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C 155 E/56 Official Journal of the European Union EN 3.7.

2003

(2003/C 155 E/062) WRITTEN QUESTION E-2869/02


by Christopher Huhne (ELDR) to the Commission

(11 October 2002)

Subject: Relationship between growth and budget balance

Will the Commission estimate, on the basis of its own computer modelling or other research, the impact
for each Member State of a one percentage point change in GDP growth on the budget balance as a
percentage of GDP?

Answer given by Mr Solbes Mira on behalf of the Commission

(12 November 2002)

The estimates on the responsiveness of the budget balance to gross domestic production (GDP) growth are
based on tax and expenditure elasticities calculated by the Organisation for Economic Cooperation and
Development (OECD). As can be seen from the table below, the average elasticity for the Union is around
0.5. The degree of budgetary sensitivity is closely linked to the share of government revenues and
expenditure in GDP. For example, Scandinavian countries which are characterised by a large government
sector also tend to have larger elasticities in the range between 0,7 to 0,9 (1).

These elasticities must be understood as an estimate of the average budgetary response to changes in the
output gap, since they are to some extent dependent on the source of GDP growth. For example, the
budgetary impact will be smaller if GDP growth accelerates due to increased export (or investment) growth
because in this case, no tax category is directly affected. Correspondingly, the budgetary impact will be
higher if growth is driven by private consumption since in this case indirect tax revenues will increase
directly. Simulation results with the Commission’s QUEST model indicate that in the case of growth driven
by private consumption the budgetary sensitivity increases to 0,7 for the Union average, while in the case
of export or investment led growth the budgetary sensitivity drops to 0,28 or 0,19 respectively (2).

Budgetary sensitivities in the EU

B DK D EL E F IRL I NL A P FIN S UK EU

0,7 0,9 0,5 0,4 0,4 0,4 0,4 0,4 0,8 0,3 0,3 0,7 0,8 0,5 0,5
Source: Public Finances in EMU 2002.

(1) For more detailled discussion, see Public Finances in EMU-2002 No 3, Chapter 3. The measurement of cyclically
adjusted budget balances.
(2) Brunila A., M. Buti and J. in ’t Veld (2002), ‘Fiscal Policy in Europe: how effective are automatic stabilisers?’,
Economic Papers No 177, September 2002, European Commission, Brussels.

(2003/C 155 E/063) WRITTEN QUESTION P-2875/02


by Nelly Maes (Verts/ALE) to the Commission

(7 October 2002)

Subject: Illegal government support for the FN weapons factory

It has recently come to light that Delcredere, the Belgian export credit insurer, has issued a government
guarantee within the framework of the agreement concluded between FN Herstal and the government of
Nepal to supply 5 500 Minimi machine guns. This was not only a breach of the Code of Conduct on the
Arms Trade but the purchase sum of EUR 15,4 million will also be paid even if the weapons are not
actually delivered.
3.7.2003 EN Official Journal of the European Union C 155 E/57

The decision was taken on 5 August 2002 in the absence of a quorum, after which the policy was sent out
and the decision submitted for confirmation.

It is clear that FN Herstal would be entitled to obtain the money for the 5 500 Minimi machine guns even
if the Belgian government were to withdraw the export licence.

Consequently, the arrangement must constitute the granting of State aid to an enterprise.

Will the Commission investigate whether this State aid complies with the relevant European directives?

If so, can the Commission indicate the grounds on which that conclusion was based?

If not, can the Commission explain what measures will be taken to call the Belgian government to order?

Answer given by Mr Monti on behalf of the Commission

(30 October 2002)

As far as export aid is concerned, the Commission has no knowledge to date of any state aid granted to
FN Herstal. It has no information to suggest that the Belgian agency Ducroire/Delcredere acted differently
from a private insurance company, since it does not have precise information on the terms and content of
the contract concluded between Ducroire/Delcredere and FN Herstal.

At this stage, the Commission would none the less stress that the interventions referred to by the
Honourable Member relate exclusively to compliance with the terms of the export credit insurance
contract. These terms are in line with Council Directive 98/29/EC of 7 May 1998 on harmonisation of the
main provisions concerning export credit insurance for transactions with medium and long-term cover (1).
The Directive explicitly allows this type of guarantee and requires Member States to set up in their
countries a private or public export insurance scheme that covers, among others, political risks. Among
the risks to be covered by the export credit insurer, the Directive cites a decision to ban exports taken by
the Government of the country of the insurer. It can thus be concluded that the intervention granted by
Ducroire/Delcredere is in accordance with the Directive.

(1) OJ L 148, 19.5.1998.

(2003/C 155 E/064) WRITTEN QUESTION E-2883/02


by Ilda Figueiredo (GUE/NGL) to the Commission

(14 October 2002)

Subject: Community support

Less than a year after another identical situation, almost a thousand workers employed by the
multinational footwear company Rohde in Santa Maria da Feira, Portugal, are again facing the prospect
of being laid off for three weeks. The situation is especially serious given the very low wage levels in
Portugal, and not even these low wages will be paid during this period.

The management’s justification, based on an alleged lack of orders, is not credible given that work has
remained at an extremely high level. The business association Appicaps itself states that Portugal again
stands out against the remaining Community countries with footwear exports reaching a new historic
high, increasing by 36 % according to INE figures, a trend which has continued in 2002.