Launch of EPEC-Eurostat Guide to Statistical Treatment of Public-Private Partnerships
OREANDA-NEWS. Investment is a key factor fostering economic growth and job creation. However, recent studies pointed out that investment in Europe has not yet recovered to the pre-crisis levels. In the framework of the Investment Plan for Europe (IPE), the European fund for strategic investments (EFSI) was created with the aim to use public funds (EU funds complimented with the MS) to mobilize private investment and by reducing the investment gap in the EU create stimulus for economic growth.
What is the European System of Accounts (ESA 2010)?
The European System of Accounts (ESA 2010) is a European accounting framework that allows a systematic and detailed description of the economy.. The structure of ESA 2010 is consistent with the worldwide guidelines on national accounting set out in the System of National Accounts (2008 SNA). ESA2010 is a legal act (a Regulation) which has been adopted by all Member States. The concepts and definitions of the fiscal indicators (deficit and debt) used in the Excessive Deficit Procedure (EDP) and for the purposes of the Stability and Growth Pact (SGP) are based on the European System of Accounts (ESA 2010).
How is investment recorded in the European System of Accounts (ESA 2010)?
In the European system of national accounts (ESA 2010) investmentis recorded as gross fixed capital formation (GFCF), which constitutes expenditure and has an impact on the deficit or surplus of a Member States' budget.
It should be noted that, in all other accounting systems, investment is also accounted for as expenditure.
What is a public-private partnership (PPP) according to Eurostat?
Public-Private Partnerships (PPPs) are long-term contractual arrangements between a government entity (the grantor) and a partner entity (the operator, usually private) mainly used for infrastructure development. The partner is responsible for building, operating and maintaining the infrastructure asset, designed to render some public services. In exchange for the services received, the government entity pays regular fees to the non-government partner following the construction of the asset.
Why are public-private partnerships (PPP) important in the context of the Excessive Deficit Procedure?
Construction projects under PPP contracts create liabilities or debt for a government, as they have to be financed. However, the financing can be recorded either on or off government balance sheet, that is, either with or without a direct impact on government debt.
In case the asset is recorded on government balance sheet, the entire expenditure is recorded for government during the period of construction. This has a negative impact on government deficit or surplus and the government debt will be increased by the same amount.
In case the asset is recorded off government balance sheet, the impact on government deficit will be limited to the regular service fees paid to the partner, which are spread over the long-term contract and no debt impact will be recorded.
The possibility of off balance sheet recording makes the use of PPP very attractive for undertaking investment, as it allows governments to invest while complying with the debt and deficit thresholds established in the Maastricht Treaty.
The National Statistical Institute (NSI) of each Member State analyses PPP contracts and decides on their sector classification following the statistical rules of ESA 2010, the provisions of the Eurostat Manual of Government Deficit and Debt (MGDD) implementing ESA 2010 and Eurostat guidance notes. From 29 September 2016, the clarifications of statistical rules contained in the "Guide to the Statistical Treatment of PPPs", jointly produced by Eurostat and the European PPP Expertise Centre (EPEC) are also applicable.
What is Eurostat’s role?
In case of doubt, National Statistictal Institutes may contact Eurostat for an “ex-ante advice”, in cases when an operation in question has not yet taken place and for “ex-post advice” – in cases when there are doubts on the statistical treatment of the already recorded transactions. Eurostat provides an advice in the form of a letter to the Member State. The advice is then published it its entirety or in summarised form on Eurostat’s