Introduction
When European Council agreed and started the new
Europe 2020 strategy, which was the main plan in order to respond to the
financial crisis and to follow the Lisbon Strategy that was expiring. The main
idea was to promote smart, sustainable and inclusive growth within the European
Union member states. There was also defined five headline goals in the fields
of employment, Research and Development (R&D) innovation, climate
change/energy, education and social exclusion. [1]
When European Union is examined, it may seem however
far from being uniform in the policies addressed by the EU2020 headline goals.
The Treaty of Lisbon determines the European Unions exclusive competency as
regards competition, monetary policy for those Member States whose currency is
the euro and the common commercial policy, shared competency for internal
market, social policy, economic, social and territorial cohesion, environment
and energy. Although, it is problematic for the European Union to set economic
and employment policies for its Member States. Therefore, there was a need for
some “overseer” tool to be created – and it was European Semester. It is
designed to coordinate and harmonise Member States policies in this field.
Against this background, the European Semester as a new key element of Economic
Governance started in January 2011 with the objective to provide “ex-ante
policy co-ordination”. Means that plans for the most important economic policy
reforms are assessed and discussed at EU level before final decisions are taken
at national level. In this process, the Commission and Council of Ministers can
suggest changes to the plans. Major economic reforms in one Member State can
cause economic spillover effects on other Member States. Such spillover effects
are all the more relevant in an Economic and Monetary Union, as the crisis has
underlined. Major economic reforms can produce economic spillover effects on
other Member States via trade and competitiveness and via financial markets.[2]
In this paper will be examined the newly adopted
European Semester, defining the main goal, the process of implementation of it
for Member States and conclusion about its effectiveness.
Terms of References:
1.
Introduce
with the material online from EUROPA website and other official sources, i.e.
Eurodaconia;
2.
Examine
the literature and give reasoned explanation and judgment over the European
Semester;
3.
Provide
with summary and conclusion about the European Semester.
Defining
the European Semester
Nowadays there’s a lot of questions about the newly
introduced system of European Semester. Some say that is one of the amongst the
most important tools which civil society organizations have at their disposal
to bring about social change.
All Member States have committed to achieving the
Europe 2020 targets and have translated them into national targets. But only if
the individual efforts of all countries are coordinated and focused, can they
result in the desired impact on growth.
Therefore, the European Union has set up a yearly
cycle of economic policy coordination called the European Semester. Each year,
the Commission undertakes a detailed analysis of EU Member States' plans of
budgetary, macroeconomic and structural reforms and provides them with
recommendations for the next 12-18 months.
The recent crises and the risk for the stability of
the euro area have underlined vividly the interdependence and exposed the
vulnerability of Member States, in particular inside the euro area. The
European Union and Member States have taken coordinated and determined action:
This included not only short-term measures to stabilise the financial sector,
revitalise the economy or ensure the solvency of Greece and the stability of
the Eurozone, but it also entailed the setting up of a medium- and long-term
vision to put Europe on the path of smart, sustainable and inclusive growth
("Europe 2020"). Now the time has come also to draw far-reaching
lessons concerning the way economic policies are dealt with. Therefore, the
Commission proposes to reinforce decisively the economic governance in the
European Union. The aim of the Communication is to strengthen the functioning
of the Stability and Growth Pact and extend surveillance to macro-economic
imbalances. It proposes to align national budget and policy planning through
the establishment of a "European Semester" for economic policy
coordination, so that Member States would benefit from early coordination at
European level as they prepare their national budgets and national reform
programmes. Finally, the Commission considers it to be a first priority to make
the European stabilisation mechanism decided by ECOFIN (Economic and Financial
Affairs Council). Based on this experience, the Commission intends in the
medium-to-long term make a proposal for a permanent crisis resolution
mechanism.[3]
The main aim of the European Semester is to ensure
co-ordination of the budgetary and economic policies that are defined under the
Europe 2020 strategy. It is an annual cycle of political activities which
primarily involves the European Commission and EU Member State governments, but
it also relies on the participation of other actors:
·
EU
institutional bodies – European Parliament and the Council of Ministers;
·
International
NGO (non-governmental organizations) platforms;
·
Networks
and local grassroots organizations.
The European Semester consists
of four main core items:[4]
1.
The
Annual Growth Survey – The first step of each new European Semester starts in
November. It is called the Annual Growth Survey and it is drafted by the
European Commission;
2.
