On Wednesday 22 February, the European Commission presented an overview of the main challenges facing 27 countries - all of the member states with the exception of Greece.
These country-by-country reports, which include an analysis of the significant or excessive macroeconomic imbalances observed in 13 countries, will serve as a basis for the continuation of dialogue with the member states called upon to present their national stability and reform programmes by the end of April, in the framework of the 'European Semester' budgetary process. They will also help to ensure that the stakeholders take ownership of the process of socio-economic policy-making at national level, said the Commissioner for the euro, Valdis Dombrovskis.
In general, the Commission notes "particularly encouraging" progress in reforms of the financial sector and the employment markets, as well as an ongoing improvement in the national public finances. However, action must be taken to continue the cleansing of the banking sector, tackling the stock of €1 trillion in non-performing bank loans, Dombrovskis said (see EUROPE 11720 and 11714). This dossier will be discussed at the informal meeting of European finance ministers, to be held in Valletta in early April.
However, although economic recovery is continuing to gain ground (see EUROPE 11724), it is struggling to reduce socio-economic inequality between states and within individual countries. Tackling inequality is beneficial, not simply from a social point of view, but also an economic one. It helps to make the economy more resistant to shocks, said the European Commissioner for Employment and Social Affairs, Marianne Thyssen. Even so, she spoke of a significant improvement on the employment front, with the record figure of 242 million people in work, unemployment of less than 10% in the Eurozone and down among young people. Calling for salaries to rise in line with the increase in productivity, she said that the increase in low wages in Portugal was likely to support struggling sections of the population, particularly the working poor.
If the recovery is to benefit all citizens, we need wage rises for all workers, everywhere in Europe, and more public investment. The European Commission must now make recommendations on increasing wages, collective negotiations and public spending, said the European Trade Union Confederation.
Surplus in German current accounts continues to rise
In Germany, the current account surplus (trade balance and financial flows), which makes up 75% of the surplus at Eurozone level, will remain above 8% until 2018, whereas the upper limit is set at 6%. "This creates both economic and political distortion for the entire Eurozone", observed the Commissioner for Economic and Financial Affairs, Pierre Moscovici. The German surplus can also be explained by external factors such as the drop in prices of oil and raw materials and the weaker euro, he said, revealing that the German government had also acted to boost public investment, particularly in infrastructure. However, the Commissioner said, "this is no time to prove Trump right, when he attacked Germany" by launching infringement proceedings against the country. On the other hand, said Sven Giegold (Greens/EFA, Germany), the "preferential treatment" granted to Germany has fuelled ill feeling related to a "German Europe".
Of the 13 member state under in-depth analysis (see EUROPE 11507), six of them (Bulgaria, Cyprus, Croatia, Italy, France and Portugal) have macroeconomic imbalances deemed excessive.
In the case of France, the excessive macroeconomic imbalances have been the subject of a "gradual correction" thanks to the necessary reforms carried out, which are starting to pay off, Moscovici said. In this election year, in which a number of candidates for the French Presidency have pledged to cast off the rules of the pact, it is absolutely essential to continue the reforms.
Romania. The Commission has furthermore written to the Romanian authorities, expressing concern at the increase in the national government deficit, which may rise to 3.6% of GDP in 2017 and 3.9% in 2018. This increase is due to tax breaks and an increase in salaries and pensions, Moscovici explained. He urged Bucharest to present measures to correct the Romanian budgetary trajectory ahead of the presentation of the spring economic forecasts.
Austria. It is worth noting that the Commission has recommended that the Council fine Austria €29.8 million on the grounds of serious negligence in transmitting its budgetary data to the statistical office of the EU (Eurostat). The matter, which is the subject of a Commission investigation opened in May of last year, concerns the compilation, checking and declaration of public accounts by the region of Salzburg, which led to an incorrect statement of Austrian government debt and deficit figures over the period 2008-2012. According to the Commission, the body Statistik Austria has been aware since at least December 2012 of possible incorrect declarations in the accounts of Salzburg, but did not notify the Commission of this until October 2013. (Original version in French by Mathieu Bion with Élodie Lamer)