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European Commission

MEMO

Brussels, 5 March 2014

Commission concludes in-depth reviews of 17 Member States to check for macroeconomic imbalances

What are the in-depth reviews?

The in-depth reviews examine macroeconomic developments with the aim of analysing potential imbalances, their origin, nature and severity, and in particular of determining whether these imbalances are excessive in the sense of the Macroeconomic Imbalance Procedure (MIP). The in-depth reviews look particularly at external financial sustainability; the drivers of external competitiveness; developments related to the deleveraging of private sector balance sheets; private and public indebtedness; housing and mortgage market developments; and financial sector stability. In-depth reviews encompass a thorough analysis of sources of imbalances in the Member State under review, taking into account country-specific economic conditions. They consider a wide set of available data and other relevant information. In the preparation of the in-depth reviews, specific surveillance missions - including discussions with the Member States' government and other stakeholders - took place. This is the third annual cycle of the Macroeconomic Imbalance Procedure.

For which countries is the Commission publishing in-depth reviews?

The in-depth reviews have been done for 17 Member States. Of these, 16 were identified in the Alert Mechanism Report of 13 November 2013 (see IP/13/1082 and MEMO/13/970) as warranting further economic analysis, since they show signs of potential macroeconomic imbalances or face challenges in adjusting to imbalances. These Member States are Belgium, Bulgaria, Croatia, Denmark, Finland, France, Germany, Hungary, Italy, Luxembourg, Malta, the Netherlands, Slovenia, Spain, Sweden and the United Kingdom, which are the 16 Member States identified in last November’s Alert Mechanism Report as showing signs of macroeconomic imbalances. Also covered is Ireland, which has since successfully exited its economic adjustment programme and is thus again covered by the EU's normal economic surveillance procedures. In the Alert Mechanism Report, the Commission made an assessment based on a scoreboard of 11 economic indicators, in order to identify internal and external imbalances in EU Member States linked to developments in competitiveness, indebtedness, asset prices, adjustment and inter-linkages with the financial sector.

What are the overall findings of the in-depth reviews?

The economic recovery is gaining ground but challenges remain. Imbalances built up over more than a decade and it will require continued policy action to ensure that Europe returns to stronger but sustainable growth rates and steadily reduces unemployment. A number of imbalances are common to several Member States. Among the challenges are the large external liabilities in some economies, persistent large current account surpluses reflecting subdued domestic demand in a few countries, cost competitiveness for the countries which used to register the largest current account deficits and those experiencing large losses in export market shares. Improving competitiveness beyond cost-related factors is important for most Member States analysed, as is the impact of deleveraging on private consumption and investment. It will be essential to continue to address these imbalances in order to bring down the unacceptably high levels of unemployment in many parts of Europe.

The focus of macroeconomic challenges in the Member States is also gradually shifting. Current account deficits have been significantly reduced and competitiveness losses to a large extent recouped in many Member States. However, persistent challenges include the impact of deleveraging on medium term growth, the high levels of private and public debt in the context of very low inflation, the difficulties faced by viable businesses in accessing affordable credit, and the high levels of unemployment.

The contribution of large Member States to growth in Europe is important. Among the largest euro area Member States, the policy priorities should be on: strengthening domestic demand and medium-term growth in Germany; addressing bottlenecks to medium-term growth while working on structural reforms and fiscal consolidation in France and Italy; and continuing the orderly deleveraging and structural transformation of the economy that will contribute to sustainable growth, and addressing social issues in Spain.

Several macroeconomic challenges need to be addressed in the context of the euro area. There is a need to increase investment and boost demand, address financial fragmentation and the challenge of indebtedness and rebalancing in a very low inflation scenario and a difficult economic climate. As recommended by the Council last June, Member States should take responsibility, individually and collectively, for the aggregate policy stance in the euro area in order to ensure the good functioning of the Economic and Monetary Union and to increase growth and employment.

On fiscal issues, the latest forecasts show that the average pace of adjustment is set to decelerate in the EU and the euro area thanks to the successful consolidation efforts of the last few years. Both in the EU and in the euro area, the debt-to-GDP ratio is forecast to have increased in 2013 but should peak this year before starting to decline. As part of its continuous monitoring of obligations under the Excessive Deficit Procedure, the Commission is today also making use of a new instrument under the strengthened Stability and Growth Pact to draw the attention of two euro area Member States, France and Slovenia, to the risk of non-compliance with the budgetary target recommended for this year.1 In the context of the European Semester in June, the Commission will reassess the overall situation as regards the obligations under the Stability and Growth Pact and, where necessary, propose the appropriate steps to the Council.