National
Reform Programme – the second step in the European semester is marked by the
creation of National Reform Programmes: each EU member state needs to submit
one by 15 April, which practically means that the European Commission receives
28 different NRPs within one month. Basically, NRPs are national responses to
the EU-wide Annual Growth Survey. Sets out national economic and social targets
for the upcoming year, taking into
account the Europe-wide priorities by reaching the Europe 2020 targets;
3.
Country
– Specific Recommendations (CSR) In the months April and May, the third main
step takes place. The European Commission evaluates the different NRPs and
formulates country specific recommendations for each EU member states. These
CSRs are intended to influence the overall policy direction your country is
taking – specific Latvia’s
recommendations will be examined in the research part;
4.
CSR
Implementation – from July onwards, a final and very crucial step takes place:
following the adoption of the CSRs, EU member states are invited to implement
them. The CSRs should be taken into consideration whilst each EU member state
sets its national budget for the upcoming year, to ensure that there is an adequate
financial basis for any required policy reforms. And then, towards the end of
the same year, the cycle begins anew.
The
Annual Growth Survey – helpful hand for each Member State
Regarding the issue of fiscal consolidation, the Annual
Growth Survey states that Member States have the conflicting priorities of
discipline versus flexibility, namely on the one hand the need to support the
credibility of monetary policy while on the other hand the need for economic
stimulus. Therefore, Member States have to adjust their structural budget balances
of more than 0,5% of GDP in order to bring debt ratios close to the 60% requirement.
On the track to sustainable public finances, all Member States are required to
“keep public expenditure growth firmly below the rate of medium term trend GDP growth,
while prioritising sustainable growth-friendly expenditures in areas such as research,
innovation education and energy.”[5] According
to the actual debt ratio, Member States are given additional recommendations.
AGS refer to excessive surplus/deficit current account
that the Member States have to correct. Whereas adjusting the wage-setting
arrangements, especially the wage-indexation mechanisms appear as one of the
lever that the Member States running deficit current account may pull, the
Euro-Plus-Pact insists very much on that. When drafting its proposals for the
country-specific recommendations, the Commission chose to lean on the
Euro-Plus-Pact and hereby, discarded non-cost factors such as the knowledge
intensity of export or the geographical distribution of export. Furthermore,
the Commission neglected to address Member States with large current account
surpluses although it urged them in the AGS to "identify and tackle the
sources of persistently weak domestic demand".
According to the Annual Growth Survey, the stability of
the financial sector must be reinforced by regulation and supervision as well
as restructuring of banks. The latter recommendation should ensure its
“long-term viability and (…) a properly functioning credit channel.”[6]
In order to align Member States on the achievement of
the EU2020 targets, the
Commission
suggests a set of measures and instruments grouped under the headings of “making
work more attractive” and “getting unemployed back to work” in its Annual
Growth Survey. Under the former heading, the Commission urges all Member States
in this document to shift “taxes away from labour”, to gear “tax benefit
systems, flexible work arrangements and childcare facilities” as well as to
“reduce undeclared work.” Under the latter heading, the Commission suggests
three main instruments: [7]
1.
provide
incentives to work through support of self-employment, time-limited support,
conditionality linking training and job search;
2.
ensure
coherence between the level of income taxes and unemployment benefits;
3.
adapt
the unemployment insurance system.
According to the European Commission within the AGS,
labour market rigidities restrain the access to labour markets. At the same
time, education is considered as variable to improve access to it especially
for young people. On the flexibility side, the European Commission suggested in
its Annual Growth Survey to diminish “labour market rigidity” and to promote education
in order to help young people to enter the job market. Moreover, a more simple
recognition procedure of professional qualifications should facilitate free
circulation of “citizens, workers and researchers.” Moreover, more open-ended
contracts should replace temporary or precarious contracts.[8]
Specific
Country Recommendations – Latvia
Introducing with the new Countries report – 2015, the
author was amazed how detailed and explained it was. It is one of the tool for
citizens in Latvia to assess the economic growth and follow within the steps of
policy makers in his own country – to check if the targets are completed or not
(being in progress).
A measurement will be given – compared against 2014
commitments for Lavia and reached goals of it.
In the following table, authors explains the meaning
of the levels of progress (assessment level): [1]
·
No
progress: The Member State has neither announced nor adopted any measures to
address the CSR. This category also applies if a Member State has commissioned
a study group to evaluate possible measures.
