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Brussels, 23 November 2012
The 2012 Annual Growth Survey: Frequently Asked Questions
1. What is the 2012 Annual Growth Survey (AGS)?
The AGS sets out what the Commission believes must be the EU’s priorities for the coming 12 months in terms of economic and budgetary policies and reforms to boost growth and employment. Its presentation marks the opening of the second European Semester of economic governance.
2. What progress has been made since the last AGS?
The 2011 AGS focused on priority actions in three main areas: fiscal consolidation and enhancing macroeconomic stability; labour market reforms for higher employment; and growth enhancing measures.
In terms of fiscal consolidation, progress is being made – though it is too early to make an overall assessment and the deteriorating economic picture will make further advances in this area more challenging.
On labour market reforms, there has been some progress in the areas of active labour market policies, skills, life-long learning and education. Reforms of wage-setting systems remain contentious and there has been progress in only a few countries.
On growth-enhancing measures, progress has been slow. Some reforms have been launched in the areas of research, development and innovation; transport; and energy. On the other hand, most of the bottlenecks in the areas of competition, services and network industries remain unaddressed.
The 2012 AGS notes that progress in implementing the guidance put forward in the 2011 AGS has been below expectations and calls for a greater sense of urgency to accompany the second European Semester.
3. What are the key messages in the 2012 AGS?
The Commission places a strong emphasis on the need to step up implementation of commitments made by Member States, with a clear focus on measures that enhance growth and labour-market participation. The AGS calls for national and EU efforts to be concentrated on five priorities for 2012:
· Pursuing differentiated growth-friendly fiscal consolidation: implementing sound budgetary policies, tailored according to Member States’ current fiscal positions; maintaining as far as possible investment in growth-enhancing areas; and making tax policies more growth-friendly
· Restoring normal lending to the economy: facilitating banks’ access to term funding and strengthening their capital positions; limiting the impact of banking sector reform on the flow of credit to the real economy; taking further measures to support SMEs’ access to finance; and developing a new European venture capital regime
· Promoting growth and competitiveness for today and tomorrow: building the EU digital economy, completing the internal market in services and tapping the growth potential of external trade; making the best use of the EU budget to underpin growth-boosting investment; and fast-tracking the pending and future proposals at EU level listed in an Annex to the AGS
· Tackling unemployment and the social consequences of the crisis: promoting business creation and self employment; enhancing labour mobility; strengthening initiatives that combine work experience and education; reducing labour taxation and disincentives to job creation; reinforcing coverage and effectiveness of active labour market policies and improving social protection systems to protect the most vulnerable
· Modernising public administration: improving national business environments by minimising administrative burdens; ensuring that exchanges between administrations and businesses/citizens can be done digitally; and implementing the commitment to cut start-up time for new businesses to three days
4. What progress has been made on the Europe 2020 targets?
Europe 2020, the EU's ten-year strategy for smart, sustainable and inclusive growth, is more relevant than ever given the current economic climate. Yet progress by Member States towards the Europe 2020 targets has so far been disappointing. Moreover, the Commission's assessment is that at this point in time, national targets set by Member States are insufficient to meet most of the EU-level targets, particularly for energy efficiency. The latest statistics indicate that only in the area of education has some progress been made:
- Education: The EU's target of not more than 10% early school leavers will not be reached on the basis of current commitments, which would bring it down to a level of 10.5%. In 2010, early school leaving dropped to 14.1% from 14.4% in 2009. But this masks wide variations between Member States.
- Employment: If all Member States achieved their national targets, the EU as a whole would still be 1-1.3% points short of the agreed target employment rate of 75%. No substantial progress has been registered in 2011.
- Research and Development: If national targets were reached, the EU would still fall about 0.3% short of the 3% 2020 target. R&D investment in 2009 stood at 2.01% of GDP, with little progress foreseen in 2011.
- Poverty reduction: Based on current national targets, around 12 million people would be lifted out of poverty and social exclusion, short of the EU's 2020 target of 20 million.
- 20/20/20 climate/energy targets: The EU as a whole is expected to meet the target of a 20% reduction in greenhouse gas emissions compared with 1990 levels. Some Member States though will have to amend their policies in order to reach their binding national targets. On energy efficiency, work is ongoing on the analysis of Member States' targets and a report will be presented in early 2012. The legally binding renewable energy target of 20% should be met if Member States fully implement their renewables action plans. At EU level, the share rose from 10.34% in 2008 to 11.6% in 2009.
5. Does the 2012 AGS analyse the implementation of the 2011 Country-Specific Recommendations?
Not in detail. This analysis will be published alongside the 2012 Country-Specific Recommendations next June.