What are the main conclusions for each country?

The analysis of the in-depth reviews shows that the 14 of the 17 Member States concerned are experiencing imbalances or excessive imbalances, which need to be addressed under the preventive or the corrective arms of the Macroeconomic Imbalance Procedure.

Belgium continues to experience macroeconomic imbalances, which require monitoring and policy action.

  • External competitiveness of goods, including its non-cost dimension, as well as persistent problems with regard to the functioning of the labour market are particularly relevant for Belgium’s macroeconomic stability. The ability of manufacturing to compete internationally has been hampered, which is reflected in eroding margins and job destruction. Squaring high labour costs with sustainable job creation and high standards of living requires a push towards products higher up in the global value chains.

  • Belgium's high public debt remains a concern for the sustainability of public finances. On the positive side, however, Belgium has managed to stabilise its public debt ratio. Belgium is estimated to have met the recommended deficit target in 2013, and is projected to keep the deficit below 3 percent of GDP. Moreover, long average maturities, relatively reduced interlinkages with the domestic financial sector and a relatively healthy private sector temper risks for the wider economy.

Bulgaria continues to experience macroeconomic imbalances, which require monitoring and policy action.

  • The protracted adjustment of the labour market in particular warrants policy action, while the correction of the external position and corporate deleveraging are progressing well.

  • Bulgaria experienced a period of very rapid accumulation of imbalances during the boom phase that coincided with its accession to the EU. The current account reversed since 2009 but the stock of external liabilities remains high, though a large share is foreign direct investment. The adjustment appears to be mostly non-cyclical, but a further reduction in external liabilities depends on sustaining external competitiveness and a strong export performance. The ongoing deleveraging of non-financial corporations could limit investments and growth in some sectors in the short and medium term.

  • Also the weak non-inclusive labour market limits the adjustment capacity of the economy and is one of the factors holding back potential growth. The contraction in employment during the crisis has been more pronounced than suggested by the contraction of output and unemployment has increased sharply. The low-skilled and young workers have been most affected by job losses. Wage floors may risk pricing the most vulnerable out of the labour market. At the same time, active labour market policies and the educational system have not been effective in facilitating the adjustment process so far and hamper a broad-based accumulation of human capital.

Croatia is experiencing excessive macroeconomic imbalances, which require specific monitoring and strong policy action. The Commission will carry out specific monitoring of policy implementation, and will regularly report to the Council.

  • In particular, policy action is required in view of the vulnerabilities arising from sizeable external liabilities, declining export performance, highly leveraged firms and fast-increasing general government debt, all within a context of low growth and poor adjustment capacity.

  • After an expansionary phase, in which imbalances accumulated, Croatia is now experiencing a prolonged bust, in which a range of external and internal risks have come to the fore. External rebalancing is beset by notable risks pending the reduction of Croatia's foreign liabilities to safer levels and is conditional on improved competitiveness and broadening exports beyond tourism to support growth. The deleveraging of non-financial corporates is still at an early stage and non-performing loan developments in this segment need monitoring. State-owned enterprises, which in some sectors still play a dominant role and which are often un-restructured, are overall highly indebted and weakly profitable. There is a need for significant additional fiscal consolidation efforts to curtail the deficit and prevent debt from rising unsustainably.

  • Croatia has the lowest activity and employment rates in the EU, which is partly related to underlying institutions and policy settings, including the benefits system. Better labour market functioning will be crucial to support the growth and adjustment needed in view of external and internal vulnerabilities. On a range of standard indicators, Croatia's business environment ranks significantly below the average for central and eastern European Member States. These factors combine to mean lower potential growth, which hinders private sector balance sheet repair and increases the required fiscal consolidation effort.

  • Croatia is in the Excessive Deficit Procedure and will need to take effective action to address the excessive deficit by 30 April 2014. On current trends, in the absence of additional measures, Croatia risks missing its targets by a large margin in 2014.

Denmark’s macroeconomic challenges no longer constitute substantial macroeconomic risks and are no longer identified as imbalances in the sense of the MIP.

  • The adjustment in the housing market and the implications of high private sector debt for the real economy and the stability of the financial sector seem contained. However, these developments, as well as drivers of external competitiveness, deserve continued monitoring.

