Brussels, 13/11/2013 (Agence Europe) - The European Commission is falling over itself repeating that it is not criticising Germany's foreign competitiveness, reiterating this on Wednesday 13 November when publishing a report on the excessive imbalance alert mechanism, which singles out Germany for the first time, along with other countries (see EUROPE 10961). The Commission says it is planning to prepare detailed reports on 16 member states, three more than in February, adding Germany, Luxembourg and Croatia to the list.
“On Germany, we are launching here a procedure, an almost automatic in-depth review. Given that Germany had surpluses in four indicators, it is unavoidable to launch this review,” explained the president of the European Commission, José Manuel Barroso. This relates, notably, to the fall in the effective exchange rate, loss of market share for export and the current account surpluses. Commissioner Rehn said: “A persistent high surplus also means that Germans are persistently investing a large part of their savings abroad. The question is whether this is efficient, even from the German perspective”. Rehn added that the country-specific recommendations were still valid. They ask Berlin to reduce taxes on low incomes, boost domestic demand and increase competition in services.
Barroso said that the drawing up of an in-depth report “should not be perceived as Europe disagreeing with German competitiveness - we would like to have more Germanys in Europe.” Rehn said that German competitiveness and its success on the financial markets is what the Commission would like to see in every member state, but the question was “whether Germany, the European Union's economic powerhouse, could do more to help the rebalancing of the European Union economy”, said Barroso, refusing to comment on the report's conclusions. Rehn regretted that the media saw this as a controversial matter, with Barroso adding that the Commission wanted more Germanys to ensure there was no ambiguity.
The other two countries added to the in-depth assessment list are Croatia and Luxembourg. For Luxembourg, the above-average indicators are the current account surplus, labour costs, private sector debt and loss of share of the export markets. For Croatia, the examination will focus on the country's foreign position and high unemployment levels. For both these countries, along with Germany, the Commission will be assessing whether imbalances exist.
For the 13 other member states, the assessment approach will be different. For Spain and Slovenia, the aim will be to measure the persistence and correction of imbalances identified in April. For France, Italy and Hungary, whose imbalances were noted in the previous assessments, the Commission will check whether the imbalances are still in place. For Belgium, Bulgaria, Denmark, Malta, the Netherlands, Finland, Sweden and the United Kingdom, which were singled out for examination in the past, the Commission will be examining whether imbalances persist or whether they have been corrected.
Confirmation of Commission's approach to solving the crisis. The Commission has published its Annual Growth Survey, in which it notes that the European economy has reached a turning point in the crisis. The report states: “What we need to do now is keep our eyes on the prize and make sure that we sustain and strengthen the recovery that is underway. We must ensure that our efforts translate into stronger growth that generates jobs. The best way - I would say the only way - to do that is to pursue our reform efforts, avoiding reform fatigue”. The Commission therefore recommends differentiated budget consolidation that encourages growth. The report says that the improvement in member states' budget situations by around 0.6% of GDP this year in structural terms reduces the urgency of the need to take basic measures. Consolidation should focus on public spending and countries with more room for manoeuvre are encouraged to take tangible measures to stimulate private investment and consumption by reducing taxes and social security charges.
The Commission's document says that, in order to support the recovery, normal lending needs to be restored in the real economy. This requires a full clean-up of bank balance sheets and the introduction of banking union. The Commission also recommends closer surveillance of debt in the private sector and the establishment of alternatives to financing from banks. A more efficient use of energy resources is also suggested, along with improvements in introduction of the services directive by removing restrictions on access to regulated professions.
“We must not compromise what we have achieved to date”, Barroso said, describing the continued efforts as a sustainable way of tackling “the biggest problem we are still currently facing: unemployment, particularly youth unemployment”. The Commission has also submitted its raft of recommendations in this area, particularly the implementation of the youth guarantee and salary development in step with productivity. On the basis of a draft report on employment, Employment Commissioner Laszlo Andor has expressed concern at the fact that the situation has worsened still further, “with 26.8 million jobseekers unable to find a job” and “household incomes” in freefall in many states. He also noted widening divergences between the social and employment situations of the member states, particularly within the eurozone.
On Friday 15 November, the Commission is to present its assessment of the national budgets for 2014, which the states put to it in October. With a view to this, it has already published an interim balance sheet of the implementation of the specific recommendations for each country enshrined by the Council last summer. In this document, it notes that the economic situation of the eurozone remains a matter for concern. Its general conclusion, however, is that progress made in implementing the recommendations “shows that measures have been taken to meet the current economic challenges”. But the work is not yet done, it warns, and could require further reforms “to improve the eurozone's adjustment and competitiveness capacity”. Of the non-eurozone countries, it particularly points the finger at Croatia, stressing that the public deficit for the first nine months of the year is nearly 4% of GDP, a figure higher than was forecast for the whole year. The Commission has already announced that it would be drafting a report on an excessive deficit for Croatia, which could ultimately lead to a procedure against the country.
Austrian Hannes Swoboda, leader of the S&D Group at the European Parliament, said that the Commission “wants to strengthen an imaginary recovery”. Quoting the figure of 0% growth for 2013, he added that this is not a recovery, but a situation in which the EU is “barely escaping recession”. He criticises the Commission for being proud of the success of its economic policy. But he did welcome the fact that the Commission is targeting Germany and admits that “corrections must be made not only by countries that encounter budgetary deficits, but also by countries with excessive export surpluses”. (EL/transl.fl)