Brussels, 26/02/2016 (Agence Europe) - On Wednesday 26 February, the European Commission published its annual analysis of the macro-economic imbalances observed in 18 member states.
“The Commission's analysis shows that reforms are being carried out in a number of policy areas, but the effort is uneven. A number of member states need to be more decisive in tackling persistent vulnerabilities, such as high public and private debt”, the commissioner for the euro, Valdis Dombrovskis, said in a press release.
On the basis of these reports, the Commission will start dialogue with the states in question. In March, it will decide into which category of the procedure for macro-economic imbalances it will put these states. For the first time, infringement proceedings may be formally launched, which has not happened since the latest reform of the Stability and Growth Pact.
In its report on the early warning mechanism on macro-economic imbalances presented at the end of November, the Commission included Austria and Estonia in the group of countries already under surveillance (see EUROPE 11439). It noted that the imbalances observed in Bulgaria, France, Croatia, Italy and Portugal require decisive action and specific monitoring, whilst those observed in Belgium, Germany, Spain, Finland, Hungary, Ireland, the Netherlands, Romania, Slovenia, Sweden and the United Kingdom require differentiated action.
For France, the Commission notes that despite recent improvements in export performance, the potential growth of French GDP has dropped since the beginning of the crisis, despite strong demographic dynamism. It states that the high and rising public debt, together with declining competitiveness and growth in productivity, may constitute a source of considerable risks for the future. The Commission recommends “considerable cleansing efforts (…) over the next few years to reduce the deficit and the high level of public debt”.
Italy, where the Commission president, Jean-Claude Juncker, was on an official visit on Friday (see other article), has reformed its employment market and its education and banking systems. The Commission states that “stronger growth in competitiveness is the key element” of the recovery of the Italian economy. The Commission also notes the high level of Italian public debt (peaking at 133% of national GDP in 2015), together with a worsened competitiveness and growth of productivity situation, “remains a source of vulnerability”.
In Rome on Friday, the Italian prime minister, Matteo Renzi, said that reducing debt was a priority of his government, which has been in place for two years. He also called for budgetary responsibility whilst applying to use all flexibility offered by the Stability Pact (see EUROPE 11488).
Portugal, whose 2016 budget may not be in line with the European budgetary rules (see EUROPE 11488), continues to face a series of vulnerabilities, says the Commission: a high level of public and private indebtedness, a generally low level of labour, an inflexible regulatory environment and inefficient administration. One of the keys to Portugal's recovery is relaunching investment, which has dropped off more than the European average in this country since 2009.
The Commission is also looking at the current account surpluses observed in several member states, particularly Germany. In view of the central position of the largest economy of the eurozone, the German trade balance surplus (it is expected to remain above +8% in 2016-2017) has an impact on the economic performance of the eurozone as a whole. The Commission recommends an increase in salaries, which will stimulate internal consumption (the introduction of a minimum wage had an effect on low earners) and public investment efforts. As regards the massive influx of refugees, the Commission takes the view that Germany's economic foundation, such as a robust employment market and healthy public finances, is a solid underpinning to build on to tackle the issue.
The reports aim to steer the member states' reflection in the work to prepare their national stability and reform programmes, which they will submit to the Commission in April. After that, the Commission will present its country-specific recommendations in the framework of the budgetary process of the European semester. (Original version in French by Mathieu Bion)