  • As regards public finances, Denmark is expected to have sustainably corrected its excessive deficit in 2013.

Finland continues to experience macroeconomic imbalances, which require monitoring and policy action.

  • In particular, the weak export performance of recent years, driven by industrial restructuring, cost and non-cost competitiveness factors, deserves continued attention.

  • Non-cost factors appear to explain most of the deterioration in competitiveness and they call for a policy response. In addition, weak investment, a declining working age population and a significant drop in productivity weigh on potential growth.

  • As regards public finances, the structural deficit is expected to be slightly above its medium-term objective in 2014 while, partly due to the unfavourable growth dynamics, the public debt is projected to increase to above 60 per cent of GDP.

France continues to experience macroeconomic imbalances, which require specific monitoring and decisive policy action. Given the need for policy action already called in the 2013 in-depth review, the Commission will carry out specific monitoring of the policies recommended by the Council to France in the context of the European Semester, and will regularly report to the Council of Ministers and the Eurogroup.

The Commission has also adopted a Recommendation addressed to France regarding measures to be taken in order to ensure a timely correction of its excessive government deficit.

  • In particular, the deterioration in the trade balance and in competitiveness, as well as the implications of the high level of public sector indebtedness, deserve continuous policy attention. The need for decisive action so as to reduce the risk of adverse effects on the functioning of the French economy and of the euro area is particularly important given the size of the French economy and potential spillovers onto the functioning of the euro area.

  • More specifically, the growing trade deficit reflects the long-term decline in export market shares, which is linked to persistent losses in both cost and non-price competitiveness. Despite measures taken to foster competitiveness, so far there is limited evidence of rebalancing. While wages have developed in line with productivity, the labour cost remains high and weighs on firms' profit margins. The low and decreasing profitability of private companies, in particular in the manufacturing sector, may have hampered their ability to grow and improve their export performance. The unfavourable business environment, and in particular the low level of competition in services, further aggravate the competitiveness challenge. In addition, rigidities in the wage setting system result in difficulties for firms to adjust wages to productivity.

  • Despite measures taken to reduce the government deficit since 2010, public debt has continued to increase. This increases France’s risk of exposure to financial market turbulence which would spill over to the real economy, but also to the rest of the euro area. Such risks call for continued fiscal consolidation and, given the high level of public expenditure, for specific focus on spending cuts, notably through the search for efficiency gains. France is projected to miss both headline deficit and structural adjustment targets over the entire forecast period.

Germany is experiencing macroeconomic imbalances, which require monitoring and policy action.

  • In particular, the current account has persistently recorded a surplus at a very high level, which reflects strong competitiveness but is also a sign that domestic growth has remained subdued and economic resources may not have been allocated efficiently. Although the current account surplus does not raise risks similar to large deficits, the size and persistence of the current account surplus deserve very close attention. Germany should aim to identify and implement measures that help strengthen domestic demand and the economy's growth potential.

  • Rather low private and public sector investment combined with subdued private consumption over a longer period contributed to modest growth, falling trend growth, increased dependence of the economy on external demand and the build-up of a sizeable and persistent current account surplus. In the case of Germany, the surplus has been receding vis-à-vis the euro area since the onset of the crisis and a gradual correction of the current account is expected to take place over the coming years on the back of a stronger contribution to growth from domestic demand. This should be sustained by policy action, including measures with positive effect on domestic demand presented in the new government's coalition agreement, since the future capacity of the economy to grow, provide jobs and ensure rising living standards in an era of global competition will depend on tapping more into domestic sources of growth. Central policy challenges, therefore, are higher investment in human and physical capital, further strengthening of labour supply and promoting efficiency gains in all sectors of the economy, including by unleashing the growth potential of the services sector.

  • Germany is expected to make adequate progress toward reducing its public debt ratio; the structural balance is forecast to be more stringent than its medium-term objective. The need for action so as to reduce the risk of adverse effects on the functioning of the domestic economy and of the economic and monetary union is particularly important given the size of the German economy.

Hungary continues to experience macroeconomic imbalances, which require monitoring and decisive policy action.

  • In particular, the ongoing adjustment of the highly negative net international position, the high level of public and private debt in the context of a fragile financial sector and deteriorating export performance continue to deserve very close attention so as to reduce the significant risks of adverse effects on the functioning of the economy.

  • Restoring normal lending to the economy in a sustainable manner would require improving the operating environment for banks. A high government debt is another important source of concern.

