Brussels, 12/11/2013 (Agence Europe) - On Wednesday, the European Commission will launch the European Semester for 2014.
One of the documents to be unveiled at the launch is a report on the excessive imbalance alert mechanism, which is expected to recommend a more detailed analysis of Germany's constant trade surplus. On French television channel LCI on Monday 11 November the president of the European Commission, José Manuel Durão Barroso, said the matter would be decided on Wednesday and, in principle, it would indeed be done.
The Commission regularly points out that Germany could do more to improve the economic situation across the eurozone as a whole, basing this position on the European summit's recommendations that Germany introduce the conditions for a sustainable growth in pay by lowering tax on low incomes, boosting domestic consumption, investing more in infrastructure and increasing competition in services.
Germany's trade surpluses seem to be the target here. In order to decide whether or not a country's situation needs to be examined in greater detail, the Commission uses a roadmap of criteria depending on whether the imbalances are external (like the balance of current accounts, changing market share or labour costs) or internal (like public and private debt, house price inflation/deflation and unemployment levels). For current accounts, the criterion used is the average trade deficit over three years (4% of GDP is the threshold used to decide whether to open excessive imbalance proceedings) or the average trade surplus over three years (the threshold here is 6% of GDP). In Germany, the trade surplus has been above 6% since 2007, pointed out EU Euro Commissioner Olli Rehn earlier this month (see EUROPE 10958).
Increased monitoring of Germany does not mean that formal proceedings will be launched against it for excess surplus, which could lead to the country being fined if it fails to take corrective measures. In 2012, twelve countries were under macroeconomic imbalance surveillance. The situations in Spain and Slovenia were examined in greater detail, but proceedings were not launched. Slovenia is expected to escape proceedings this time around as well.
On Wednesday, the Commission will publish its Annual Growth Survey, in which it will recommend a social and economic policy. There has been little change in the situation since last year, and the Commission is expected to recommend a differentiated budget consolidation policy, improved financing of the real economy, promotion of growth and competitiveness, dealing with the negative social impact of the crisis and updating the civil service. The Commission will also publish a report on single market integration.
Budgets 2014. On Friday 15 November, the Commission will publish its analysis of the draft budgets for 2014 of the 13 eurozone nations not in receipt of aid.
For the first time under the new legislation, known as the two-pack, the Commission will issue opinions on each of the 13 draft budgetary plans it has received from eurozone member states (those not subject to a macroeconomic adjustment programme). The idea here is to provide national stakeholders with independent advice, of which the Commission hopes they will take account if it feels that the country's budget will not meet the 2014 commitments under the budget pact, explained a European official, admitting that it was not compulsory to do so. When the 2013 figures have been validated by Eurostat in the spring and draft legislation to implement the 2014 budgets in the member states has been prepared, the Commission will make more detailed recommendations on the budget plans.
For countries under the preventative arm of the stability and growth pact - Germany, Estonia, Finland, Italy and Luxembourg - which have a nominal deficit of under 3% of GDP, the Commission will assess whether the medium-term deficit reduction trajectory has been met. These countries have an investment clause they can use to exclude public investment in infrastructure backed by EU funding from their deficit calculations. Countries under the corrective arm of the SGP (Austria, Belgium, Spain, France, Malta, Slovakia, Slovenia and the Netherlands) with a deficit of over 3% of GDP will be closely examined by the Commission to assess their ability to reduce their underlying structural deficit, in other words not including the cost of the economic crisis. On Monday, Barroso said the French budget for 2014 was broadly satisfactory.
How credible are these measures, given that the European Central Bank says that only 10% of the recommendations will be followed in practice? A European official says that the Commission takes a different view from the ECB and a number of countries that want a different system, pointing out that there is not one country that totally ignored the recommendations. Every country had reacted to the suggestions, although some have not yet reacted enough. He said it was not possible to give an exact percentage. (MB/transl.fl)