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European Commission - Speech - [Check Against Delivery]

Remarks by Vice-President Dombrovskis at the European Semester Conference

Brussels, 16 February 2016

Honourable Co-chairs, Mr. Ferber, Mr. Händel, Honourable Members,

First of all, thank you for this invitation, for this possibility to share views on economic governance of the EU. Parliamentary Week is a key opportunity in the economic governance cycle to take stock, listen to your experiences and ideas moving forward.

Let me start with a few words on the economic and social context.

The European economy has come out of recession and, according to our latest forecast, it maintains the course of a moderate recovery. Employment and domestic demand have been gradually improving, although investment has grown at a slower pace compared to past recoveries. The strengthening of domestic demand and gradually reduced reliance on external demand supported the resilience of the economy.

Our Winter Economic Forecast shows 1.9% growth for the EU and 1.7% growth for the euro area. The implementation of policies has helped to restart the economy and the recovery is also supported by external factors. Monetary conditions are set to remain highly accommodative and fiscal policy is also considered to be broadly neutral, or even according to ECB assessment - slightly expansionary.

Yet, this recovery remains fragile. Unfortunately, today we have more reasons for concern than a few months ago. The external environment has deteriorated and we have seen a marked increase in financial market volatility and in risk aversion.

We need to remain vigilant and continuously reassess the situation.

Most of all, we need to implement policies that support macroeconomic stability and confidence. This includes continuing to work on persisting vulnerabilities in some countries, as addressing issues of high public and private debt and high external debt.

And recent improvements on the employment and social side have only just started to reduce the disparities between Member States in key social and labour market indicators.

We will publish our annual country reports on 24 February. They will show that Member States have been tackling structural shortcomings, but at an uneven pace. We have seen a slowing down of reforms as market pressure has eased.

A number of Member States still need to carry out genuine reforms in many areas to unlock Europe's growth potential so we can be better prepared for new challenges and risks.

Economic policy coordination at EU level gives coherence and continuity to the actions taken in Member States.

Policy directions should not be driven by market sentiment alone, but by a sense of what is good for Member States and what is good for our citizens.

For the Commission, the European Semester process is the key vehicle to focus Member States' attention on their most important challenges.

We see that, gradually, the European Semester takes a more central role, also in domestic policy debates on fiscal and macroeconomic challenges. We are continuously striving to improve in further, not least by keeping it focused.

Yet, the record of implementation on the country-specific recommendations is mixed.

And this is despite the fact that these recommendations go through a very thorough adoption process. Recommendations proposed by the Commission are carefully screened by both the Council of Ministers and the European Council.

It is also important to strengthen ownership at national level. Recommendations from Brussels will not work without ownership at national level.

The role of the European Parliament and national parliaments is absolutely critical here. The role of national parliaments in particular needs to evolve to become more intensively and more regularly involved in the process at national level, in line with national practices.

From the Commission side, we have already held detailed discussions with national parliaments, social partners and other important stakeholders. This has been enriching for both sides. And I look forward to visiting many of your countries in the weeks and months ahead.

Let me now move to the main elements of the economic strategy for the 2016.

The Commission has put growth, convergence and stability at the heart of our economic policy. The three main policy priorities, endorsed also by the European Council, are:

Reviving investment;

Pursuing structural reforms to boost productivity and competitiveness; and

Ensuring sustainable public finances.

In any of these areas, the measures must be well-designed, legislated and effectively implemented. This requires an adequate institutional and administrative capacity.

To support Member States in this respect, we have also proposed a comprehensive European Structural Reform Support Programme with a dedicated budget.

Any EU Member State that wishes so would be able to benefit from support based on best international practices but tailor-made to the circumstances in individual countries.

Our proposal is now with the co-legislators. I trust that the European Parliament will be able to grant its support in time for the Programme to start as of 2017.

In line with the Five Presidents' Report on Completing the Economic and Monetary Union, we have also made the euro area dimension - and related policy challenges - more prominent.

For the first time, we have published the euro area recommendations at the beginning of the European Semester - in November and together with the Annual Growth Survey - rather than at the end, per our previous practice. This new timing has opened up the possibility for a more lively debate than in the past. It will also ensure that common euro area concerns are fully reflected in the country-specific recommendations for euro area Member States in May.

The five recommendations for the euro area highlight the need for further structural reforms, sound public finances, measures to address macroeconomic imbalances, reduce private and public debt, and for deepening EMU.

There is, of course, overlap between the challenges and policy needs of the euro area and those of all EU Member States. The need to restore convergence is, however, particularly acute in the euro area, to ensure that all its members can prosper within the euro.

There are also challenges that need a joint response by the euro area as a whole, and this includes working together towards a stronger Economic and Monetary Union.

Shortly after the 5 Presidents' Report of last June, the Commission put forward proposals on practically all the initiatives foreseen in the short term and that can be undertaken under the current Treaty.

None of these initiatives are totally uncontroversial. At the same time, we believe we have a balanced and realistic approach on how best to move forward.

To conclude, our common task is to improve economic and social conditions and bring them closer to the best performers.

We cannot do so by simply standing still. There are no easy recipes. We need to reform our economic and social structures to keep us competitive in the global economy, to be prepared for any future shocks and to preserve a cohesive society.

I wish you every success for this Parliamentary Week!

Thank you.


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