  • Despite substantial improvements in the structural fiscal balance, a weakened exchange rate, poor growth potential and elevated financing costs have kept the debt from declining. Hungary is not expected to meet its medium-term objective and its structural balance is projected to deteriorate in 2014.

Ireland's recently completed macroeconomic adjustment programme was instrumental in managing economic risks and reducing imbalances. However, the remaining macroeconomic imbalances require specific monitoring and decisive policy action. The Commission will put in motion a specific monitoring of the policy implementation, and will regularly report to the Council and the Eurogroup. This monitoring will rely on post-programme surveillance.

  • In particular, financial sector developments, private and public sector indebtedness, and, linked to that, the high gross and net external liabilities and the situation of the labour market mean that risks are still present.

  • The fiscal consolidation targets under the programme have been met, and Ireland has improved domestic fiscal rules and institutions. Moreover, the headline deficit is projected to meet the targets in 2013 and 2014. Bank deleveraging targets have been met and capital adequacy ratios have improved. Financial supervision and regulation have been strengthened. Households have increased their saving rates to reduce their indebtedness. Labour market reforms contributed to a reduction in unemployment. House prices have also stabilised and shown signs of recovery. Nonetheless, more progress is needed as public debt remains very high, as does external debt, the financial sector is vulnerable with a high amount of non-performing loans and long-term and youth unemployment remains high.

Italy is experiencing excessive macroeconomic imbalances, which require specific monitoring and strong policy action. The Commission will carry out specific monitoring of the policies recommended to Italy by the Council in the context of the European Semester, and will regularly report to the Council and the Eurogroup.

  1. Italy has to address the very high level of public debt and weak external competitiveness; both are ultimately rooted in the protracted sluggish productivity growth and demand urgent policy attention. The need for decisive action to reduce the risk of adverse effects on the functioning of the Italian economy and of the euro area, is particularly important given the size of the Italian economy.

  2. More specifically, high public debt puts a heavy burden on the economy, in particular in the context of chronically weak growth and subdued inflation. Reaching and sustaining very high primary surpluses – above historical averages – and robust GDP growth for an extended period, both necessary to put the debt-to-GDP ratio on a firmly declining path, will be a major challenge.

  3. In 2013, Italy made progress toward its medium-term fiscal objective. However, the adjustment of the structural balance in 2014 as currently forecast appears insufficient given the need to reduce the very large public debt ratio at an adequate pace.

Luxembourg is not experiencing macroeconomic imbalances in the sense of the MIP.

  • Luxembourg’s growth model is based on an efficient financial sector, which has weathered the crisis well. Still, losses in the manufacturing competitiveness, the evolution of the housing market and the high level of indebtedness of the private sector deserve continued monitoring.

  • More specifically, the analysis of the current account surplus shows that it does not stem from anaemic domestic demand, but is rather the result of the particular growth model of the country strongly based on financial services. Still, it masks a large and steadily increasing deficit in merchandise trade, which broadly comes from disappointing exports. Losses of export market shares are largely associated with unit labour costs rising much faster than in trading partner countries, driven to a certain extent by the wage setting mechanism. The temporary modulation of the automatic wage indexation needs to be replaced by more a structural solution.

  • There are risks to domestic financial stability which stem from a large financial sector, but they are relatively contained as the sector is diversified and specialised at the same time. Furthermore, domestic banks post sound capital and liquidity ratios. The high level of indebtedness of the private sector and, in particular, of the non-financial corporations mainly reflects the presence of a large number of multinational firms that use their branches or subsidiaries in Luxembourg for intra-group financing operations.

  • The dynamism of house prices represents an increasing source of concern. Finally, the current favourable position of public finances is highly dependent on the sustainability of the growth model based on a buoyant financial sector and presents a high sustainability risk in the long term. In this vein, the recently implemented pension reform is insufficient to cope with the challenge. However, the structural balance is above the medium-term objective.

Malta is no longer experiencing macroeconomic imbalances in the sense of the MIP. Although indebtedness remains high, risks to the sustainability of private and public sector debt and the stability of the financial sector appear contained, even if they deserve continued monitoring.

  • More specifically, the analysis in the IDR finds that financial stability indicators remain sound. Still, in light of the structural nature of the risks in the sector, a continuation of the current prudent supervisory and risk-taking practices is key.

  • The housing market has stabilised and thus risks arising from over-exposure to property are limited. Private debt is on the decrease; corporate deleveraging is taking place in an orderly manner and credit market pressures are limited.