6. How does the Euro+ Pact link to the AGS?
The Euro+ Pact was concluded in March 2011 by the 17 euro area countries with the participation of six of the remaining ten Member States. The 23 signatories to the pact agreed to make further commitments, beyond what had been agreed at EU level, in the areas of competitiveness, employment, sustainable public finances and financial stability. Member States’ commitments made in the context of the Euro+ Pact are integrated into their National Reform Programmes and Stability or Convergence Programmes and assessed within the framework of the European Semester. Progress regarding these commitments is tracked in the 2012 AGS, notably in the concluding table of the annexed Macro-Economic Report.
7. What specifically does the AGS say on labour market challenges?
Slow growth is hampering the already weak employment recovery. Any recent increases in job levels have been mainly driven by the growth in temporary contracts and part-time jobs. Youth unemployment has increased dramatically from 15% to 21% between 2008 and 2011, while the share of 15-24 year olds neither in education, employment or training has risen to 16%. Long-term unemployment is also growing quickly across the Union (40% of those looking for work are long-term unemployed).
8. What must Member States do to ensure a job-rich recovery?
The rate of job creation of the EU economy has not recovered the levels before the crisis. To ensure a job-rich recovery Member States must give priority to promote business creation and self-employment, including social entrepreneurship and to exploit the potential offered by some specific sectors (low-carbon economy, health and social sectors and in the digital economy).
Labour market policies can help create the right environment for job creation by addressing labour shortages through labour mobility, reducing labour taxation as well as helping to address excessive rigidities of permanent contracts and providing easier access to the labour market and better protection to those left outside.
9. What does the AGS say about specific challenges like youth unemployment?
The situation of young people is especially worrying. Between 2008 and 2010, the total number of young unemployed people in the EU increased by one million and the EU-wide youth unemployment rate has increased to over 20%, with peaks of more than 40% in some Member States. The priorities for Member States are to establish strategies identifying the most urgent needs and proposing concrete actions that target young people not in employment, education or training. This includes good quality apprenticeships, traineeship contracts and entrepreneurial skills, as well as modernising education and training systems to reflect labour market skills demand while reinforcing their efficiency and quality.
10. What does the AGS say about how to address the social consequences of the crisis?
The crisis has disproportionately hit those who were already vulnerable and has created new categories of people at risk of poverty. Member States must give priority to reinforcing the coverage and effectiveness of active labour market policies. They also need to take account of the distributional impacts of fiscal consolidation to avoid compounding existing social difficulties. This will mean improving the effectiveness of social protection systems and avoiding sudden withdrawals of past extensions of coverage and eligibility.
11. What does the AGS say on taxation's role in achieving consolidation and growth?
The AGS advises Member States to take a close look at how the quality of their revenues can be improved, focussing on a number of important areas in particular:
- Raising revenues in a smarter way: Instead of arbitrarily raising rates, Member States should look at how to improve their current tax systems to raise revenues - for example, reconsidering tax breaks, broadening tax bases and phasing out hidden tax subsidies.
- Tackling tax evasion and fraud: Many billions of euros are lost from national budgets every year due to tax evasion and fraud. Member States need to strengthen their administrations to combat this problem, and ensure that the controls and sanctions are strong enough deterrents. Coordination at EU level is also crucial. It can ensure that aggressive tax planners can't exploit loopholes between Member States' systems and that there is a consistent EU approach to third countries when it comes to tackling uncooperative jurisdictions.
- Creating a better environment for business: Member States are advised to examine whether they could shift taxes away from areas that impede growth (labour, corporate taxes) towards more growth-friendly taxes (consumption, environment). Member States should also agree on proposals that would remove obstacles for businesses such as the Common Consolidated Corporate Tax Base and the Energy Tax Directive.
- Coordinating at EU level to maximise reforms: EU coordination on taxation prevents distortions and obstacles to the Internal Market, limits non-taxation and abuse, and prevents a "race to the bottom" approach which can curtail national reform efforts. It also allows the exchange of best practices and strength in numbers when tackling common problems such as harmful tax competition from third countries.
12. What are the next steps in the European Semester?
The AGS launches the 2012 European Semester of economic governance. It is the basis for building the necessary common understanding about the priorities for action at both EU and national level in the coming twelve months. In the coming weeks and months, the different Council formations will discuss the AGS and report to the March European Council so that it can adopt appropriate policy guidance for the Member States. This guidance should be incorporated into Member States’ National Reform Programmes (regarding economic reforms) and Stability or Convergence Programmes (regarding public finances) presented in April/May. Having analysed these programmes, the Commission will issue its Country-Specific Recommendations in time for these to be endorsed by the June 2012 European Council. The Member States should then incorporate this policy guidance in their national economic and budgetary decisions.
For more information:
IP/11/1381 New action for growth, governance and stability
MEMO/11/820 European Commission Green Paper "Feasibility of introducing Stability Bonds"
MEMO/11/822 Economic governance: Commission proposes two new Regulations to further strengthen budgetary surveillance in the euro area