Download 1. The May 2015 package What`s in the May Package?

THE 2015 EUROPEAN SEMESTER:
Targeted policy advice to foster
growth and sustainability
Marco Buti
Director-General for Economic and Financial Affairs
European Commission
26 May 2015
Agenda
1. The May 2015 package
2. Economic situation and policy challenges
3. 2015 CSRs
4. Next steps
2
1. The May 2015 package
3
What's in the May Package?
• A Communication sets out the new approach to the
2015 European Semester
• Country-specific recommendations for:
•
26 Member States (not Cyprus or Greece )
•
the Euro Area
• Decisions under the Stability and Growth Pact for a
few Member States; No action taken under the
Macroeconomic Imbalances Procedure
• Technical
assessment
of
the
Stability
and
Convergence programmes (SWDs coming out soon)
4
Stability and Growth Pact
EURO AREA
NON-EURO AREA
Countries in the corrective arm (EDP)
2015
2016
MT
IE
ES
2017
2014-15
2015
2016
2016-17
FR
UK
PL
HR
UK
Abrogation
PT
No effective action
SI
EL*
Abrogation
2014
Extension of the deadline
CY*
AT
BE
DE
IT
EE
Report 126(3)
Countries in the preventive arm
FI
LU
BG
DK
NL
CZ
HU
SE
SK
LT
LV
RO*
Member States for which legal steps were adopted by the Commission in the context of the February package.
Member States for which legal steps will be adopted by the Commission in the context of the May package.
*Member States under programme.
5
2. Economic situation and policy challenges
6
Economic situation
• Economic tailwinds are breathing extra vitality into
an otherwise mild cyclical upswing
• EU GDP growth expected at 1.8% this year, 2.1% next
• Labour markets are slowly improving
• EU unemployment down to 9.2% next year from 9.6% in 2015
• HICP inflation to recover later this year
• Set to increase from 0.1% this year to 1.5% in 2016
• The fiscal outlook continues to improve
• Deficit at 2.5% this year and debt on decreasing path
Overview - the spring 2015 forecast
2014 2015
2016
2014
2015
2016
0.8
0.3
1.8
5.0
4.6
4.4
3.5
0.3
0.4
1.5
11.3
9.6
9.2
0.5
2.9
-1.4
-1.5
0.8
26.5
25.6
23.2
1.4
2.8
2.6
-0.2
-0.6
1.1
24.5
22.4
20.5
0.4
1.1
1.7
0.6
0.0
1.0
10.3
10.3
10.0
-0.4
0.6
1.4
0.2
0.2
1.8
12.7
12.4
12.4
0.9
1.6
1.8
-0.2
0.2
1.3
14.1
13.4
12.6
0 .9
1.5
1.9
0 .4
0 .1
1.5
11.0
10 .5
2.8
2.6
2.4
0.4
1.6
5.4
5.3
2014
2015
2016
Germany
1.6
1.9
2.0
Ireland
4.8
3.6
Greece
0.8
Spain
France
Italy
P o rtugal
E uro a re a
United Kingdo m
Unemployment rate
Inflation
Real GDP
1.5
11.6
6.1
Italy vs. Euro Area: Selected indicators
IT
EA
IT
Inflation rate (HICP)
EA
IT
Employment (% change)
EA
IT
Unemployment rate
EA
General Government budget balance IT
EA
(% of GDP)
IT
General Government gross debt
EA
(% of GDP)
Real GDP (% change)
*Commission Spring Forecast 2015
1999-2007 2008-2013
average average
-1.5
1.5
-0.3
2.3
2.2
2.3
2.0
2.1
-0.6
1.4
-0.5
1.3
9.0
8.4
10.2
8.8
3.6
2.9
4.2
..
116.4
102.9
83.6
..
