22 May 2017

European Semester 2017 Spring Package: Commission issues country-specific recommendations

The 2017 country-specific recommendations

The European economy has proven resilient in the face of significant challenges. Growth rates in both the EU and the euro area were nearly 2% in 2016, public finances are improving and employment is at a record of nearly 233 million people. Unemployment is at its lowest since 2009 and investments exceed pre-crisis levels in some Member States – also helped by the Investment Plan for Europe, the so-called Juncker Plan. However, slow productivity growth and the legacies of the crisis, including disparities within and across countries, continue to weigh on the economy, as does uncertainty stemming mostly from external factors.

To strengthen the positive trends and the convergence within countries and the EU, it is essential to achieve a more inclusive, robust and sustainable growth, including through greater competitiveness and innovation. This is the objective of the recommendations made under the European Semester of economic policy coordination. This approach also includes an enhanced focus on the social priorities and challenges in the Member States. The Commission recently outlined its proposal for a European Pillar of Social Rights, which sets out key principles and rights to support fair and well-functioning labour markets and welfare systems.

Over time, Member States have made some progress with two out of every three country-specific recommendations on average, confirming that significant reforms are being implemented across the EU. Looking at a multi-year horizon provides a clearer picture of the evolution of progress than a single-year horizon, because designing and implementing significant reforms takes time. Progress is recorded for the large majority of reforms, but the pace and depth of reform implementation by Member States varies, also in light of their complexity and importance. Reform progress has been the highest in the policy areas that concern “fiscal policy and fiscal governance” as well as in “financial services”, which have been pressing issues in recent years.

Since the adoption of last year's set of country-specific recommendations, Member States made most significant progress in the area of fiscal policy and fiscal governance, as well as in active labour market policies. Steps have been taken in taxation policies (such as to reduce the tax burden on labour), labour market and social policies (notably social inclusion and childcare) and financial services. The areas showing least progress include competition in services and the business environment. The overall picture that emerges is that Member States continue to make efforts to implement reforms, but so far the degree of progress ranges between ‘limited' and ‘some' for most policy areas identified in the 2016 country-specific recommendations.

The package presented today takes account of the conclusions of and follows up on February's European Semester Winter Package, including on the Macroeconomic Imbalances Procedure. For Cyprus, Italy and Portugal, which were experiencing excessive macroeconomic imbalances, the Commission concluded that there is no analytical ground for stepping up the procedure, provided that the three countries fully implement the reforms set out in their country-specific recommendations.

Fiscal developments and decisions

Overall, the aggregate deficit level in the euro area is set to fall to 1.4% of GDP this year, down from a peak of 6.1% of GDP in 2010. 

Based on the assessment of the 2017 Stability and Convergence Programmes, the Commission has also taken a number of steps under the Stability and Growth Pact. The Commission recommends that the Excessive Deficit Procedures be closed for Croatia and Portugal. If the Council follows the Commission's recommendation, this would leave only four Member States under the corrective arm of the Pact, down from 24 countries in 2011.

The Commission also adopted reports for Belgium and Finland under Article 126 (3) of the Treaty on the Functioning of the European Union (TFEU), in which it reviews their compliance with the debt criterion of the Treaty. In both cases, the conclusion is that the debt criterion should be considered as currently complied with. In the case of Belgium, this conclusion is on the condition that additional fiscal measures are taken in 2017 to ensure broad compliance with the adjustment path towards the medium-term objective in 2016 and 2017 together. In the case of Finland, it is noted that the swift adoption and implementation of structural reforms increasing productivity and supply of labour are key to enhance growth prospects in the medium term and improve fiscal sustainability.

Concerning Italy, the Commission confirms that the requested additional fiscal measures for 2017 have been delivered and that therefore no further steps are deemed to be necessary for compliance with the debt criterion at this stage.

The Commission addressed a warning to Romania on the existence of a significant deviation from the adjustment path toward the medium-term budgetary objective in 2016 and recommends the Council to adopt a recommendation for Romania to take appropriate measures in 2017 with a view to correcting this significant deviation. It is the first time that this procedure of the EU economic governance framework is applied. It gives the authorities the opportunity to take corrective action in order to avoid the opening of an excessive deficit procedure.

Based on the assessment of the 2017 Stability Programmes, the Commission proposes to grant the requested flexibility to Lithuania and Finland. [...]

Full press release

Remarks by Vice-President Dombrovskis at the European Semester Spring Package press conference

© European Commission