05 November 2013

EIM Economic October 2013

The Commission proposed a batch of ideas to deepen social integration, but the competitiveness agenda will re-appear on November 15 when the fourth iteration of the European Semester process gets underway – with first outing of the new powers from the 'two pack' to monitor national budgets.

The Commission proposed a batch of ideas to deepen social integration as a political counterweight to the pressure to reduce budget deficits, but the competitiveness agenda will re-appear on November 15th when the fourth iteration of the European Semester process gets underway – with first outing of the new powers from the `two pack’ to monitor national budgets. A key problem will be how to scrutinise the implementation of the Country Specific Recommendations, as the record so far shows that only about 15 per cent of them have been implemented.

European Council Conclusions: Regulatory fitness and economic coordination: The Council gave a new impetus to better regulation, saying regulation at Union level was necessary in order to ensure that EU policy goals, including the proper functioning of the Single Market, were attained. The European Council welcomes the recent Commission Communication on regulatory fitness (REFIT), which acknowledges work already undertaken in recent years to alleviate the burden of legislation, in particular for SMEs, and proposes ambitious further steps to make the EU regulatory framework lighter. The Council will hold a discussion in December following the publication of the Commission's Annual Growth Survey and the Alert Mechanism Report, with the aim to agree on the main areas for coordination of economic policies and reforms. The Commission will also provide a first overview of the implementation of country-specific recommendations that will be a basis for the further monitoring of their implementation. Work will be carried forward to strengthen economic policy coordination, with the objective of taking decisions in December on the main features of contractual arrangements and of associated solidarity mechanisms. This would engage all euro area Member States but non-euro area Member States may also choose to enter into similar arrangements.

President Barroso said: I really believe this is an important agenda for Europe to have simpler, cheaper and lighter regulation, 'common sense' regulation. Let's be honest about this, there are some regulations we need; in the internal market if every country has its own regulations it's a problem, not only for the SMEs but even for big companies. So there is, I think, a point to be made here: we need common regulations at European level but of course these regulations should be lighter, simpler and cheaper. Since 2005, I've been pushing for a change of culture in Brussels and also in the national capitals. We have come a long way. 6,000 legal acts repealed. €32 billion already saved. And our regulatory fitness programme – REFIT - is the next phase in the roll-out. I thank David Cameron and business representatives for the positive remarks you have made about this important programme.

UK Prime Minister Cameron said "The conclusions which you’ll see coming out of this European Council are once again very strong on deregulation; I think perhaps the strongest we’ve seen over many, many years. So I think that is a success story; not just for Britain, but a success story for Europe.”

EPC Post-summit briefing: A summit of little substance:  Although EU leaders did not take any concrete decisions on a further deepening of the EMU, the process is gaining momentum and the cornerstones of a ‘final bargain’ are becoming increasingly clear. This ‘bargain’ will include an agreement on the details of a future Single Resolution Mechanism (SRM). It will also include the introduction of ‘contractual arrangements’ between individual Member States and the Commission, supported by funds provided through a new “solidarity mechanism”. It seems unlikely that the deepening of the EMU will – at least in this phase – go much beyond this. But, once again there was a big ‘elephant in the room’: namely, the potential political consequences of the crisis and its likely impact on the outcome of the European Parliament elections next May. The chances are high that anti-EU, anti-euro, anti-immigrant, and/or anti-establishment/elitist parties or movements will generally do well, especially if turnout is low again, as those keen to register a protest are traditionally more inclined to cast their votes.

Plenary Session: EU economic and budget coordination must improve, say MEPs: Economic and budgetary policies of EU countries need to be far better coordinated in order to give a boost to growth, employment and investment. The European Semester, designed to do just that, is not delivering the goods, MEPs warned in a resolution. The resolution notes that for 2012 only 15 per cent of EU recommendations to governments were significantly implemented. The warnings and requests are set out in Parliament's annual resolution on the latest developments in the European Semester, the process whereby EU Member States coordinate their budgetary and economic policies. Drafted by Elisa Ferreira (S&D, PT), the resolution calls for stricter criteria to ensure that economies converge and underlines once more that democratic accountability of the process is not up to scratch. 

ECOFIN Council results: EMU / European Semester: The Ministers finalised their input in preparation for the October Council. The European Council will discuss the further development of the EU's economic and monetary union (EMU), assessing ongoing work in all fields. It will look at economic policy coordination and the social dimension of EMU. It is expected to take decisions in December. The Council took stock of lessons learned from the 2013 European Semester monitoring exercise and possible improvements for next year's exercise. Identifying areas for potential further improvement, a note from the Economic and Financial Committee suggests that greater attention be given to the monitoring of implementation throughout the year, and highlights pension reforms as a particular challenge. Furthermore, the tight timeframe applied to the whole exercise continues to be a constraint, with little time for the preparatory committees to discuss and coordinate.

ECB/Draghi: The euro area economy - Current prospects 
and challenges ahead: Draghi suggested a three-pronged strategy for policy-makers to respond to the still fragile macro-economic recovery. Monetary policy has to remain consistently supportive of the baseline outlook and mitigate the risks that surround it. But preserving monetary accommodation is a necessary but not sufficient condition for the recovery to take hold. An essential ingredient is that countries continue the adjustment of their domestic policies in a way that removes structural impediments to their economic potential and fosters long-term fiscal sustainability. Monetary accommodation can accompany and facilitate such a regime shift in economic policy. But we know it can never replace it. Europe has to continue the reform process in its banking sector. 

The future of the EMU: Commission proposes ideas to deepen social integration: President Barroso said: "The EU has taken giant leaps forward in terms of economic governance in the last five years, providing financial lifelines to many vulnerable Member States. From the start of the crisis, we have taken targeted action to deal with the social distress created in part of our societies. But the severity of the crisis, particularly in the euro area, has taught us that we need to work even more closely to heal the social scars it has left behind. This Communication is about building on the rules we have already put in place under the European Semester to ensure there is a strong social dimension in the way we run our Economic and Monetary Union. We owe that to the 26 million unemployed and the most deprived in our society."

Inter-parliamentary Conference held in Vilnius discussed post-crisis economic governance in the EU: All the speakers stressed the importance of enhanced cooperation between the EP and national Parliaments in setting the right framework for post-crisis economic governance. “The involvement of national Parliaments is essential to improve ownership, ensure early discussions on national reform programmes, and make the best use of the analysis and recommendations they receive in designing growth-enhancing policy reforms and budgetary decisions. The European Parliament, on its side, is a key partner in the economic dialogue at European level. As such, it should ensure the transparency of the entire exercise and monitor the comply-or-explain principle on Country Specific Recommendations addressed to Member States.”

Commission adopts Work Programme for 2014: “The Commission will actively help the European Parliament and the Council completing work on all the important proposals that are still pending. There is a lot on the table and the Commission will push to finalise it."  In line with the Blueprint for a deep and genuine Economic and Monetary Union, the Commission will continue work on completing the Banking Union, reinforcing economic governance and exploring further deepening of the EMU. The adoption of the Single Resolution Mechanism Fund is a priority, and the Single Supervisory Mechanism becomes operational in 2014. The list of priority items for adoption by the European Parliament and/or the Council is led by: Single Resolution Mechanism; Framework for Bank Recovery and Resolution; Deposit Guarantee Schemes; Markets in Financial Services Directive (MiFID); Helping consumers in retail banking; Long-term investment funds; Fight against money laundering. Administrative cooperation on automatic exchange of tax information is priority number 23, followed by Financial Transaction Tax.

© Graham Bishop