2014
2015*
2016*
-0.4
0.9
0.2
0.4
0.1
0.6
12.7
11.6
3.0
2.4
132.1
94.3
0.6
1.5
0.2
0.1
0.5
0.9
12.4
11.0
2.6
2.0
133.1
94.0
1.4
1.9
1.8
1.5
0.4
1.0
12.4
10.5
2.0
1.7
130.6
92.5
Key policy challenges:
Tackling the legacy of the crisis
CHALLENGES
• Lower growth potential
The AGS three-pillar approach
• High private and public debt
3-pillar
approach
for
a
determined response at EU/EA
and national level:
• Financial stability, credit
• A boost to investment
provision and NPL
• Unemployment and the social
impact
• Ambitious structural reforms
• Fiscal responsibility
10
3. Country-Specific Recommendations (CSRs)
– approach and main features
11
2015 CSRs – A new approach
• Engagement with
and social partners
governments,
parliaments
• Fewer and more focused CSRs
• Only key priority issues of macro-economic relevance
• Reflecting the degree of macroeconomic imbalances
• Actions to be taken within one year
• The
Commission
implementation
will
closely
monitor
• Implementation at national level the three–
pillar
approach:
investment,
structural
reforms and fiscal responsibility
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Member States - Overview
Broad Category
Policy areas
Fiscal policy & fiscal governance
Long-term sustainability of public finances, inc. pensions
Reduce the tax burden on labour
Public finances & taxation
Broaden tax bases
Reduce the debt bias
Fight against tax evasion, improve tax administration & tackle tax avoidance
Financial services
Housing market
Financial sector
Access to finance
Private indebtedness
Employment protection legislation & framework for labour contracts
Unemployment benefits
Active labour market policies
Incentives to work, job creation, labour market participation
Labour market, education Wages & wage setting
& social policies
Childcare
Health & long-term care
Poverty reduction & social inclusion
Education
Skills & life-long learning
Research & innovation
Competition & regulatory framework
Competition in services
Structural policies
Telecom, postal services & local public services
Energy, resources & climate change
Transport
Business environment
Insolvency framework
Public administration &
Public administration
business environment
State-owned enterprises
Civil justice
Shadow economy & corruption
AT BE BG CZ DE DK EE ES FI FR HR HU IE IT LT LU LV MT NL PL PT RO SE SI SK UK
Italy: 6 CSRs
Public finances
&
taxation
Financial
sector
Transports
&
management of
EU funds
Public
administration
&
civil justice
Labour market
&
education
Business
environment
&
competition
CSR 1: Public finances and taxation
• Make further progress towards
putting the general
government debt ratio on an
appropriate downward path.
• Improve the structural
balance by 0.25% of GDP in
2015 and by 0.1% of GDP in
2016.
• The latter because Italy qualifies
for the structural reform
clause, provided that it
adequately implements the
agreed reforms and it remains
under the preventive arm.
Source: European Commission
CSR 2: Transports and management of
EU funds
Overall EU-fund absorption rate
• Serious weaknesses continue to
affect the management of EU
funds, in particular in southern
regions.
• Investment was hard hit during
the crisis aggravating the long-run
deterioration in its quality. Hence,
it is important to free public
resources for productive
investment.
• The spending review is not yet
an integral part of the budgetary
process. There is also need to
implement performance budgeting
at all level of governments.
Source: European Commission
CSR 3: Public administration & justice
European Quality of Government Index 2013
(Average and within country regional variations)
• Inefficiencies in public
administration and justice
system hamper the quality of
the business environment and
reduce the capacity to
implement reforms effectively.
• The revision of the statute of
limitations is essential to fight
against corruption.
• On civil justice, the length of
proceedings remains a major
problem and the reforms
undertaken still need to bear
fruit.
Source: European Commission
CSR 4: Financial sector
• A smooth and efficient functioning of the banking sector is key for the recovery.
• Introduce binding measures by end-2015 to tackle remaining weaknesses in the
corporate governance of banks, particularly the role of foundations.
• Take measures to accelerate the broad-based reduction of non-performing loans.
Source: European Commission
CSR 5: Labour market & education
Nominal unit labour cost
• Italy's competitiveness remains
subdued: sluggish productivity
growth continues to push up unit
labour costs.
• Full implementation of the 'Jobs
act' should improve entry and exit
flexibility, enhance labour
reallocation and thus productivity.
• Second-level bargaining could
help to better align wages with
productivity, but it still concerns
only a minority of companies.
• School outcomes and adult skills
are below the EU average and the
labour market relevance of
education is still limited.
Source: European Commission
CSR 6: Business environment and
competition
• Italy's productivity is, indeed,
very much subdued.
• The administrative and
regulatory burden is still high,
weighing on firms'
competitiveness.
• A range of restrictions on
competition still hamper the
proper functioning of product
and services markets.