  • As regards public finances, Malta is expected to meet its nominal deficit targets in 2013 and 2014. As regards external sustainability, trade performance has been positive, thanks to product and geographical market orientation and non-cost competitiveness factors; the current account balance is in surplus. Still, external competitiveness could benefit from active policy response to cost-adjustments in competitor countries.

The Netherlands continues to experience macroeconomic imbalances, which require monitoring and policy action.

  • In particular, macroeconomic developments regarding private sector debt and ongoing deleveraging, coupled with remaining inefficiencies in the housing market, deserve attention.

  • Although the large current account surplus does not raise risks similar to large deficits, and is partly linked to the need for deleveraging, the Commission will follow the developments of the current account in the Netherlands in the context of the European Semester.

  • As regards public finances, the Netherlands is forecast to miss its headline deficit target in 2014, the year in which the excessive deficit should be corrected, although it is expected to have adopted the structural measures of the recommended size in 2013-14.

Slovenia continues to experience excessive macroeconomic imbalances which require monitoring and continuing strong policy action.

The Commission has also adopted a Recommendation addressed to Slovenia regarding measures to be taken in order to ensure a timely correction of its excessive government deficit.

  1. Slovenia’s imbalances have been unwinding over the past year, thanks to macroeconomic adjustment and policy action. Yet the magnitude of the necessary correction means that substantial risks are still present.

  2. More specifically, the risk stemming from the losses in cost competitiveness, the corporate debt overhang, the increase in government debt and an economic structure characterised by weak corporate governance warrant very close attention. While considerable progress has been made in repairing the banks' balance sheets, determined action with respect to the full implementation of a comprehensive banking sector strategy, including restructuring, privatisation and enhanced supervision is still required.

  3. While the headline fiscal deficit is expected to be above the targets due to the significant expenditures related to bank recapitalisation in 2013 and 2014, the deficit is also projected to exceed the target in 2015 under a no-policy-change scenario.

Spain is experiencing macroeconomic imbalances which require specific monitoring and decisive policy action.

In several dimensions, the adjustment of the imbalances identified last year as excessive has clearly advanced and the return to positive growth has reduced risks. Yet, the magnitude and inter-related nature of the imbalances, in particular high domestic and external debt levels, mean that risks are still present. The Commission will continue a specific monitoring of the policies recommended by the Council to Spain in the context of the European Semester, and will regularly report to the Council and the Eurogroup. This monitoring will rely on post-programme surveillance.

  • More specifically, the very high stock of private and public debt, both domestic and external, continues to pose risks for growth and financial stability. Despite its recent contraction, unemployment remains at alarming levels. The re-orientation of the productive system towards exporting sectors and the recovery in international competitiveness will have to be maintained to reduce the very large stock of external liabilities and the burden that it causes in terms of negative flow of incomes towards the rest of the world.

  • The adjustment of private sector balance-sheets is advancing, but high unemployment and falling incomes have limited the pace of deleveraging of households. Non-financial corporations have reduced debt at a somewhat more sustained pace.

  • In the labour market, building on the positive effects of recent reforms on internal flexibility and wage setting, additional reforms could be envisaged.

  • Finally, significant revenue shortfalls, higher social expenditure and costs of bank recapitalisation have led to substantial pressure on government deficits and a steep rise in government debt to high levels. The 2013 fiscal deficit target might have been missed, although the improving macroeconomic prospects should allow Spain to meet the 2014 headline target. Ensuring a reduction in government debt in the medium-term will require sustained fiscal efforts.

Sweden continues to experience macroeconomic imbalances, which require monitoring and policy action.

  • In particular, developments regarding household indebtedness, coupled with inefficiencies in the housing market, continue to warrant attention. Although the large current account surplus does not raise risks similar to large deficits, and is partly linked to the need for deleveraging, the Commission will follow the developments of the current account in Sweden in the context of the European Semester.

  • More specifically, household debt has increased again after a period of stabilisation, as the main contributing factors – low interest rates on mortgages, debt-bias in taxation, slow mortgage amortisation and limited housing supply – remain in place. After stabilising in recent years, house prices increased again in 2013, driven by favourable demand conditions and supply inefficiencies. Moreover, rental market inefficiencies, cumbersome planning procedures and little competition in construction, have also contributed to the house price dynamics. More stable house prices are needed to limit private indebtedness and reduce macroeconomic risks, once debt service costs increase. The recent macroprudential measures are instrumental, but likely not enough, to reduce macroeconomic risks. In particular, strong tax incentives for debt financing are perceived as key drivers of house prices. Higher residential investment would also improve the savings‑investment balance.

