditure reductions; a reduction of public service employment; a reduction of existing public service pensions on a progressive basis averaging over 4 %; other expenditure savings, including cuts in goods and services spending and in other transfer payments; a reduction of at least EUR 1,8 billion in public capital expenditure against existing plans for 2011. In exceptional circumstances, other measures yielding comparable savings shall be considered, in close consultation with the Commission. 7. Ireland shall adopt the following measures during 2011, in line with specifications in the Memorandum of Understanding: (a) a 10 % pay reduction for new entrants to the public service. The Irish government shall also consider an appropriate adjustment, including in relation to the public service wage bill, to compensate for potential shortfalls from projected savings from administrative efficiencies and public service numbers reductions; (b) the adoption of a budget for 2012 including fiscal consolidation measures amounting to at least EUR 3,6 billion and aiming at a reduction of the general government deficit within the timeframe referred to in Article 3(3). The draft budget shall, in particular, include revenue measures to yield EUR 1,5 billion in a full year including, inter alia: a lowering of personal income tax bands and credits; a reduction in private pension tax relief; a reduction in general tax expenditure; a new property tax; a reform of capital gains tax and capital acquisitions tax; and, an increase in the carbon tax. The budget shall provide for a reduction of expenditure in 2012 of EUR 2,1 billion including social expenditure reductions; cuts in public sector employment; adjustments in public sector pensions and in other expenditure set out in the Programme; and reductions in capital expenditure; (c) the finalisation of an independent assessment of transfer of responsibility for water services provision from local authorities to a water utility, and preparation of proposals for implementation with a view to starting charging in 2012-2013; (d) the adoption of legislation to increase the state pension age to 66 years in 2014, 67 in 2021, and 68 in 2028, with a view to enhancing the long-term sustainability of the public finances. Further, pension entitlements for new entrants to the public service shall be reformed with effect from 2011. This shall include a review of accelerated retirement for certain categories of public servants and an indexation of pensions to consumer prices. Pensions shall be based on career average earnings. New entrants’ retirement age shall be linked to the state pension retirement age; (e) the adoption of measures reinforcing a credible budgetary strategy and strengthening the budgetary framework. Ireland shall adopt and implement the fiscal rule that any additional unplanned revenues in the period 2011-2015 will be allocated to deficit and debt reduction. In accordance with the proposal set out in the National Recovery Plan 2011-2014, Ireland shall establish a budgetary advisory council to provide an independent assessment of the government’s budgetary position and forecasts. Ireland shall adopt a fiscal responsibility law introducing a medium-term expenditure framework with binding multi-annual ceilings on expenditure in each area. This shall be adopted taking into account any revised economic governance reforms at the level of the Union and shall build on reforms already in place; (f) Ireland shall adopt legislative changes to remove restrictions to trade and competition in sheltered sectors including the legal profession, medical services and the pharmacy profession; (g) the recapitalisation of Irish domestic banks to an initial level of 12 % core tier 1 capital, taking account of haircuts on the additional loans to be transferred to NAMA, and funding of early deleveraging by making available EUR 10 billion in the system. The recapitalisation shall take the form of equity shares (or equivalent instruments for the Educational Building Society); (h) the introduction of legislation to reform the minimum wage in such a way to foster job creation and act to prevent distortions caused by sectoral minimum wages, and undertaking, in agreement with the Commission, an independent review of the framework Registered Employment Agreements and Employment Regulation Orders; (i) a reform of the unemployment benefit system to enhance incentives for an early exit from unemployment. Activation measures shall be strengthened by better identifying job seekers’ needs, enhancing engagement, and developing sanctions to ensure job search or training by beneficiaries; this shall be underpinned by more effective monitoring. The sanctions mechanism shall be set to cause an effective loss of income without being excessively penal; (j) the publication of an in-depth review of the personal debt regime, and start of work on a reform of legislation which will balance the interests of both creditors and debtors; (k) the preparation of a report providing an independent assessment of the electricity and gas sectors to assist with public financing needs, as well as to increase competition. The Irish authorities shall consult with the Commission on the results of this assessment with a view to setting appropriate targets; (l) enhancing competition in open markets; legislation shall be reformed to generate more credible deterrence by providing for the possible imposition of fines and other sanctions in competition cases. In addition, the competition authorities will be required to identify sectors which are effectively outside the scope of competition law and identify processes to address those exclusions; (m) encouraging growth in the retail sector; the government will conduct a study to examine the economic impact of eliminating the current cap on the size of retail premises with a view to enhancing competition and lowering prices for consumers. Implementation of the policy of the study will be discussed with the Commission. 