Completing EMU: Arguments and proposals for the next term of office of the European Parliament and the European Commission

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1 Completing EMU: Arguments and proposals for the next term of office of the European Parliament and the European Commission Public Hearing, European Economic and Social Committee, 5 December 2013 Taneli Lahti Adviser Cabinet of Vice President Olli REHN Economic and Monetary Affairs and the Euro

2 Reform of economic governance European Semester 1 st edition in 2011 EU27 Integrated surveillance Six-Pack in force since December 2011 EU27 + EA Major reforms of economic governance in the EU (fiscal and macroeconomic surveillance) International Treaty in force since January 2013 EA + 8 Fiscal Compact mirrors EU rules at the national level Two-Pack in force since May 2013 EA More stringent framework for budgetary policy coordination and surveillance for the euro area 2

3 Implementation of the EU semester January February March April May June July European Commission Annual Growth Survey and other reports Proposals for country-specific recommendations Council of Ministers European Parliament Debate & orientations Debate & orientations Discussion in Council formations Autumn: Monitoring and peer review at European level European Council Spring EU summit: overall guidance on EU priorities Endorsement of country-specific recommendations Member States Adoption of National Reform Programmes (NRPs) & Stability and Convergence Programmes (SCPs) Autumn: Implementation at national level

4 Two pack: completing the fiscal governance framework in the euro area Autumn Presentation of draft budgetary plan for following year Opinion by the COM Discussion at the eurogroup End of Year Budget Law The European Semester December March Annual Growth Survey: Overall guidance for the EU Produced by the Commission - Discussed by the Council - Endorsed by the Spring European Council Annual Growth Survey: Overall guidance for the EU European Council Policy orientations April Medium-term budgetary plans Stability or Convergence Programmes Based on Reg1466/97 -Produced by EU Member States Medium-term structural reform plans National Reform Programmes Based on a political agreement -Produced by EU Member States June Country-specific recommendations Produced by the Commission - Adopted by the Council with endorsement of the European Council Implemented by EU Member States 4

5 EU recommendations for national action in 2013/14 Public finances Financial sector Structural reforms Employment and social policies AT BE BG CZ DE DK EE ES FI FR HU IT LT LU LV MT NL PL RO SE SI SK UK Sound public finances Pension and healthcare systems Fiscal framew ork Taxation Banking and access to finance Housing market Netw ork industries Competition in service sector Public administration and smart regulation R&D and innovation Resource efficiency Labour market participation Active labour market policy Wage setting mechanisms Labour market segmentation Education Poverty and social inclusion For Cyprus, Ireland, Greece and Portugal the only recommendation is to implement commitments under EU/IMF financial assistance programmes. Note: Recommendations proposed by the Commission in May 2013 for More information at:

6 Economic sentiment 100 = long-term average index EU28 Euro area Vulnerable countries (ES, IT, EL, PT) /12 04/12 07/12 10/12 01/13 04/13 07/13 10/13 Source: Commission services 6

7 GDP growth in the EU q-o-q% index, 2007= forecast GDP growth rate (lhs) GDP (quarterly), index (rhs) GDP (annual), index (rhs) Figures above horizontal bars are annual growth rates Source: Commission services 7

8 Public finances General government budget balance General government debt % of GDP pps. General goverment balance (lhs) Structural balance (rhs) forecast % of GDP forecast Euro area EU Source: Commission services 8

9 Sovereign bond markets Ten-year government-bond yields, selected EU Member States 8 % DE ES FR 6 IT UK Source: Commission services 9

10 Credit conditions Credit standards and credit demand for loans to non-financial corporations in the euro area 40 balance balance tightening easing decrease increase Credit standards - past 3 months (lhs) Credit standards - next 3 months (lhs) Credit demand - past 3 months (rhs) Credit demand - next 3 months (rhs) Source: ECB Bank Landing Survey 10

11 Euro area fiscal map based on draft budgetary plans Source: Commission services

12 European growth map Source: Commission services

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14 THANK YOU