Brussels, 02/06/2014 (Agence Europe) - On Monday 2 June, the European Commission published social and economic recommendations for each of the 28 member states, which the European summit will be invited to endorse at the end of the month.
As expected, the recommendations set out the situation in each country and stress the need to continue budget consolidation and structural reforms, which the Commission says is the only way to encourage the green shoots of recovery. Publishing the recommendations shortly after European elections characterised by rising Euroscepticism and even Europhobia, the Commission used conciliatory wording, talking of team-work. The president of the European Commission, José Manuel Durão Barroso, said: “If we keep fiscal consolidation and structural reforms then there will be more space for growth through investment. Fiscal consolidation was necessary”.
He listed the Commission's thematic priorities as dealing with the long-term impact of youth unemployment and unemployment in general, encouraging investment in education and research, amending the tax system to tax labour less and pollution, property and consumption more, tackling the financial fragmentation that is hindering lending to the real economy, and speeding up the reform process for services, energy, transport and innovation.
Euro Commissioner Olli Rehn said that economic recovery was spreading and the Commission expected growth of 1.2% of GDP in the eurozone and 1.6% in the EU28 in 2014. He said: “Recovery is spreading. Nevertheless major challenges remain, like a high level of unemployment”. He drew a mixed balance sheet for the Commission's 2013 recommendations.
The Commission recommends ending the infringement proceedings against six countries that have sustainably reduced their public deficits to below 3% of GDP, namely Austria, Belgium, Denmark, the Netherlands, the Czech Republic and Slovakia. If the Council of Ministers follows the European Commission's recommendations, that would leave eleven countries with proceedings running against them, compared with 24 in 2011. The Commission recommends not launching macroeconomic imbalance proceedings against Croatia, Spain and Italy.
Employment and Social Affairs Commissioner Laszlo Andor said the social situation is not improving, despite the recovery, and 26 million people in Europe, including 5.3 million young people, are out of work: “Compared with 2008, 6.6 million people are at risk of poverty and social exclusion”, he stated, adding that the gap between core and peripheral member states was growing.
Taxation Commissioner Algirdas Semeta said taxation is crucial when it comes to job creation and a third of member states (Austria, Belgium, Spain, France, Italy, Latvia, Lithuania, the Czech Republic and Romania) have reduced taxation on labour, but more needs to be done to bring the average tax on labour in the eurozone in line with that in OECD countries.
Noting the fall in competitiveness in France, Rehn said that the reforms in the country were going in the right direction, particularly those to encourage investment in production and reduce the deficit by cutting public spending. The Commission does not think the budget target of reducing the deficit to below 3% of GDP in 2015 will be met but calls for details of planned measures to achieve the structural adjustment scheduled for 2015.
Despite recovery in Spain, significant challenges remain, such as high unemployment and high private and public sector indebtedness. The Commission recommends further reforms in the service sector, the labour market and the civil service. Rehn says the measures that Prime Minister Mariano Rajoy announced at the weekend (details of which will be announced on Friday) go in the right direction.
The Commission recommends that Italy “intensify” reforms to rationalise public spending and make tax collection more efficient in order to deal with its excessive public debt levels and low international competitiveness.
Noting not much progress in Germany, the Commission says its recommendations for the country are much the same as last year - making public spending more cost-efficient in healthcare and long-term care, boosting domestic demand by cutting high taxes and high social security contributions and doing more to open up the service sector to competition. The Commission says Germany should make more of this window of opportunity to increase and make better use of investment in infrastructure, education and research. Germany's budget is commendable.
The Commission says the programme of economic reform in Croatia is dealing adequately with the problem of excessive macroeconomic imbalances. Rehn said he hoped the excessive deficit proceedings would be concluded in 2016. He said Croatia's budget for 2014 and measures announced in April should be sufficient to help the country achieve its budget targets and structural reforms this year.
The Commissioner said Slovenia had addressed its imbalances in a “decisive” manner but substantial risks remain. He said action was needed to achieve budget targets and deal with problems in the country's companies and banks. Slovenia has announced early general elections on 13 July. Quizzed about this, Rehn said he was concerned about the country's economic sustainability. He recommended that Ljubljana agree on measures to finance the pensions system beyond 2020 and that the state privatise some of its stake in the country's banks. (MB & EL)