Kicking off the 'European Semester' budgetary process for 2018 on Wednesday 22 November, the European Commission stressed the need to make use of the current dynamism in the European economy to continue reforms and the cleansing of the financial sector to better prepare the member states for an economic downturn in the future.
Aside from the autumn economic forecasts, predicting an average growth of 2.2% of GDP in the Eurozone (see EUROPE 11901), the launch of this budgetary exercise at European level saw the adoption of a series of documents. These include the Annual Growth Review, which unsurprisingly recommends a continued socio-economic policy based on the following triptych: stimulating investment, continuing structural reforms and getting on top of public finances.
In this framework, the Commission has for the second time put together a draft specific economic policy recommendation for the entire Eurozone. As recommended by the European budgetary committee (see EUROPE 11814), the institution recommends a globally neutral budgetary trajectory. This year, it stresses the importance of stepping up the fight against aggressive tax planning at Eurozone level.
At the same time, the Commission presented its opinions on the draft 2018 budgets of all of the countries of the Eurozone with the exception of Greece (see other article).
On the financial level, the Commissioner for the euro, Valdis Dombrovskis, spoke of weaknesses that are undermining the banking sector. The Commission stresses that the integration of the financial markets is still lagging behind considerably, particularly in the Eurozone, and argues the need to increase the transparency of capital flows, for taxation purposes in particular.
Once again, the European institution flags up the importance of completing Banking Union in the Eurozone and deepening Economic and Monetary Union (EMU). With regard to this, in response to the delay in setting the German government in place, the President of the European Council, Donald Tusk, tweeted that the Eurozone summit would still take place in mid-December to work on the specific proposals on EMU to be presented by the Commission on 6 December (see EUROPE 11899).
Macro-economic imbalances. On Wednesday, the Commission also published its report on the early warning mechanism for 2018, which aims to correct imbalances harming the smooth functioning of the economies of the EU countries. It proposes an in-depth review for 12-member states (Germany, Bulgaria, Cyprus, Croatia, Spain, France, Ireland, Italy, the Netherlands, Portugal, Slovenia and Sweden) concerned by the macro-economic imbalance procedure (see EUROPE 11792).
The examination of the German situation is expected to focus on the current account surplus (trade balance and financial flows), which regularly exceeds the indicative upper limit laid down in the procedure (see EUROPE 11731).
Reinforced social dimension. The Commissioner for Employment and Social Affairs, Marianne Thyssen, explained that the 'European Semester' reflected a greater social dimension related to the European pillar of social rights, which was adopted on Friday of last week (see EUROPE 11907).
For the first time, the Commission has published a joint report on employment to accompany the annual growth review. This report aims to put into practice the social scoreboard, which analyses the performances of the member states in light of 14 key indicators (see EUROPE 11775) structured around three axes: - equal opportunities and access to the employment market; - fair working conditions; - social protection and social inclusion.
For each indicator, the member state is marked on the basis of the reforms carried out on social and employment matters, the Commissioner explained, adding that she is aware that reforms cannot be carried out overnight. She stressed that the European pillar will steer the drafting of the country-by-country reports expected for May 2018 by identifying the most urgent social challenges.
Despite an unemployment rate of 7.5% in the EU, there are still major differences between member states, with rates of 3.5% in Germany and the Czech Republic, compared to 17% in Spain and Greece. (Original version in French by Mathieu Bion, Lucas Tripoteau and Pascal Hansens)