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European Commission - Speech - [Check Against Delivery]

Press remarks by Vice-President Dombrovskis on the 2016 Annual Growth Survey

Brussels, 26 November 2015

Today, the European Commission has adopted the Annual Growth Survey for 2016, Alert Mechanism Report and Joint Employment Report. This marks the launch of the next cycle of the European Semester. In these documents, we are charting the direction of EU economic and social policy for the year ahead. This package reflects several new features introduced to the European Semester last month, when we presented our follow-up to the 5 Presidents' Report. There is more emphasis on employment and social aspects. More should be done to tackle the social disparities that still exist both between and within Member States. Marianne will say more on this in a moment.

Another novelty is to publish the Euro area Recommendations now, rather than in spring, as was the case in previous years. This will give Member States the opportunity to take the Euro area Recommendations into account in national policymaking, before designing their reform programmes and before the country-specific recommendations are adopted in spring.

The main focus of the 2016 AGS is on policies that can strengthen the recovery and support the process of economic and social convergence towards the best performers. This is because the economic recovery in the EU is still moderate and because there are notable differences in economic performance and social conditions across Europe. Our latest economic forecast shows a moderate recovery both in the EU and in the Euro area. Many of the Member States that were hardest hit by the crisis are now growing faster. Economic growth in the EU is expected to strengthen slightly, from 1.9% this year to 2.0% next year. The recovery is supported by temporary tailwinds. At the same time, we are facing headwinds from a slowdown in emerging markets, geopolitical tensions and security concerns. We should therefore continue to make EU economies more resilient and to foster convergence. In other words, bring economic and social levels across Europe closer together, and closer to the best performers.

To do that, we suggest to use benchmarking, to pursue best practices and to keep up peer pressure amongst countries. In this context, we will build on our current policy priorities:

  • First, stepping up investment. This means building on the Investment Plan for Europe, developing projects that would have a real impact on the economy. It also means removing barriers and creating the right regulatory environment for attracting private investment. High private debt and non-performing loans are also holding back investment. We need to further streamline insolvency systems and ensure efficient judicial processes to address the overhang of debt.
  • The second policy priority is structural reforms to modernise our economies. This implies increased productivity through a flexible and secure labour market, coupled with efficient and sustainable social protection systems. It also implies a competitive and more integrated product and services market that can drive forward innovation and job creation. This cannot be done without efficient and modern public administrations.
  • The third focus is to continue fiscally-responsible policies. Average budget deficit in the Euro area is continuing to decline and is expected to reach 1.7% of GDP next year.

This year, average public debt is also starting to fall. Yet, public debt in many Member States is still very high and needs to be brought down in line with the rules of the Stability and Growth Pact. Debt acts as a drag on growth and makes countries vulnerable to adverse shocks. Population ageing also needs to be addressed. This means ensuring that pension, healthcare and social security systems are financially sustainable and can provide proper protection. The quality of public finances can also be improved, not least with fairer and more efficient tax systems.

Today, we have adopted a proposal for Regulation that establishes a formal Programme for Structural Reform Support - amounting to €143 million to fund technical assistance to Member States. To support structural reforms, the Commission intends to progressively roll out the technical assistance offered by the Structural Reforms Support Service. Our experts are currently working closely with reform teams in Greece and Cyprus. And it is our intention is to make this technical assistance available to all Member States. Any Member State can apply for technical assistance in the design and implementation of institutional, administrative and structural reforms.

Finally, we propose four Euro area Recommendations that focus on the challenges facing Euro area Member States. By publishing the Euro area Recommendations now - at the very start of the new European Semester - we identify common challenges and concerns before Member States shape their national policies.

Today's Euro area Recommendations are as follows:

First, we recommend that Euro area Member States pursue policies that support the recovery and convergence and address macro-economic imbalances that are still holding back stronger growth.

Second, we recommend implementing a series of reforms that tackle rigidities in the labour market and that can help the jobless back into work. Our social protection systems should support people in need, while preventing possible abuse of the system. We need reforms to open up product and services markets. As regards tax policies, we should reduce the tax wedge on labour, especially low-paid labour.

Third, the expected broadly neutral fiscal stance is adequate for the Euro area in 2016. Having said that, we should differentiate fiscal efforts in individual Member States to ensure that the rules of the Stability and Growth Pact are being respected.

And finally, the fourth recommendation aims to address large stocks of private debt and non-performing loans as well as improve insolvency proceedings for businesses and households.    

Thank you.

SPEECH/15/6179


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