1. GOVERNMENT STATISTICS AND THE EUROPEAN MONETARY UNION

2. Economic and Monetary Union (EMU)
The EMU represents a major step in the integration of EU economies. It involves the coordination of economic and fiscal policies, a common monetary policy, and a common currency, the EURO
All 28 EU Member States take part in this economic union, but some countries have integrated further through the adoption of the EURO

3. Background
The decision to form an Economic and Monetary Union was taken by the European Council in Maastricht in December This became known as the Maastricht Treaty (signed Feb 1992).
Economic and Monetary Union takes the EU one step further in its process of economic integration, which started in 1957 when it was founded.

4. Development of economic integration
Preferential trading area (with reduced customs tariffs between certain countries)
Free trade area (with no internal tariffs on some or all goods between participating countries)
Customs union (with the same external customs tariffs for third countries and a common trade policy)

5. Development of economic integration
4. Single market (with common product regulations and free movement of goods, capital, labour and services) 5. Economic and monetary union (a single market with a common currency and monetary policy) 6. Complete economic integration (all the above plus harmonised fiscal and other economic policies)

6. Maastricht Criteria
The Maastricht criteria are the criteria for EU Member States to enter the EMU and adopt the euro as the national currency. The 4 criteria are defined in article 121 of the treaty: these impose control over inflation, public debt and public deficit, exchange rate stability and the convergence of interest rates.

7. 1. Inflation rates
No more than 1.5 percentage points higher than the average of the 3 best performing (lowest inflation) member states of the EU.

8. 2. Government finance Annual government deficit
The ratio of the annual government deficit to GDP must not exceed 3%
Government debt
The ratio of gross government debt to GDP must not exceed 60%

9. Exchange rate
Any applicant countries should have joined the exchange-rate mechanism under the European Monetary System for two consecutive years and should not have devalued its currency during the period

10. Long Term Interest Rates
The nominal long-term interest rate must not be more than 2 percentage points higher than in the three lowest inflation member states.

11. Maastricht Treaty: EDP
EU Treaty defines the reference values for public deficit and public debt: EDP
Treaty defines them both by reference to ESA
Deficit / Surplus = Net lending / net borrowing (B.9) of General Government (S.13)
Debt = liabilities of GG in currency and deposits (AF.2); securities other than shares, excluding financial derivatives (AF.33) and loans (AF.4); at nominal value; consolidated

12. Why such a reference?
Comparability across Member States as national budgets may be drawn up on various basis
Economic accounting
Integration with other macroeconomic statistics

13. The introduction of ESA2010
Impact on denominator (GDP at current market prices)
Specific chapter on government (20)
Deficit and Debt impacts from:
Classification of units
Pension lump sums
Standardised guarantees
Others (e.g. Mobile phone licences)

14. Eurostat’s role
Treaty:’Commission provides fiscal data to the Council’
Regulation 479/2009 (as amended) – Member States notify the data to the Commission / Eurostat
Eurostat:
Validates, or
Expresses reservations; or changes the data

15. ….Eurostat’s role Eurostat Press Release at t+3 weeks
Eurostat must notify + justify 3 days in advance the intention to express reservations or to change the data
Report to the Economic and Financial Committee

16. Separation between statistics and forecasts
The Commission is strongly recommending a clear separation between the function of forecasting versus the function of compiling statistics: NSIs do not make forecasts of the deficit and debt. Forecasts are made by Ministries of Finance, and Eurostat is itself not in a position to verify the quality of forecasts.

17. ….Eurostat’s role Dialogue with Member States Conceptual decisions
‘Requests for clarification’ within days of notifications
EDP missions (standard dialogue or methodological)
Treatment of specific cases (ex post or ex ante)
Conceptual decisions
Bilateral: letters to Member States with specific or general decisions
Regular update to the chapters of the Manual on Government Deficit and Debt

18. Data Transmission - EDP
Actual data (previous four years) and current data (planned data)
(eg: By October 2014 data transmitted: Planned 2014)
Reporting deadlines: before 1 April and 1 October
Detailed set of tables by sub-sector: central government, state government, local government and social security funds

