26 February 2016

POLITICO: Commission highlights financial failings

As part of the so-called European Semester 2016, the Commission released individual “Country Reports” analysing economic and social challenges in 25 member nations.

“It is urgent to strengthen the fundamentals of our economies,” said Valdis Dombrovskis, the Commission’s vice-president responsible for the euro and social dialogue. “A number of Member States still need to be more decisive in tackling persistent vulnerabilities, such as high public and private debt.”

The Commission singled out the number of unemployed Europeans as a major concern. “Boosting jobs and growth remains our first objective,” said Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs.

The Commission will use the findings in the reports and subsequent bilateral discussions with each country to make specific policy recommendations.

Following are some of the highlights from the individual country reports:

• France: Even though the country has made some efforts to reform and enhance its competitiveness, significant problems remain. GDP growth is low due to a lack of investment, productivity growth is also slow mainly because of “labor and product market rigidities” as well as the “regulatory burden facing French firms”, and “the unemployment rate, at 10.5 % in 2015, is not expected to decline in the short term.”
• Italy: While the current government has undertaken “important steps to address Italy’s long-standing weaknesses,” the country’s low productivity and high public debt ratio remain problematic. The Italian banking sector is plagued by a high level of non-performing loans that weigh on banks’ balance sheets. The report also blamed Italy’s tax system and relatively inefficient public sector for its weak competitiveness.
• Portugal: High levels of debt, both public and private, and low competitiveness threaten Portugal’s recovery. Commission experts noted that “in absence of further structural consolidation measures, the very high level of public debt is set to come down only slowly in the near term.” Combined with high indebtedness of the private sector, this could be an even bigger threat for the stability of Portugal’s economy. The report also warned against an increase in minimal wages that could further hinder the competitiveness of Portugal’s labor-intensive industries.
• Spain: The report lauded the country’s efforts in undertaking structural reforms in labor and product markets as well as the banking sector. Yet, despite a visible return of growth, “Spain has not left the crisis unscathed,” the Commission warned. One of the highest unemployment rates in Europe, deteriorating poverty and a high public and private debt remain challenges for the country. Interestingly, the final report no longer warns – like an earlier draft seen by the Spanish newspaper El País – that “the difficulties in forming a government could slow down the agenda of reforms.”

No reports were issued for Greece and Cyprus since they are covered by separate economic rescue programs.

Full country reports

Full article on POLITICO

© European Commission