The new European Commission has highlighted its desire to “green” the ‘European Semester’ budgetary process at the start of the 2020 financial year and the presentation of the traditional “autumn package” on Tuesday 17 December in Strasbourg, bringing together all the reports to be used to draw up recommendations to be addressed to the various Member States.
For Paolo Gentiloni, the Commissioner for the Economy, who came to present the package alongside Vice-President Valdis Dombrovskis and the Commissioner for Employment and Social Rights, Nicolas Schmit, the “greening” of the ‘European Semester’ is the “strong message” that will guide the cycle that is beginning.
The ‘European Semester’ will thus fully build on the UN’s sustainability objectives, as well as the climate and environmental objectives of the new Commission, he said. However, these reports are only a “basis”, he insisted. They mark the beginning of a process whose effects will already be tangible when the country-by-country recommendations are presented in February.
A greener semester...
A central element of this new package, the Annual Sustainable Growth Strategy defines the European Union’s approach to economic policy and employment. In line with the Green Deal, this strategy should enable the EU to respond to the three major challenges it faces: “climate change, technological progress/digitisation and demographic change”, Mr Dombrovskis declared.
Its objective is threefold: – to ensure that Europe remains the cradle of the most advanced social protection systems in the world; – transforming Europe into the first climate-neutral continent; – to make Europe a dynamic centre for innovation and competitive entrepreneurship.
To this end, it encompasses four interrelated dimensions that “must guide structural reforms”, namely: environmental sustainability, productivity gains, equity and macroeconomic stability.
In detailing the last point, Mr Dombrovskis stressed the importance of reducing public debt in order to make countries more resilient to economic shocks and to make funds available for public investment by reducing borrowing costs.
He also recalled that the Commission will present an examination of the ‘2 Pack’ and ‘6 Pack’ legislative packages in January (see EUROPE 12384/21), while calling for the “completion of an economic and monetary Union”.
Regarding the “social equity” dimension, the Vice-President stressed the importance of “placing people at the heart of the transition”, taking particular care not to leave any region by the wayside, referring to the future Just Transition Mechanism (see EUROPE 12388/3).
To consult the strategy: http://bit.ly/36KM5oa
...For a strong euro area
Mr Gentiloni, Commissioner for the Economy, called for greater coordination in the euro area – while recalling the diversity of challenges facing the Member States.
Thus, addressing economies with current account deficits, he called on them to strengthen their competitiveness and reduce their external debt. Countries with large surpluses are invited to focus on supporting wage growth and stimulating public and private investment. And more precisely: “The review of tax governance is relevant to the public, the completion of the capital markets union for private investment.”
The Commission also calls on the euro area countries to work twice as hard to deepen the Economic and Monetary Union, in particular for the completion of the banking union and the capital markets union. This policy should also help to strengthen the international role of the euro.
As for tax systems, they must be modernised and tax evasion and avoidance combated. Mr Gentiloni called for action against aggressive tax planning and the fight against the race to the bottom in corporate taxation.
In the event of a deterioration in prospects, Mr Gentiloni called on the Eurogroup to strengthen its cooperation and adopt a favourable budgetary position. Together, these actions contribute to addressing the common challenges facing the entire euro area, the recommendation stresses.
To read the report, go to: https://bit.ly/2M2LYMS
A new report on the single market
This ‘European Semester’ also contains a major innovation: a single market performance report for 2019. More precisely, this report is a revised and expanded version of a report that existed 9 years ago, an internal source explained to us, focusing on the single market for goods and services and competition. Reliable and systematised indicators are yet to be established.
At the press conference, Mr Dombrovskis indicated that there are two areas where significant improvements can be made: the single market for services and public procurement (although transparency in public procurement is improving, notably in Hungary, Poland and France).
According to the report, European rules are not sufficiently implemented and market surveillance can be improved. Poland is thus the country with the “highest potential return” in terms of improved compliance, followed by Italy, Spain and Greece, or France, Belgium and Germany. On the energy side, cross-border competition is far from complete, which would, according to the institution, benefit not only consumers, but also the pursuit of the EU’s climate objectives.
An interesting point concerns the role of standardisation in pursuing the Union’s environmental and climate objectives, and ultimately in trying to impose European standards at international level. Other key issues noted in the report include accelerating the digitisation of the Single Market and the integration of capital markets.
Finally, the report notes that the EU lags behind China and the United States in terms of the number of high-growth SMEs (‘scale-ups’). Above all, these scale-ups are very poorly distributed throughout Europe: 70% of the 1,220 new scale-ups in 2017 were located in the United Kingdom, France, Germany and Sweden.
To consult the Single Market Report: http://bit.ly/2RYGRRL
13 Member States in the sights
In its report on the alert mechanism – an instrument for detecting macroeconomic imbalances – the European Commission recommends that 13 Member States be the subject of a “thorough review” in 2020.
The balance sheet of these countries (Bulgaria, Croatia, Cyprus, France, Germany, Greece, Ireland, Italy, the Netherlands, Portugal, Romania, Spain and Sweden) should make it possible to identify possible macroeconomic imbalances and assess their severity.
While 10 of these States are considered to demonstrate imbalances, Cyprus, Greece, and Italy are considered to be excessively unbalanced. These are the same countries as last year, Commissioner Gentiloni told media.
According to him, macro-financial stability risks are declining in the face of rising growth, but “vulnerability points” remain. He highlighted, in particular, the current account surplus which, although declining slightly, still represents more than 3% of GDP, or “the highest rate in the world”.
Unit labour costs have risen sharply, particularly in Central and Eastern Europe and the Balkans, according to the Commissioner. He also explained that while private sector debt reduction continues, household debt reduction has slowed and housing prices have continued to rise rapidly. Nor has public debt declined in some Member States, Mr Gentiloni regretted. He added that the resilience of the EU banking sector had improved, but that problems remained.
To read the report: http://bit.ly/2M4DS6G
Persistent inequalities
Finally, the Joint Employment Report also brings good and bad news, as indicated by the Commissioner for Employment and Social Rights, Nicolas Schmit. On the one hand, the level of employment has never been so high in the Union, with 241 million people in employment, and on the other hand, wage and gender inequalities remain high between Member States, but also within Member States themselves.
In 2018, Greece, the regions of southern Spain and Italy, and the outermost regions, are the most affected by unemployment (more than 20% of the 15-74 age group). The same regions and Member States, with Romania and Bulgaria, have the highest rates of young people not employed, not in education or training (NEETs), and the highest number of people at risk of poverty or exclusion.
To consult the joint employment report: http://bit.ly/36GPyUX (Original version in French by Pascal Hansens, Camille-Cerise Gessant, Damien Genicot and Hermine Donceel)