1. Head of Unit D2 Excessive Deficit Procedure I
Introduction to EDP
Lena Frej Ohlsson
Head of Unit D2 Excessive Deficit Procedure I
Ch. 11.5
Introduction

2. Introduction to EDP Introduction to EDP (Quick) Quiz!
This shouldn’t take more than 5 minutes
The quiz is also in a word document so can go round either in advance of the session or at the start.]
NB make sure the slides – with the answers - have not been circulated
GFS-course 2014, ch. 13.4

3. Introduction to EDP: Quiz q1
What is the main methodological basis for EDP data?
ESA2010
SNA2008 and ESA10 provide the accounting guidance, principles and rules for EDP
GFS-course 2014, ch. 13.4

4. Introduction to EDP: Quiz q2
What legislation is the data for EU fiscal surveillance and budgetary discipline based on?
Regulation 479/2009, as amended. This leads from the Treaty (including annexed Protocol) on EDP.
In EU fiscal surveillance is based on EDP.
These regulations should be familiar - at the very least the titles should be familiar - from the first week of the course
GFS-course 2014, ch. 13.4

5. Introduction to EDP: Quiz q3
Why is there a need for an MGDD?
ESA2010 can be silent or may not be clear enough
The world is constantly evolving and MGDD elaborates and extends the detail (or lack of detail) provided in ESA95.
The aim of MGDD is to ensure that deficit and debt are measured appropriately and there is equality of treatment across member states.
For example you should be aware by now that some of the issues for EDP emerge when ESA2010 allows a choice of approaches for measurement. (Ask for examples)
However, it is important to ensure that MS’s data is comparable and this can require that the same approach is used by everyone.
In addition, some complex transactions require consideration and an agreed treatment.
GFS-course 2014, ch. 13.4

6. Introduction to EDP: Quiz q4
How does Eurostat supplement the guidance in MGDD?
With guidance notes and methodological decisions. The MGDD is updated annually
MGDD 2014 was the latest paper version of MGDD published.
When new - specific or complex questions emerge (give a current example) – Eurostat will provide guidance notes and methodological decision.
On to the next question to find out more about this process....
GFS-course 2014, ch. 13.4

7. Introduction to EDP: Quiz q5
Which working group does Eurostat work and consult with in relation to EDP guidance?
Financial Accounts Working Group (FAWG)
FAWG – Financial Accounts Working Group....
GFS-course 2014, ch. 13.4

8. Introduction to EDP: Quiz q6
If a Eurostat methodological decision is required, which group is consulted as part of the procedure?
Committee on Monetary, Financial and Balance of Payment statistics (CMFB)
Once FAWG (or a FAWG task force) have considered an issue in detail CMFB can be consulted for a decision. CMFB comprise Member States ‘experts’, from both the statistical offices and the central banks (and the ECB). It is possible that some of you help provide (or will help in the future to provide) briefing and advice to your own country’s CMFB members when they are asked for a decision.
Once CMFB provide a decision Eurostat then decide whether (or not) to accept their recommendations.
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9. Introduction to EDP: Quiz q7
Can you give an example of a recent methodological decision?
Unbalanced pension transfers, ESM, Low interest rate loans…
If they don’t know, refer them to the GFS web site..
GFS-course 2014, ch. 13.4

10. Introduction to EDP: Quiz q8
Can you define deficit and debt for EDP purposes?
- Deficit: net borrowing of GG
- Debt: total consolidated gross debt for GG at nominal value for: AF.2, AF.3 and AF.4
This is a very cruel question as we haven’t really covered it yet AND will actually be coming back to it later in this session and also later in the week.
This week is all about EDP, specific issues relating to deficit and debt and the information and data MSs need to fill in the tables.
GFS-course 2014, ch. 13.4

11. Introduction to EDP: Quiz q9
What are the two main deficit/debt criteria identified if an excessive deficit procedure should be opened up?
- Deficit: exceeding 3% of GDP
- Debt: exceeding 60% of GDP
The world is becoming more complex now, as the new economic governance system puts greater emphasis on structural deficits and evolution/sustainability of debt.
GFS-course 2014, ch. 13.4

12. Introduction to EDP: Quiz q10
How many times a year does EDP data have to be delivered?
Twice a year at the end of March and at the end of September
(Published 3 weeks later)
Annual data is delivered twice a year. The deadline is 30 March and 30 September.
Eurostat quality assures the data and, after any necessary correspondence with MS to verify the data, publishes a release 3 weeks later.
Cecilia will be speaking more about this process later in the week
GFS-course 2014, ch. 13.4