19. Data transmission - EDP
EDP (see example of Malta)
Table 1 (summary table):
Net borrowing (-)/ Net lending (+)
Debt
Gross fixed capital formation
Interest

20. EDP Table 2
Transition between working balance in the public accounts (e.g. in the budget) to the B.9 in national accounts

21. Key features of EDP Table 2
Notion of working balance: a key accounting or budget balance which is nationally relevant
Notion of sub-sectors
Elimination of financial transactions + corrections for time of recording
Notion of ‘other bodies’
Other adjustments (includes off-budget treasury operations)

22. Key features of EDP Table 3
Stock-flow adjustment
Role of transactions in assets (privatisations, etc)
Importance of receivables/payables
Adjustment for accrual of interest and face value definitions
Revaluations and other changes in volumes
Statistical discrepancies

23. The edp submission includes also a comprehensive questionnaire asking for a set of supporting data

24. Crucial Issues
Delimitation of general government (dealt with separately)
Time of recording
Financial vs. non-financial transactions
Pension lump sums; capital injections…

25. Time of recording (1/4) Accrual principle
Flows recorded when the economic value is created, transformed or extinguished
When claims and obligations arise, are transformed or cancelled

26. Time of recording (2/4) Taxes and social contributions
Taxes expected not to be collected should not be in government revenue: government revenue should over the long run equal to that of cash (ESA 10 paras )
Two acceptable sources of data
Assessment information: use of a coefficient
Cash information: time adjustment
Two methods of presentation: gross or net

27. Time of recording (3/4) Interest
Recorded as accruing continuously (paid) over time to the creditor (amount of the principal)

28. Time of recording (4/4) Court decisions with retroactive effect
Do not go back and revise history
Recorded in the year the court decision occurs (claim is established, recognised)
If the total amount remains in doubt, can record claims as these become payable

29. Central coordinating role of the NSI for EDP
Following the crisis of statistics of some years ago, the European Statistical System is strengthening its independence. This change will be reflected in the updates to Regulation The objective is to confirm that it is the national statistical authority which is fully in charge of the notification of EDP statistics.

30. The EURO
The euro was created because a single currency offers several advantages over individual currencies. These include:
Greater security and more opportunities for busineses and markets
More integrated financial markets
Improved economic stability and economic growth

31. Extension of assessment of quality of data to upstream data sources (1)
In April 2011, following the Greek crisis and Financial crisis, a Commission Communication ‘Towards robust quality management for European Statistics’ was issued.
The Communication set out a strategy to give the EU a quality management framework for and the mechanisms to ensure the high quality of statistical indicators related to Reinforced Economic Governance.

32. Extension of assessment of quality of data to upstream data sources (2)
Actions taken by Eurostat:
- Strengthening the Governance of the ESS (Code of Practice, Independence of NSIs and Code of Confidence)
- Preventive approach through internal country risk assessments and more focus on quarterly data - Upstream dialogue visits
- Implementation of quality management framework in the EDP processes
- Promote accrual based accounting in public finance

33. The Scoreboard Indicators
The LIME working group has established a set of eleven indicators to act as support to the annual Alert Mechanism Report. These indicators are essentially a macroeconomic reading of potential imbalances and identifies those Member States for which in-depth analysis are required
The MIP is part of the EU’s so-called ‘six-pack’ legislation, which aims to reinforce the monitoring and surveillance of national macroeconomic policies

34. Scoreboard Indicators
The Scoreboard consists of eleven headline indicators:
5 cover External Imbalances and Competitiveness
6 cover Internal Imbalances

35. External Imbalances and Competitiveness
Current Account Balance as % of GDP
Net International Investment Position as % of GDP
Real Effective Exchange Rate
Share of World Exports
Nominal Unit Labour Cost

36. Internal Imbalances
House Price Developments % y-o-y change n deflated prices
Private sector Credit Flow as % of GDP, consolidated
Private Sector Debt as % of GDP, consolidated
General Government Debt as % of GDP
Unemployment Rate (3 year average)
% y-on-y change in Total Financial Sector Liabilities

37. Thank you for your attention
Joseph Bonello
Acting Director General
National Statistics Office
Malta