Transcript Economic_policy_challenges

Economic policy
challenges 2013
Directorate General for Economic and Financial Affairs
European Commission
I. Recent economic developments
and outlook
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4
5
Breaking the negative feedback loop
Bank
funding
Firewalls
SOVEREIGN
DEBT
Fiscal
discipline
FINANCIAL
STABILITY
Break
the negative
feedback loop
Bank
recaps
Structural
reforms
ECONOMIC
GROWTH
Differentiated fiscal
consolidation & quality
of public finances
Public sector deleveraging
180
General government consolidated gross debt, % of GDP
160
2007
140
2012
120
100
80
60
40
20
0
EL IT PT IE BE EA- FR CY UK EU- ES DE HU AT MT NL PL SI FI SK DK CZ LV LT SE RO LU BG EE
17
27
Public finances set to improve further
General government budget
balance, euro area
2
General government debt,
euro area
General goverment balance
% of GDP
General government balance in structural terms
1
100
0
95
-1
90
-2
85
-3
80
forecast
-4
% of GDP
75
-5
70
-6
65
60
-7
05
06
07
08
09
10
11
12
13
14
05
06
07
08
09
10
11
12
13
14
Financial fragmentation in the euro
area
Interest rates on loans to enterprises
(new businesses, maturity up to 1 year)
7.5
1.8
%
1.6
6.5
1.4
5.5
1.2
1
4.5
0.8
3.5
0.6
0.4
2.5
0.2
1.5
0
2007
2008
standard deviation (rhs)
2009
2010
DE
FR
2011
IT
2012
ES
EL
PT
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Intra-EA adjustment is taking place
Current-account position, % of GDP
Facing the economic challenges in
the EU…
1. Continue growth-friendly fiscal consolidation
• - differentiated pace
• - growth-friendly mix of revenue and expenditure
2. Continue financial repair
3. Implement structural reforms for growth and
adjustment
II. Economic policy priorities in the
EU in 2013
Annual Growth Survey 2013: 5 priorities
• 1. Pursuing differentiated, growth-friendly fiscal
consolidation
• 2. Restoring normal lending to the economy
• 3. Promoting growth and competitiveness for
today and tomorrow
• 4. Tackling unemployment and the social
consequences of the crisis
• 5. Modernising public administration
1. Differentiated, growth-friendly
fiscal consolidation
• Main components:
• 1. Differentiated pace of consolidation in line with
the SGP
• 2. Growth-friendly composition of consolidation
• Additionally:
• 3. Long-term sustainability
• 4. Fiscal governance and budgetary institutions
2. Restoring normal lending to the
economy
• - Restoring macro-financial stability
• - Continuing financial repair
• - Promoting new sources of funding
• - Using EU financial instruments
3. Promoting growth and
competitiveness
• Improving framework conditions for growth and
facilitate adjustment by:
• - driving innovation
• - rising the performance of education systems
• - improving business environment
• - tapping the potential of the green economy
• - deepening the Single Market, in particular in
services sectors
• - improving the performance of network
industries
4. Tackling unemployment and the
social consequences of the crisis
Precarious situation on the labour market in some
EU countries: economic, social and political costs.
Priorities
- Laying the grounds for a job-rich recovery
- Improving employability
- Promote social inclusion and prevent poverty
5. Modernising public administration
Modern, efficient and effective public
administration:
- Improving financial management
- Simplifying the regulatory framework
- Digitalisation of public administration,
- Improving the quality, independence and
efficiency of judicial systems
- Making better use of EU structural funds
III. Directorate General of
Economic and Financial Affaires –
work streams in 2013
ECFIN policy files 2013
1. Future of EMU – more integrated EMU
2. European semester – economic policy coordination
3. Implementation of the Stability and Growth Pact
4. Macro-economic Imbalances Procedure
5. Financial assistance to Member States (EL, PT, IE, ES, CY, RO)
6. Macro-financial assistance (Kyrgyz Rep., Georgia, Egypt, Jordan)
7. International meetings – G20 and IMF
1. Future of EMU
- Banking union – financial sector regulation
- Fiscal union – establishing fiscal capacity
- Economic union – coordinated policy reforms
- Political union – democratic legitimaticy and accountability
2. Integrated country surveillance:
European semester
SGP: fiscal policy
Competitiveness and
Competitiveness
imbalances and
imbalances
• Budgetary balances
• Public debt
• Long-term sustainability
of public finances
• Budgetary rules and
institutions
• Elements of quality of
public finance
• Wages and price
•competitiveness
Wages and price
competitiveness
• External imbalances
• External imbalances
• Internal imbalances
•(housing,
Internal credit)
imbalances
(housing, credit)
Structural reforms to
raise growth
potential
• Labour market
reforms
• Product market
reforms
• Reforms of social
protection systems
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3. Stability and Growth Pact
•
A rule-based framework for the coordination of national fiscal policies in the
economic and monetary union (EMU)
•
Preventive arm:
• Member States must submit annual stability or convergence
programmes, showing how they intend to achieve or safeguard sound
fiscal positions in the medium term
• Commission assesses these programmes and the Council gives its
Opinion on them (integrated in country-specific recommendations)
•
Corrective arm: Excessice Deficit Procedure
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4. Macro-economic Imbalances Procedure
•
Procedure for preventing and correcting macro-economic imbalances in the
Member States
•
Commission’s Annual Alert Mechanism Report (AMR) – economic reading of
scoreboard
•
Commission In-depth reviews (IDRs) of selected Member States to assess
whether there is any imbalance and if yes, then how serious is the
imbalance
•
Council recommendations to Member States where imbalances exist
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Macro-economic Imbalances Procedure:
