Economic governace and coordination of economic policies 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 1
Reform of economic governance response to the crisis More effective prevention of gross policy errors Focus on debt developments Crisis resolution instruments - EFSM/EFSF: temporary - Focus on structural balances - Expenditure benchmark Better enforcement of SGP rules - Sanctions - Two-pack: ex ante submission of draft budgets, monitoring - National layer: Directive on fiscal frameworks, Fiscal Compact European Semester for economic policy coordination Sound fiscal policy Debt reduction benchmark Prevention and correction of macro imbalances Procedure and sanctions Structural reform strategy (Europe 2020) Balanced growth - ESM: permanent - OMT More effective supervision and regulation of the financial system ESAs - ESRB - CRD IV Banking Union: SSM; direct recaps by ESM Growth Compact (EIB, Structural funds, Projects bonds) 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 Member States Spring EU summit: overall guidance on EU priorities Adoption of National Reform Programmes (NRPs) & Stability and Convergence Programmes (SCPs) Endorsement of country-specific recommendations Autumn: Implementation at national level 2
Two pack : A new cycle of surveillance Autumn Presentation of draft budgetary plan for following year " COM Opinion " Assessment of the EA policy stance " Discussion by Eurogroup End of Year Budget Law European Semester Spring Presentation of medium-term fiscal and economic policy plans (Stability Programmes and NRPs for years t-1 to t+3) " Assessment of compliance with preventive arm of SGP (structural balance + expenditure benchmark) - Ex ante for in-year and following years - Ex post for previous year " Macroeconomic surveillance " Policy guidance and recommendation 5 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" Annual&Growth&Survey:"Overall"guidance"for"the"EU" Produced"by"the"Commission";"Discussed"by"the"Council";"Endorsed"by"the"Spring"European"Council" March" Annual&Growth&Survey:"Overall"guidance"for"the"EU" European"Council"Policy"orienta@ons" April" Medium5term&budgetary&plans& Stability&or&Convergence&Programmes&& Based"on"Reg"1466/97";"Produced"by"EU"Member"States"" Medium5term&structural&reform&plans& Na;onal&Reform&Programmes&& Based"on"a"poli@cal"agreement";"Produced"by"EU"Member"States"" June" Country5specific&recommenda;ons" Produced"by"the"Commission"";"Adopted"by"the"Council""with"endorsement"of"the"European"Council" Implemented"by"EU"Member"States" 6 3
Two pack: COM Opinions on draft budgetary plans Rationale/lessons Innovations learned Need to better integrate EU policy guidance in national budgetary preparations National draft budgetary plans submitted before 15 October to # COMMISSION Need to equip national Parliaments with an independent assessment Need to assess euro area fiscal stance as a whole Poss. request for revision of draft if serious breach of European rules (within 2 weeks) Opinion on the plan (can be + or -) to inform the national debate on the budget " not binding (before end-november) Overall assessment at the level of the euro area # EUROGROUP ""Only"change"from"original"COM"proposal:" COM"Opinions"are"systema@c"(even"if"plan"is"ok)" Discussion based on COM Opinions and overall assessment 7 Two pack: Improving national budgetary frameworks Rationale/lessons learned Need to improve compliance with budgetary rules and transparency Innovations Independent bodies at national level Monitoring national fiscal rules National fiscal rules to strengthen ownership Including rules implementing MTO at national level By providing assessments linked to automatic correction mechanism Need for more reliable forecasts Providing macroeconomic forecasts 8 4
Two pack: tighter surveillance of EDPs Rationale/lessons learned Need to better follow the correction implemented by Member States Need for additional information flows from Member States to the Commission Innovations Closer monitoring for Member States in Excessive Deficit Procedure (EDP) # OPENING OF EDP Comprehensive reporting on budgetary execution [If not in EIP]: Economic partnership programme structural measures/reforms instrumental to an effective and durable correction of ED # REGULARLY (every 3 or 6 months) Report on budgetary execution and measures taken # ON REQUEST by the Commission Audit of public accounts Any other information Need to be able to react in case of risk of noncompliance with the deadline $ If risks on non-compliance: additional Commission recommendations 9 EU recommendations for national action in 2013/14 Public finances Financial sector Structural reforms Employment and social policies Pension and Sound public Fiscal healthcare finances framework systems Taxation Banking and access to finance Housing market Netw ork industries Public Competition administration R&D and in service and smart innovation sector regulation Labour Resource market efficiency participation Active labour market policy Labour Poverty and Wage setting market Education social mechanisms segmentation inclusion AT BE BG CZ DE DK EE ES FI FR HU IT LT LU LV MT NL PL RO SE SI SK UK 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 2013-2014. More information at: http://ec.europa.eu/europe2020/index_en.htm 5