·
Limited
progress: The Member State has announced some measures to address the CSR, but
these measures appear insufficient and/or their adoption/implementation is at
risk.
·
Some
progress: The Member State has announced or adopted measures to address the
CSR. These measures are promising, but not all of them have been implemented
yet and implementation is not certain in all cases.
·
Substantial
progress: The Member State has adopted measures, most of which have been
implemented. These measures go a long way in addressing the CSR.
·
Fully
addressed: The Member State has adopted and implemented measures that address
the CSR appropriately.
Evaluating
the Latvia’s situation in specific recommendation process, author assumes that
overall country has only some progress where the Member State has announced or
adopted measures to address the CSR. These measures are promising, but not all
of them have been implemented yet and implementation is not certain in all
cases.
Conclusion
After the
recent economic crisis, there was a need for stronger economic governance and
better policy coordination tool between the EU Member States.
In a Union of
highly integrated economies, enhanced policy coordination can help prevent
discrepancies and contribute to ensuring convergence and stability in the EU as
a whole, and in its member states
As a part of
a wider reform of the EU economic governance, the European Council decided to
establish the European Semester in 2010. The legal basis for the process is the
so-called 'six-pack' - 6 legislative acts that reformed the Stability and
Growth Pact. The first European Semester cycle took place in 2011.
Main key objectives
for European Semester:
·
to
contribute to ensuring convergence and stability in the EU
·
to
contribute to ensuring sound public finances
·
to
foster economic growth
·
to
prevent excessive macroeconomic imbalances in the EU
·
to
implement the Europe 2020 strategy
Monitoring
progress and ensuring the active involvement of EU countries are key elements
of the strategy. The European Semester,
an annual cycle of macro-economic, budgetary and structural policy coordination.
The key stages in the European semester are as follows:
·
In
January, the Commission issues its Annual Growth Survey, which sets out EU
priorities for the coming year to boost growth and job creation.
·
In
February, the Council of the European Union and the European Parliament discuss
the Annual Growth Survey.
·
In
March, EU Heads of State and Government (i.e. the European Council) issue EU
guidance for national policies on the basis of the Annual Growth Survey.
·
In
April, Member States submit their plans for sound public finances (Stability or
Convergence Programmes) and reforms and measures to make progress towards
smart, sustainable and inclusive growth (National Reform Programmes).
·
In
May, the Commission assesses these Programmes.
·
In
June, the Commission provides country-specific recommendations as appropriate.
The European Council discusses and endorses the recommendations.
·
In
July, the Council of the European Union formally adopts the country-specific
recommendations.
·
In
Autumn, the Governments present the budget draft to their Parliaments.
[1]COMMISSION
STAFF WORKING DOCUMENT Country Report Latvia 2015. Available online: http://ec.europa.eu/europe2020/pdf/csr2015/cr2015_latvia_en.pdf
[Accessed: 2015.05.17.]
[1] Eugene
Eteris. “Modern European Law For Businessmen: Lisbon Treaty in Action”. RSU.
Rīga: 2012. P. 14 - 16
[2] Next
steps towards a deep and genuine Economic and Monetary Union: Early co-ordination
and contractual arrangements. Available online: http://europa.eu/rapid/press-release_MEMO-13-259_en.htm
[Accessed: 2015.05.17.]
[3]Mastering
economic interdependence: Commission proposes reinforced economic governance in
the EU IP/10/561 Brussels, 12 May 2010 http://europa.eu/rapid/press-release_IP-10-561_en.htm?locale=fr
[Accessed: 2015.05.17.]
[4] EUROPEAN
SEMESTER. Available online: http://eurodiaconia.org/toolkit-european-semester/#link-know-europeansemester
[Accessed: 2015.05.17.]
[5] European
Commission, Annual Growth Survey COM (2011) 11 final, op.cit., 12/01/2010, p.4,
http://ec.europa.eu/europe2020/pdf/en_final.pdf (Accessed: 2015.05.17.]
[6] European
Commission, Annual Growth Survey COM (2011) 11 final, op.cit., 12/01/2010, p.5,
http://ec.europa.eu/europe2020/pdf/en_final.pdf
[Accessed: 2015.05.17.]
[7] Ibid,
p.6.
[8] European
Commission, COM (2011) 11 final, Annual Growth Survey, op.cit., 12/01/2010,
p.8,
http://ec.europa.eu/europe2020/pdf/en_final.pdf
[Accessed: 2015.05.17.]