scoreboard indicators
•
External imbalances and competitiveness:
•
•
•
•
•
•
current account balance (as a % of GDP, 3-year average)
Net International Investment Position (as a % of GDP)
Real Effective Exchange Rate (% change of 3 years, HICP deflators)
export market shares (% change in 5 years)
nominal unit labour cost (% change in 3 years)
Internal imbalances
•
•
•
•
•
•
deflated house prices (y-o-y % change)
private sector credit flow (as % of GDP)
Unemployment rate (3-year average)
private sector debt (as % of GDP)
General government debt (as % of GDP)
Total Financial Sector Liabilities (y-o-y % change)
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Excessive Imbalances Procedure (EIP)
•
- Opened in case the IDR identifies an excessive imbalance for a Member State
•
- Member State concerned will have to submit a corrective action plan with a
clear roadmap and deadlines for implementing corrective action
•
- Enforcement for euro area Member States (reversed qualified majority voting
in the Council):
• An interest-bearing deposit can be imposed after one failure to comply with the
recommended corrective action
• After a second compliance failure, this interest-bearing deposit can be converted into
a fine (up to 0.1% of GDP)
• Sanctions can also be imposed for failing twice to submit a sufficient corrective action
plan
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IV. Legislative framework of
economic policy surveillance
Economic policy surveillance:
legislative framework
•
- Treaty: Articles 121 and 136
•
- Six-pack legislation
•
- Two-pack regulations (to be adopted)
.......................
•
- Treaty on stability, coordination and governance (intergovermental)
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Treaty article 121
•
•
•
•
•
•
- Member States coordinate economic policies within the Council
- Council adopts broad guidelines of the economic policies of the Member
States and the EU
- Council monitors economic developments in each Member State
- Commission may address warnings and Council may address
recommendations to Member States
- Parliament is kept informed
- Parliament and Council may adopt detailed rules for multilateral
surveillance procedure
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Treary article 136
•
Council adopts measures specific to those Member States whose
currency is the euro:
(a) to strengthen the coordination and surveillance of their
budgetary discipline
(b) to set out economic policy guidelines for them
•
Only euro area Member States can vote on these measures in the Council
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Six-pack legislation
(entered into force on 13 December 2011)
•
•
•
•
•
•
Regulation (EU) No 1173/2011 on the effective enforcement of budgetary
surveillance in the euro area
Regulation (EU) No 1174/2011 on enforcement measures to correct excessive
macroeconomic imbalances in the euro area
Regulation (EU) No 1175/2011 amending Council Regulation (EC) No 1466/97 on the
strengthening of the surveillance of budgetary positions and the surveillance and
coordination of economic policies
Regulation (EU) No 1176/2011 on the prevention and correction of macroeconomic
imbalances
Council Regulation (EU) No 1177/2011 amending Regulation (EC) No 1467/97 on
speeding up and clarifying the implementation of the excessive deficit procedure
Council Directive 2011/85/EU on requirements for budgetary frameworks of the
Member States
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Two-pack regulations
(proposals; to be adopted in 2013)
•
Proposal for a Regulation on common provisions for monitoring and
assessing draft budgetary plans and ensuring the correction of excessive
deficit of the Member States in the euro area - COM(2011)821
•
Proposal for a Regulation on the strengthening of economic and budgetary
surveillance of Member States experiencing or threatened with serious
difficulties with respect to their financial stability in the euro area COM(2011)819
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Treaty on stability, coordination and governance
(entered into force on 1 January 2013)
•
- Intergovernmental agreement (not EU law)
•
- Signed by 25 MS (all but UK and CZ)
•
-Ratified by 12 euro area MS and 4 non-euro area MS: AT, CY, EE, FI, FR, DE,
EL, IE, IT, PT, SI and ES; DK, LV, LT and RO
•
- For euro area MS, others can opt-in
•
- Foresees strict fiscal rules to be integrated in national legislation, preferably
in constitutions, to be backed with the possibility of financial sanctions (fiscal
compact)
•
- Implies ex-ante coordination of economic policies, and presenting economic
partnership programmes on structural reform plans by Member States subject
to the EDP
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Integrated guidelines
•
Council recommendation of 13 July 2010 on broad guidelines for the
economic policies of the Member States and of the Union (2010/410/EU)
– public finances
– macro-economic imbalances
– R&D&I
– resource efficiency
– business and consumer environment
•
Council decision of 26 April 2012 on guidelines for the employment policies
of the Member States (2012/238/EU; 2010/707/EU)
– labour market participation and structural unemployment
– matching skills with labour market needs
– education and training
– social inclusion and combating poverty
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Balance of Payments regulation
•
Commission proposal for a Council regulation establishing a facility for
providing financial assistance for Member States whose currency is not the
euro - COM(2012) 336 – 22 June 2012
•
Aligning the framework of financial assistance to non-euro area Member
States with the framework of assistance to euro-area Member States (the
two-pack regulations)
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Thank you for your attention
Directorate General for Economic and Financial Affairs
European Commission