Bridging different positions Solidarity Discipline All MS (symmetric adjustment) Only vulnerable MS (asymmetric adjustment) Short-term response Long term reform Secondary law Treaty changes Discretion Rules Demand (cyclical/ macro) Supply (potential growth struct. ref.) Community framework Intergovernmental Maintaining sovereignty Political Union Euro Area European Union Member State Coordination of Economic Policy & the European Semester (Corrective actions not included) Year-1 Time Year+1 Process Policies Coordinated (non-exhaustive lists) Preparation European Semester Implementation & Follow-up Structural/ Thematic Coordination (Europe2020) R&D, ICT, education, resource-efficiency, industrial policy, labour market, inclusion and social cohesion Economic reform coordination in NRPs, unless urgent (EA) National Reform Programme (NRP) by 15 Apr; no later than 30 April Contractual Arrangements & Financial Support (EA+) Stability and Growth Pact (SGP) Preventive Fiscal policy, including MTO and adjustment path, debt and deficit paths, implicit liabilities due to ageing, and contingent liabilities and guarantees Annual Growth Survey (AGS) (Nov/ Dec) Discussion & Council Conclusions (Mar) Discussion & economic policy guidelines to MS (Mar) Stability or Convergence Programme (SCP) by 15 Apr; no later than 30 April Approval of CSRs*, based on CION recs. (Jun) Endorsement of CSRs (end-jun) Adoption of CSRs (Jul) Assessment of the implementation of CSRs in the context of the analysis of draft national budgets (EA) Dialogue between MS and CION on CSR implementation Macroeconomic Imbalances Procedure (MIP) Preventive^ Macroeconomic policies, including indebtedness, financial and asset markets, private sector credit flow, labour market, current account & international investment, competitiveness and exchange rates Alert Mechanism Report (AMR) (Nov/Dec) In-depth Reviews (Mar) Budgetary Timeline^^ Fiscal policy, including the Medium-term Fiscal Plan & the Draft Budget Medium-term fiscal plan; independent macroeconomic forecast by 15 Apr; no later than 30 April Draft Budgetary Plan by 15 Oct Adoption of Budget Laws by 31 Dec Debt Issuance^^ Debt issuance calendars Report ex-ante national debt issuance plans (-UK, CZ); Harmonised format (EU-17 only) MS Action (EU-27) MS Action (Euro Area ) Legend: EC Action Commission Action Council Action Envisaged in Commission Communications 20.3.2013 This chart provides a general view on the main elements of the economic policy coordination, including the preventive arm of the SGP. Actions under the corrective arms of the MIP an SGP have been excluded. Additional economic policy coordination of Member States under stress (Two Pack) is excluded. The map omits any actions by the EU institutions outside the European Semester. Reporting requirements under the European Semester for countries under an Excessive Deficit procedure (corrective) or under a Macroeconomic Adjustment Programme are suspended. CSRs stands for Country Specific Recommendations; EA stands for Euro area. ^ Introduced in Six Pack ; ^^ Introduced in Two Pack Date: 21.3.2013 6
Yksikkötyökustannukset jatkaneet nousuaan Lähde: Euroopan komissio Signs of recovery in the euro area Contributions to real GDP growth, euro area (qoq % point contributions; swda) 0.8 0.6 0.4 0.2 0.0-0.2-0.4-0.6-0.8-1.0 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 inventories net exports domestic demand (ex. inventories) Source: Eurostat GDP growth 14 7
Rising confidence Economic sentiment (100 = long-term average) 105 100 EU28 EA Vulnerable6countries:6EL,6ES,6IE,6IT,6PT 95 90 85 80 1/2012 4/2012 7/2012 10/2012 1/2013 4/2013 7/2013 Source: Eurostat 15 Three keys to sustainable growth Adjustment capacity in the real economy Well-functioning financial system for efficient investment Sound public finances in a credible framework 8
Fiscal consolidation goes on, but its pace is slowing down General government budget balance, euro area General government debt, EU and euro area 100 95 90 85 80 75 70 65 60 55 50 % of GDP EA EU 07 08 09 10 11 12 13 14 17 12 Sovereign spreads receding (10yr spread relative to Bund) 10 8 6 4 IE EL PT ES IT 2 0 2/1/2013 2/3/2013 2/5/2013 2/7/2013 2/9/2013 Source: Eurostat 18 9
Nominal Unit Labour Cost Lähde: Euroopan komissio Real GDP growth 2007-14 5 4 3 2 1 0-1 -2-3 q-o-q% index, 2007=100 3.2 0.3-4.3 2.1 1.6-0.3-0.1 07 08 09 10 11 12 13 14 GDP growth rate (lhs) GDP (quarterly), index (rhs) GDP (annual), index (rhs) 1.4 forecast Figures above horizontal bars are annual growth rates. 100 95 90 10
Medium-term debt projections for the aggregate EU 21 11