EU warns member states over economic plans

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The European Commission yesterday (7 June) slammed national economic reform plans for lacking ambition and concreteness.

By delivering country-specific recommendations which are targeted and measurable, the Commission yesterday gave member states its assessment of their national plans.

"We know that achieving the goals we have collectively set ourselves means sometimes hard choices, but these efforts, if made seriously and by all, will allow Europe to leave the crisis behind it and safeguard our future prosperity," said European Commission President José Manuel Barroso.

In the first of what will be annual national policy recommendations for the economies of each of the EU's 27 member states and the euro zone as a whole, the Commission insisted that more needs to be done to ensure that member states' public finances are sustainable.

"National plans are often lacking in ambition," the Commission said. "Programmes vary significantly in terms of the specificity of the actions referred to. Many of the proposed measures are vague, lacking sufficient focus," the EU executive reported.

Some states are not doing enough to cut government spending in line with EU rules and don't have clear plans for getting people back to work, according to the Commission's assessment of national plans.

Long-term unemployment and joblessness among young people and women also are serious problems in countries that have not been hit as hard by the crisis, the Commission warned.

Eurozone members were told to align their pension systems with their demographics, limit wage rises in line with productivity, and cut payroll tax.

Country-by-country recommendations

The Commission advised Germany to sort out its problematic regional government-sponsored Landesbanks, to broaden its labour market, and to open up its energy sector.

France was told it should cut labour taxes and rely more on environmental and consumption taxes, and do more to help the young and low-skilled get jobs.

The Spanish government was urged to ensure fiscal discipline on the part of its regional governments, to push through painful pension reforms including a higher retirement age, and to clean up governance at its heavily indebted savings banks.

The UK was encouraged to reform its housing market, planning system and mortgage market, as well as to tackle youth unemployment and skills shortages.

London was also told to make sure there was "no slippage from the ambitious spending reduction targets".

Italy was asked to introduce binding spending limits and to make better use of EU Cohesion Funds to even out differences between regions.

Belgium was urged to implement more ambitious spending cuts in 2011, finish restructuring the banking sector, reduce high labour taxes and reform wage-bargaining systems.

Greece, Ireland, Portugal, Romania and Latvia were told to stick to their bailout programmes.

EU countries are also due to reach a compromise on economic governance this month, as well as finalise a third round of EU-wide banking stress tests.

Commenting on the recommendations, EU Economic Affairs Commissioner Olli Rehn said the crisis had both country-specific and systemic features and it was logical that to overcome it, actions needed to be taken both at country level and at European level.

Daniela Vincenti-Mitchener

French Socialist MEP Pervenche Berès, president of the European Parliament's employment and social affairs committee, welcomed the European semester by stating: "I can only be pleased with the aim of heightened coordination of the policies of the member states."

However, she added that she was "wary as to the contents of the recommendations. The automatic indexation of the retirement age with life expectancy as well as the proposals in the area of the setting of salaries and the reform of legislation in the area of employment protection are unacceptable".

She stressed that "[t]he next European semester will have to ensure a more important role for European and national parliamentary representation as well as for social partners. It is the only guarantee for reform programmes oriented towards the long-term and that are sustainable".

The European Trade Union Confederation (ETUC) accused the European Commission of "targeting wages in a negative way and [of] ignoring what is a key principle in Europe: the autonomy of social partners and collective bargaining".

"It is not up to governments and certainly not up to the Commission to decide on a reform of the wage setting machinery," it added.

ETUC went on to state that EU countries must not adopt "beggar-thy-neighbour" strategies for competitiveness. It urged governments to respect the principle of "equal pay for equal work" and work towards "reversing the trend of high and rising inequalities".

It called on the European Council "to change track and to consider wages as an engine for growth and jobs and not as an enemy of the economy".

Last year, the EU created an additional instrument for preventive surveillance of the economic and fiscal policies of its member states: the 'European semester' – a cycle of economic policy coordination.

Under proposals presented by the European Commission last year, EU countries will review each others' draft annual budgets before they are adopted at national level, with an early peer-review system aimed at preventing a repeat of the Greek sovereign debt crisis.

The system – later backed by EU leaders in June – applies as of 2011 and would introduce closer economic surveillance to the bloc.

The surveillance would be carried out in the first half of the year during the 'European semester,' before EU governments prepare their national budgets and economic reform programmes.

Member states will be required to present their draft budgetary plans in April of each year to give the Commission time to analyse them and possibly suggest "country-specific policy guidance" in early July.

EU countries would then finalise their budgets in the second half of the year (for more, see EURACTIV's LinksDossier on economic governance).

  • 23-24 June: Recommendations debated and endorsed at European Council.
  • 2012:  Implementation monitored by Commission and member states through rigorous peer-review process.
  • Jan. 2012: Commission will asses progress in its Annual Growth Survey and for each member state in its next set of country-specific recommendations (June 2012).

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