8. Ireland shall adopt the following measures during 2012, in line with specifications in the Memorandum of Understanding: (a) the adoption of a budget for 2013 including fiscal consolidation measures amounting to at least EUR 3,1 billion aiming at a reduction of the general government deficit within the timeframe referred to in Article 3(3). In particular, the budget shall include revenue measures to raise at least EUR 1,1 billion (inclusive of carryover from 2012), including: a lowering of personal income tax bands and credits; a reduction in private pension tax relief; a reduction in general tax expenditures and an introduction of property tax. The budget shall also provide for a reduction in expenditure in 2013 of at least EUR 2 billion, including: social expenditure reductions; a reduction of public service employment; public service pension adjustments; cuts in other expenditure set out in the Programme; and reductions in capital expenditure; (b) the submission of legislation to the Oireachtas to reform the personal debt regime with a view to ensuring a better balance of the interests of both creditors and debtors. 9. In order to ensure the smooth implementation of the Programme’s conditionality, and to help to correct imbalances in a sustainable way, the Commission shall provide continued advice and guidance on fiscal, financial market and structural reforms. Within the framework of the assistance to be provided to Ireland, together with the IMF and in liaison with the ECB, it shall periodically review the effectiveness and economic and social impact of the agreed measures, and shall recommend necessary corrections with a view to enhancing growth and job creation, securing the necessary fiscal consolidation and minimising harmful social impacts, particularly regarding the most vulnerable members of Irish society. Article 4 Ireland shall open a special account with the Central Bank of Ireland for the management of the Union financial assistance. Article 5 This Decision is addressed to Ireland. Article 6 This Decision shall be published in the Official Journal of the European Union. Done at Brussels, 7 December 2010. For the Council The President D. REYNDERS (1) OJ L 118, 12.5.2010, p. 1. (2) See http://epp.eurostat.ec.europa.eu/portal/page/portal/government_finance_statistics/methodology/advice_member_states

Summary: Financial assistance to Ireland Financial assistance to Ireland SUMMARY OF: Implementing Decision 2011/77/EU — EU financial assistance to Ireland WHAT IS THE AIM OF THE DECISION? It approved an economic adjustment programme for Ireland. This included a financial package of loans of up to €85 billion for 2010-2013 from a number of donors, including the European Union (EU). KEY POINTS In December 2010, the EU agreed that Ireland required €85 billion in financial assistance between 2010 and 2013. The funding was provided by: EU: €22.5 billion through the European financial stabilisation mechanism (EFSM) and €17.7 billion through the European Financial Stability Facility; bilateral loans: €4.8 billion — from the UK (€3.8 billion), Sweden (€0.6 billion) and Denmark (€0.4 billion); International Monetary Fund (IMF) : around €22.5 billion; Ireland: €17.5 billion from its cash reserve and national pensions reserve fund. The financial agreement set out in the economic adjustment programme for Ireland required its government to: strengthen and reform the banking sector; restore fiscal sustainability and reduce the country’s deficit to below 3% of gross domestic product (GDP) by 2015; implement labour market reforms to return to robust and sustainable growth. In December 2013, the assistance programme came to an end. Ireland is now subject to the EU’s post-programme surveillance (PPS). Under this, the European Commission, liaising with the European Central Bank: carries out regular visits to the country to assess its economic, fiscal and financial health; prepares half-yearly reports to monitor progress and determine whether further measures are needed. The surveillance will continue until Ireland has repaid at least 75% of the loans it received. Barring any early repayments, that requirement will be met by 2031. FROM WHEN DOES THE DECISION APPLY? It took effect on 10 December 2010. BACKGROUND On 11 May 2010, the EU agreed to create a European financial stabilisation mechanism (Council Regulation (EU) No 407/2010). This enables the Commission to borrow on financial markets and lend the resulting funds to a beneficiary country requiring financial support. Ireland, faced with large external liabilities and severe economic strain, requested help from the EU and the IMF on 21 November 2010. The mechanism has been used to help Ireland, Portugal and Greece. For more information, see: ‘The Economic Adjustment Programme for Ireland’ on the European Commission's website ‘Post-Programme Surveillance for Ireland’ on the European Commission's website. MAIN ACTS Council Implementing Decision 2011/77/EU of 7 December 2010 on granting Union financial assistance to Ireland (OJ L 30, 4.2.2011, pp. 34–39) Successive amendments to Decision 2011/77/EU have been incorporated in the original text. This consolidated version is of documentary value only. RELATED ACTS Council Regulation (EU) No 407/2010 of 11 May 2010 establishing a European financial stabilisation mechanism (OJ L 118, 12.5.2010, pp. 1–4) See consolidated version last update 22.01.2017