The European Semester: a new instrument for budgetary and economic coordination
Only a few months ago the expression “economic governance” within the EU was taboo. Following the attacks against the Euro it is now clear that one cannot have both a single currency and big discrepancies in the macro-economic field: budgetary and economic coordination is necessary.
The European Semester, formally agreed by Member States in September 2010, is a new tool designed precisely to tackle the issue of economic coordination in the EU and in the Eurozone, which has been destabilised by the widening competitiveness gap between its members. The first novelty is that it is attempting at coordinating budgetary and economic policies within the EU via an ex ante mechanism, not via the type of ex post evaluation which is much more usual at EU level. The second novelty is that it aims to synchronise two previously rather independent procedures alongside a precise timeline. In January, the Commission is expected to publish its Annual Growth Survey, in which it is “reviewing economic challenges for the EU and the euro area as a whole” based on an analysis of the progress achieved on EU2020 targets, “a macro-economic report and the joint employment report”, and “concentrating on key measures” to foster “an integrated approach to recovery and growth”. Based on this stock taking exercise, the European Council in March is expected to give strategic advice on budgetary and economic policies, which Member States are then to incorporate in their annual Stability and Convergence Programmes (mid-term budgetary targets in line with the Stability and Growth Pact (SGP)) and also in their National Reform Programmes (structural economic reforms in areas like employment, research, energy or social inclusion in line with the EU2020 strategy “headline targets” - See Europeinfos No. 128, 129 & 131). All reports must be submitted in April to the Commission, which will assess them and wherever applicable make integrated country-specific recommendations. These recommendations will be discussed and approved within the various adequate Council formations before the European Council endorses them in late June. In July, finally, the ECOFIN Council will provide specific budgetary advice to Member States before they draft their budgets in the second half of the year, according to their usual national parliamentary procedure.
Keeping up with such a tight timeline is going to be a challenge. As might have been expected, the increased role of the EU in the preparatory phases of the budgetary and economic policies of the Member States is not welcome everywhere. This is why the Commission strongly underlines the fact that the budgetary procedure ultimately remains in the domain of the national parliaments’ responsibilities according to national procedures.
According to an assessment recently published by the think tank Notre Europe, the European Semester lacks incentives to reward ‘virtuous’ countries, and relies too much on sanctions along the SGP rules, which still are not convincing enough. Another drawback is that the whole process is meant for the EU-27, not only for the Eurozone. It may therefore not be strong enough to bridge the competitiveness gap between the EMU (European Monetary Union) members. Finally, according to Notre Europe, the EU should focus more on growth and economic structural reforms and less on fiscal consolidation which is more the duty of the Member States.
The “European Semester” is not the only tool dedicated to economic coordination within the EU and more specifically the EMU. A package of six legislative proposals was also presented by the Commission on 29th September 2010, which is supposed to be “fast tracked” so that it can be approved by June 2011. In October 2010 the task force chaired by Herman Van Rompuy came up with some specific recommendations. A Treaty amendment (art. 136 TFEU) according to the simplified procedure is currently being discussed, so as to allow for a permanent financial mechanism to replace the temporary one currently used for Ireland.
The European Semester is part of a whole range of instruments designed to tackle the lack of economic coordination in the EU and the Eurozone. Things have moved, and are still moving, very quickly when compared to usual EU time scales. As often the outcome will nevertheless depend much on how the Member States make use of those new tools.
Hervé Pierre Guillot SJ
Translated from the Original French