23 February 2016

ECON: Report on the European Semester for economic policy coordination: Annual Growth Survey 2016

This report represents the Parliament’s contribution to the definition of economic policy priorities for the 2016 European Semester process of policy coordination, responding to the Commission’s Annual Growth Survey, and including a draft recommendation for the economic policy of the euro area.

Policy mix

2.  Welcomes the improvements in public finances, in particular the gradually declining debt/GDP ratios for the EU and euro area and falling headline budget deficits; notes, however, that public debt ratios continue to rise in several Member States with low nominal GDP growth and low inflation, and that the Excessive Deficit Procedure is still ongoing for nine Member States; points out that many Member States have limited fiscal space to cope with possible new economic shocks and that stronger European coordination should therefore be considered in order to support fiscal consolidation without hindering growth; [...]

6.  Is encouraged by mild improvements in labour market indicators, while recognising that divergence between Member States remains wide, and unemployment still remains unacceptably high; notes the need to build on recent improvements by also increasing the quality of jobs created and their productivity; calls for a greater effort to step up investment in skills, make labour markets more inclusive, create quality employment and reduce poverty, social exclusion and growing inequalities in income and wealth while maintaining budgetary discipline; stresses that employment indicators should be given the same status as existing indicators, allowing an in-depth analysis to be triggered, in order to avoid a two-class approach, and that they should be properly taken into account in EU policy and guidance to the Member States; [...]

Investment

10.  Is aware of the ongoing deleveraging process in the private sector; stresses that Europe’s investment rate is well below the pre-crisis period; points in this context to the importance of rapidly implementing the banking union and bank structural reform, as well as the importance of boosting equity investments in SMEs thanks to a Capital Markets Union; calls for maximum use of the EFSI and the COSME in order to improve SMEs’ access to finance; considers that greater regulatory predictability in the Single Market would improve investors' confidence; [...]

12.   Welcomes the country-specific investment profiles identifying some of the main challenges to investment in individual Member States; invites the Commission and the Member States to involve all levels of government and relevant stakeholders in the identification of obstacles to investments, focusing in particular on the internal market, subdued domestic demand and structural reforms, as well as on making available adequate instruments bringing together public and private financing; points to the importance of high levels of productive investment for a sustained economic catch-up process between Member States; notes that an appropriate balance between current expenditure, long-term sustainability of public finances and investment in economic growth potential needs to be found in each country, and that the Single Market and European instruments such as EFSI and ESIF have an important role to play in supporting a healthy level of investment; stresses that low public investment in research and innovation in several countries might further anchor them within a middle-income trap;

Structural reforms

13.  Considers that, after a long period of macroeconomic adjustment, focus should be put on delivering structural reforms and investments with the aim of strengthening growth potential based on quality jobs and productivity, of promoting fair, robust, efficient and fiscally sustainable welfare systems, and of fostering a sustainable transition of Member States’ economies towards greater resource efficiency; [...]

Fiscal responsibility

20.  Reiterates the need for responsible, growth-friendly fiscal policies, ensuring debt sustainability and taking account of the economic cycle and investment gaps, while at the same time respecting citizens’ social rights; recalls that the very high indebtedness of some Member States constitutes a substantial risk in the event of possible future shocks within the euro area; emphasises that efforts to increase the resilience of public finances and boost growth will need to be stepped up in countries with high debt/GDP ratios in order to place them on a sustainable downward path;

21.  Insists on implementation of the Stability and Growth Pact, while making full use of its existing flexibility clauses, in line with the Commission communication of 13 January 2015 , inter alia to support greater investment and structural reforms, as well as to deal with security threats and refugee inflows; [...]

Specific focus on the euro area

24.  Welcomes the recommendation on the economic policy of the euro area, proposed by the Commission six months before country-specific recommendations, as a step towards deepening policy coordination in the follow-up to the Five Presidents’ Report and relevant resolutions of the European Parliament;

25.  Emphasises that, given its high level of interdependence and the singleness of its monetary policy, the euro area is an economic entity where convergence towards best performers must be promoted and supported by stronger coordination of national policies; emphasises the importance of enhanced action by all national governments to implement inside their Member States the economic reforms and investments needed to reduce macroeconomic imbalances and to prevent negative spillover effects of national policies into other Member States; calls therefore for an in-depth assessment of these macroeconomic imbalances and spillovers to complement the assessment of each country’s specific vulnerabilities and the Macroeconomic Dialogue; insists on full coherence between the euro area recommendation and country-specific recommendations;

26.  Welcomes increased attention to the euro area’s aggregate fiscal stance, which does not divert attention away from individual Member States’ responsibilities; recalls that a fiscal deficit in one Member State cannot be offset by a fiscal surplus in another as far as the Excessive Deficit Procedure is concerned; calls for regular monitoring of whether the aggregate fiscal stance is appropriate in view of the existing investment gap;

27.  Supports the recommendation to differentiate fiscal effort by individual Member States, taking into account their respective positions vis-à-vis Stability and Growth Pact requirements and stabilisation needs, as well as spillover effects; notes that for many Member States this implies pursuing growth-friendly fiscal consolidation; notes on the other hand that some countries have increasing fiscal space vis-à-vis the requirements of the Stability and Growth Pact, which could be used at the present juncture to help to support the domestic economy; [...]

Budgetary policies

43.  Stresses that greater integration within the euro area is indispensable in order to complete economic and monetary union (EMU), and that budgetary union is a cornerstone of the proper operation of the euro;

44.  Calls, as regards Parliament’s position on the euro area and its budget capacity, for account to be taken of the conclusions of the own-initiative report on the budgetary capacity of the euro area, which will be prepared in the course of 2016; [...]

Full report

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