The United Kingdom continues to experience macroeconomic imbalances, which require monitoring and policy action.

  • In particular, developments in the areas of household debt, linked to the high levels of mortgage debt and structural characteristics of the housing market, as well as unfavourable developments in export market shares, continue to warrant attention.

  • More specifically, while recent growth in economic activity is welcome, it is driven mostly by household consumption and is accompanied by a rising current account deficit. Business investment and net exports are yet to pick up from their current low levels. Containing high indebtedness, in particular of the household sector, while minimising the impact on investment and growth, would help limit medium-term risks and vulnerability to rises in the cost of borrowing. The risks in the housing sector relate to a continuing structural under-supply of housing; the relatively slow response of supply to increases in demand results in high house prices, particularly in London and the south-east, and in household mortgage indebtedness. While the declining export market share is unlikely to pose short-term risks, together with the current account deficit, it still points to structural challenges. These are related to restricted access to credit for SMEs, skills gaps and a low level of infrastructure endowment.

  • As regards public finances, the UK seems to continue missing its headline deficit targets and its structural adjustment targets by wide margins.

What are the next steps?

The imbalances and excessive imbalances that the Member States will have to address vary in nature; details of the analysis and conclusions are presented in the individual in-depth reviews. The Commission expects the Member States to take the findings of the in-depth reviews into account in their National Reform Programmes and Stability and Convergence Programmes, which will be assessed in early June, when the Commission will come forward with its next set of country-specific recommendations, under the European Semester, for consideration and adoption by the Council of Ministers. For the Member States with excessive imbalances the Commission will also decide in June whether other steps are necessary.

For the Member States with excessive imbalances (Croatia, Italy and Slovenia), as well as for Ireland, Spain and France the Commission will carry out specific monitoring of policy implementation and will regularly report to the Council and the Eurogroup as appropriate. For Spain and Ireland, this will rely on their post programme surveillance.

Overview of the Macroeconomic Imbalance Procedure:

1. If the situation is considered unproblematic, the Commission concludes that no further steps are necessary under the MIP. This is currently the case for Denmark, Luxembourg and Malta.

2. If the Commission considers that a macroeconomic imbalance exists or could arise, it will come forward with the appropriate recommendations under the preventive arm of the MIP. The Member State concerned will be asked to correct the imbalance or prevent an imbalance from occurring. These recommendations are presented in the context of the European Semester as part of the package of country-specific recommendations (which this year will be presented in early June). This is currently the case for Belgium, Bulgaria, Finland, France, Germany, Hungary, Ireland, the Netherlands, Spain, Sweden and the United Kingdom.

3. If the macroeconomic imbalances are considered excessive, the Commission can recommend that the ECOFIN Council places the Member State under an Excessive Imbalance Procedure; this is the corrective arm of the MIP. In today's package, the Commission has made clear that it will assess in June, based on its analysis of the countries' Stability or Convergence Programmes and National Reform Programmes, whether such a step is merited for the three countries concerned: Croatia, Italy and Slovenia.

Are any sanctions planned to ensure that the MIP is properly carried out?

There are no fines foreseen under the preventive arm of the MIP.

As regards the corrective arm, i.e. if an Excessive Imbalance Procedure is launched, the situation is different: in this case financial sanctions (up to 0.1% of GDP) are foreseen for euro area Member States if they repeatedly fail to deliver a sufficient corrective action plan or to take agreed action. It is important to note that it is the failure to take adequate measures that could be sanctioned, not the fact that the imbalance has not disappeared.

Is the Macroeconomic Imbalance Procedure from now on limited to countries which were found to have a macroeconomic imbalance?

No, the Commission will again assess all EU Member States - except those in a financial assistance programme - in the next Alert Mechanism Report in the second half of 2014. Moreover, it should be noted that also Member States for which the latest Alert Mechanism Report concluded that there was no need for an in-depth review are covered by the European Semester for strengthened coordination of economic and budgetary policies. Therefore the Commission will also put forward country-specific recommendations for them (but not in the scope of the Macroeconomic Imbalance Procedure).

For further information:

http://ec.europa.eu/economy_finance/economic_governance/macroeconomic_imbalance_procedure/index_en.htm

1 :

In accordance with Article 11 (2) of Regulation 473/2013.


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