13. Introduction to EDP: deficit and debt
GFS-course 2014, ch. 13.4

14. Introduction to EDP: ‘Deficit’
Deficit: net borrowing of General Government (as defined in ESA2010
The B.9 balancing item should be familiar from the ESA framework;
General government has been defined in week 1;
Specific transactions and interventions that could affect General Government deficit are examined this week; and
Specific transactions and interventions are examined this week - For example you have a session on ‘Public private partnerships’ to consider how and where to record transactions relating to PPPs in the accounts. Should the transactions impact deficit and debt? And if so how and (importantly) why
‘SWAPS and forward rate agreement adjustment’ this adjustment ensures consistency with the measurement of EDP debt. You will be looking at this in more detail later this week as well
GFS-course 2014, ch. 13.4

15. Introduction to EDP: ‘debt’
Debt: total consolidated gross debt for General Government outstanding at the end of the year at nominal value for: AF.2; AF.3 (excl. AF.34) and AF.4
Debt is defined in this way to ensure that a comparable – and as meaningful as possible – measurement is used
Nominal values are meaningful from GG’s point of view & are also easier to measure
GFS-course 2014, ch. 13.4

16. ESA 2010 changes to debt and deficit
Delineation of general government sector
A change in the criteria used to determine the scope of the general government sector, which may lead to the reclassification of entities within the general government sector
Lump sums related to pension schemes
A change in the recording of lump sums paid to government in relation to transfer of pension funds
Treatment of swaps
The removal of an adjustment made for net interest flows associated with swaps and forward rate agreements
Other items
Mainly, standardised guarantees, payable tax credits and government issued permits
GFS-course 2014, ch. 13.4

17. EDP package Notification tables
Questionnaire relating to the EDP notification tables
Supplementary tables on financial turmoil +
- Questionnaire on government controlled entities classified outside government
- Intergovernmental lending including EFSF
- questionnaires on contingent liabilities and potential obligations (guarantees, non-performing loans, PPPs etc.)
GFS-course 2014, ch. 13.4

18. Notification tables
Table 1: Reporting of government deficit/surplus and debt levels and provision of associated data (GFCF, interest)
Table 2A-2D: Provision of the data which explain the transition between the national definitions of government balance and the deficit/surplus (B.9)
Tables 3A-3E: Provision of the data which explain the contributions of the government deficit/surplus and the other relevant factors to the variation in the government debt level, and the consolidation of the debt .
Table 4: Provision of other data in accordance with the statements in the Council minutes of 22/11/1993
GFS-course 2014, ch. 13.4

19. Questionnaire relating to EDP
Table 1. Revision of general government net lending (+)/ borrowing (-) and revision of general government consolidated gross debt
Table 2. Breakdown of financial transactions included in the working balance
Table 3. Adjustments for sector delimitation in EDP tables 2A-D - breakdown of B.9 by groups of units or units
GFS-course 2014, ch. 13.4

20. Tables 4.1.1 and 4.1.2 relating to F.8 reported in EDP table 3A
Table 4. Breakdown of other accounts receivable/payable (F.8) reported in EDP tables
Tables and relating to F.8 reported in EDP table 3A
Tables and relating to F.8 reported in EDP tables 2A/B/C/D
Table 5. Taxes and social contributions: other accounts receivable/payable (F.89/AF.89) of general government
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21. Table 8. Central government claims, debt cancellations
Table 6. EU flows: other accounts receivable/payable (F.89/AF.89) of general government
Table 7. Military equipment expenditure (weapons and supporting equipment)
Table 8. Central government claims, debt cancellations
Table 8.1 Reconciliation of stocks and flows of central government claims S.1311 (ESA2010 accounts)
Table 8.2 Debt cancellation as reported in EDP tables 2A-D
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22. Table 9. Government guarantees
Table 9.1 Government guarantees in public accounts
Table 9.2 Reconciliation of stocks and flows relating to assumed debt (ESA2010 accounts
Table 9.3 Guarantees as reported in EDP table 2
Table 10. Capital injections, superdividends and privatisations
Table 10.1 Capital injections in public corporations, superdividends and privatisations
GFS-course 2014, ch. 13.4

23. Table 11. Public-Private Partnerships
Table 10.2 Capital injections in public corporations, superdividends and privatisations (detail) of S.13
Table 11. Public-Private Partnerships
Table 11.1 Financial data and national accounts information on PPPs
Table 11.2 Financial data on government payments in PPPs, other than unitary charge payments
Table 12. Sale and leaseback operations undertaken by government
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24. EDP and week 2 You will cover
- Data requirements within the EDP tables
- Specific methodological issues
- The corresponding related questionnaire
Understand what the issue is for the measurement of deficit and debt in each ‘methodological’ session
- You should be able to complete EDP tables and questionnaire tables
On the EDP tables
- Think about your own data and transforming ‘working balances’ into EDP data
GFS-course 2014, ch. 13.4

25. GOOD LUCK!
GFS-course 2014, ch. 13.4