Source: European Commission
• Local public services, which
show clear signs of inefficiency,
remain sheltered from
competition, and this has
adverse effects on public
finances as well.
5. Next steps
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• June
2015:
discussion
of
the
country-specific
recommendations in the committees of the Council and in the
relevant Council formations
• 25-26 June 2015: endorsement of the country-specific
recommendations by the European Council
• July
2015:
final approval of the
recommendations by the Ecofin Council
country-specific
THEN
• National semester!
22
Useful information
• http://ec.europa.eu/europe2020/making-it-happen/countryspecific-recommendations/index_en.htm
23
Background slides
Recommendation 1:
public finances & taxation
Achieve a fiscal adjustment of at least 0.25% of GDP towards the
medium-term objective in 2015 and of 0.1% of GDP in 2016 by
taking the necessary structural measures in both 2015 and 2016,
taking into account the allowed deviation for the implementation of
major structural reforms. Swiftly and thoroughly implement the
privatisation programme and use windfall gains to make further
progress towards putting the general government debt ratio on an
appropriate downward path. Implement the enabling law for tax
reform by September 2015, in particular the revision of tax
expenditures and cadastral values and the measures to enhance tax
compliance.
Recommendation 2:
transports & management of EU funds
Adopt the planned national strategic plan for ports and logistics,
particularly to help promote intermodal transport through better
connections. Ensure that the Agency for Territorial Cohesion is made
fully operational so that the management of EU funds markedly
improves.
Recommendation 3:
public administration & civil justice
Adopt and implement the pending laws aimed at improving the
institutional framework and modernising the public administration.
Revise the statute of limitations by mid-2015. Ensure that the
reforms adopted to improve the efficiency of civil justice help reduce
the length of proceedings.
Recommendation 4:
financial sector
Introduce binding measures by end-2015 to tackle remaining
weaknesses in the corporate governance of banks, particularly the
role of foundations, and take measures to accelerate the broad-based
reduction of non-performing loans.
Recommendation 5:
labour market & education
Adopt the legislative decrees on the use of wage supplementation
schemes, the revision of contractual arrangements, work-life balance
and the strengthening of active labour market policies. Establish, in
consultation with the social partners and in accordance with national
practices, an effective framework for second-level contractual
bargaining. As part of efforts to tackle youth unemployment, adopt
and implement the planned school reform and expand vocationallyoriented tertiary education.
Recommendation 6:
business environment & competition
Implement the simplification agenda for 2015-2017 to ease the
administrative and regulatory burden. Adopt competition-enhancing
measures in all the sectors covered by the competition law, and take
decisive action to remove remaining barriers. Ensure that local public
services contracts not complying with the requirements on in-house
awards are rectified by no later than end-2015.
Stability and Growth Pact
2.2 Proposed SGP decisions
Follow-up to February Package
February Package
May Package
Country
Action
Comment
BE
IT
Report
article
126(3)
• Compliance
with the SGP.
• No need to
open EDP at
that stage.
FI
FR
Revised
recommen-dation
• Extension of
deadline by two
years.
Comment
Action
No further
action
deemed
required.
Report
article
126(3)
Wait for
effective
action DDL
•
•
Conclusions from February remain
broadly valid.
Need to closely monitor for IT due
to recent ruling by the Italian
Constitutional Court (possible new
Report article 126(3) later.
•
Non-compliance with deficit and
debt criteria leaning toward
opening EDP.
•
10 June deadline to report on
effective action.
32
2.2 (cont.) Proposed SGP decisions
Other elements of May Package
May Package
Country
Comment
Action
MT
•
•
Timely and durable correction of excessive deficit.
Compliance with debt rule ensured.
•
•
Durable correction 1 year ahead of deadline.
Excess over 3% explained by net directs costs of 'systemic' pension reform.
Revised
recommen-dation
•
•
•
Excessive deficit not corrected by deadline of 2014-15.
Non-effective action to comply with EDP recommendation.
New deadline for correction in 2016-17.
No EDP step
but strong
CSR
in May
•
•
Risk of timely and durable correction of excessive deficit.
However:
o HR: bottom-up fiscal effort complied with over 2014-2015;
o ES: nominal target complied with in 2014;
o PT: close to 3% of GDP in 2015.
Proposed
abrogation
of EDP
PL
UK
HR
ES
PT
33