Brussels, 12/01/2011 (Agence Europe) - On Wednesday 12 January, the European Commission adopted its Annual Growth Review, a document detailing key action to get the European Union out of the financial crisis. The action focuses on correcting public finances, structural reforms in the member states and EU measures to stimulate economic growth. The unveiling of the document marks the launch of the “European semester” when member states will present to their EU peers the outline of their upcoming national budget and economic reform programmes for the following year, before they are decided upon by the national parliament (see EUROPE 10289). This comes at a time of rising tension on the money markets for sovereign debt in euros, which is encouraging the Commission to call for expansion of the EFSF intergovernmental fund used to help eurozone countries (see related article).
“We are introducing a genuine EU dimension into national budgetary and economic policymaking for the first time. Of course, member states will be taking the final decisions. But from now on, each member state will bring ex-ante the EU dimension into the shaping of its national policy and decision making”, said the president of the European Commission, José Manuel Durão Barroso. EU Economic and Monetary Affairs Commissioner Olli Rehn said the key message was clear - the need for both budget consolidation and structural reform to create the criteria for sustainable growth and job creation. Welcoming the launch of the “European semester”, the Hungarian Presidency pledges in a press release to immediately launch discussions at the EU Council of Ministers so that the March 2011 European Council can provide recommendations for the preparation of national economic programmes scheduled for part-way through April 2011.
Budget consolidation is the main priority as far as the European Commission is concerned. Rehn pointed out that if it does not clean up its public finances, the EU will be at the mercy of the markets. He said the EU had to get out of the vicious circle of excess public debt, unstable financial markets and lack-lustre economic growth. The Commission is recommending annual budget adjustment for 2011 of above 0.5% of GDP without reducing investment likely to foster growth (such as investment in education, research and innovation). If they have to increase taxes, the member states should focus attention on indirect taxes like VAT and increasing the tax basis rather than raising rates as such. When it comes to macroeconomic imbalances, the Commission believes that countries running a current account deficit should strictly limit pay rises. Those with a current account surplus (Germany, for instance) should examine why domestic consumption is being held back. In 2010, gross aggregate public debt accounted for 85% of the eurozone's Gross Domestic Product, and 80% of the EU27's GDP.
To avoid economic growth without job creation, people have to be put to work and the 75% employment rate set as a target for the EUROPE 2020 strategy must be met, explained EU Employment and Social Affairs Commissioner László Andor. He called for a raise in the retirement age to reflect increased life expectancy, a reduction in early retirement schemes and a taxation system that does not penalise labour as much. Asked about Spain's current reforms that will set the retirement age at 67, Andor said that Spain was lucky to have high life-expectancy but also unlucky in having high levels of unemployment. When it comes to economic measures to stimulate growth, the Commission wants to make the most of the growth potential provided by the internal market. It will closely monitor implementation of the Services Directive and the third EU energy market package (see EUROPE 10290). Later this year, it will suggest harmonising the company tax basis in the EU, a measure described as Barroso as being beneficial for the internal market and making life easier for corporations. In the draft multiannual financial framework, the Commission will include suggestions on EU bonds to finance the introduction of public-private partnerships for priority EU investment. (M.B./transl.fl)