European Semester 2014: strengthening the recovery
European Commission - IP/13/1064 13/11/2013
Brussels, 13 November 2013
European Semester 2014: strengthening the recovery
The biggest challenge now facing Europe's economy is how to sustain the recovery that is now underway. This is the main message of this year’s Annual Growth Survey (AGS), adopted today by the Commission. Its adoption kicks off the fourth European Semester of economic policy coordination in an environment where growth is beginning to return and Member States are making progress on correcting the imbalances that developed before the crisis.
That is why the Commission maintains its balanced strategy for growth and jobs, and its focus on five main priorities over the coming year:
President Barroso said: “This is a turning point for the EU economy. The EU's hard work is starting to pay off and growth is slowly coming back. The 2014 Annual Growth Survey points out where we need to be bolder to tackle reforms that are needed to build a lasting and job-rich recovery.”
The AGS shows how Member States are adjusting to the recently reinforced economic policy-coordination process under the European Semester, and are working better together according to common rules.
Budgetary coordination in the euro area has reached an unprecedented level this year: for the first time, the Commission will assess euro area draft budgetary plans for 2014 before the budgets are adopted by national parliaments, and will present an overview of the fiscal stance in the euro area as a whole. The results of this assessment will be published on 15 November.
Annual Growth Survey: A progress report
Member States have made progress on each of the five priorities identified by the Commission in 2013. The same priorities are proposed for 2014, although with different areas highlighted for attention to reflect the changing EU and international economic environment:
The AGS also makes recommendations on how to deepen the European Semester. National ownership of EU level country specific recommendations needs to be strengthened so Member States should involve national parliaments, social partners and citizens more in the process to ensure key reforms are understood and accepted. Euro area Member States should devote more time to coordinating major reforms - particularly in labour and product markets - before they are adopted at national level. And Member States need to better implement the country-specific recommendations they receive each spring. The Commission will provide input on these issues for the European Council in December.
Alert Mechanism Report: Towards a balanced recovery
The 2014 Alert Mechanism Report (AMR), which launches the next annual cycle of the Macroeconomic Imbalances Procedure, provides an objective analysis of Member States' economies based on a scoreboard of indicators that measure internal and external competitiveness.
This year the AMR has found that several Member States are making progress in reducing their current account deficits and reversing losses in competitiveness. However, the AMR shows that further progress is needed to address high debt and the net international investment position of the most indebted economies, while high current account surpluses persist in some countries, suggesting possibly inefficient levels of saving and investment and the need to strengthen domestic demand.
The AMR recommends an in-depth review of economic developments in 16 Member States, which have different challenges and potential risks that could spill over to the rest of the euro area and wider EU. The AMR does not prejudge the results of these reviews, which aim to assess whether imbalances exist, and whether previously identified imbalances persist or are being unwound.
Draft Joint Employment Report: Focus on jobs and social developments
The draft Joint Employment Report, annexed to the AGS, shows that there are some encouraging signs that unemployment has stopped rising, and that Member States have made progress in the last year on labour market reforms. However unemployment is still unacceptably high - especially youth and long-term unemployment - and, according to data presented in a new scoreboard of employment and social indicators included in the report for the first time, persistent divergences in unemployment, youth unemployment, household income, inequality and poverty rates have built up across Member States, particularly within the euro area.
It is therefore crucial to keep up efforts to improve the resilience of labour markets. It will also be important to boost job creation in fast-growing sectors, contributing to reducing inequalities and poverty over time while strengthening social protection and making targeted social investments.
Single Market Integration Report: Making the single market work better
The Commission’s second annual report on Single Market integration presents an analysis of the state of Single Market integration in areas with the highest growth potential. This year's report finds that while progress has been made in reforming the financial, digital and transport sectors, there is still work to be done to get investment flowing, create jobs and improve consumer satisfaction in these areas. The report highlights a particular lack of progress in opening up energy markets, where 14 Member States have yet to properly transpose the EU’s third energy package into national law - two years after the deadline. It also shows that Member States have yet to fully implement the EU’s Services Directive, which could boost overall growth by up to 2.6% of GDP in the next 5-10 years.
On Friday 15 November the Commission will adopt opinions on the draft budgetary plans submitted by 13 euro area Member States (not including the 4 countries under macroeconomic assistance programmes) and propose Council opinions on the Economic Partnership Programmes submitted by 5 euro area Member States under the Excessive Deficit Procedure. The Commission will also provide an overview of the budgetary outlook of the euro area as a whole, and will report on action taken by non-euro area countries in the Excessive Deficit Procedure.
The Annual Growth Survey will be discussed by national ministers (in the Council) and endorsed by EU leaders at their March 2014 summit. The Commission is also looking forward to the contribution of the European Parliament.
The Alert Mechanism Report will be discussed by finance ministers and EU leaders in December, who will agree on the main areas for further coordination of economic policies and reforms. In the meantime, the Commission will prepare in-depth reviews for the 16 countries identified in the Alert Mechanism Report, which will be published in spring 2014.
The European Semester, introduced in 2010, ensures that Member States discuss their budgetary and economic plans with their EU partners at specific times throughout the year. This allows them to comment on each other's plans and enables the Commission to give policy guidance in good time, before decisions are made at national level. The Commission also monitors whether Member States are working towards the employment, education, innovation, climate and poverty reduction targets in the EU's long-term growth strategy, Europe 2020.
The cycle starts in November each year (see graphic below) with the Commission's Annual Growth Survey (general economic priorities for the EU), which provides Member States with policy guidance for the following year. Country-specific recommendations published in the spring offer Member States tailored advice on deeper structural reforms, which often take more than one year to complete.
Euro area budgetary surveillance intensifies towards the end of the year, with Member States submitting draft budgetary plans, which are assessed by the Commission and discussed by euro area finance ministers. The Commission also reviews the fiscal stance in the euro area as a whole.
The Commission monitors implementation of priorities and reforms throughout the year, with a focus on the euro area and Member States with fiscal or financial problems. For more detail see MEMO/13/979
For further information
Europe 2020 website: http://ec.europa.eu/europe2020/index_en.htm
MEMO/13/970 Third Alert Mechanism Report on macroeconomic imbalances in EU Member States
MEMO/13/976 Draft Joint Employment Report – frequently asked questions
MEMO/13/979 The EU's economic governance explained