The annual growth survey published by the European Commission yesterday (12 January) is the first stage in a process designed to ensure better economic co-ordination in the eurozone and the EU.
This process, known as the European semester, is a response to the problems caused by the lack of financial discipline among the members of the euro since it was launched. This allowed countries to continue running high debt levels and avoid taking politically difficult steps to improve competitiveness, consequently storing up the problems which provoked the eurozone crisis last year.
The European semester attempts to bring together three strands of EU economic policy: economic governance, fiscal consolidation and structural reforms.
The annual growth survey sets out the main economic policy challenges for the EU at the start of the semester. They include fiscal consolidation, ie, reducing debts and deficits to sustainable levels, while supporting growth and employment.
MEPs, ministers of finance and other ministers whose portfolios are relevant to the growth survey will discuss the main message of the survey over coming weeks, ahead of the European Council on 24-25 March. That is when EU leaders are scheduled to take a common line on the economic challenges and agree the strategic direction of policy.
In April, member states are to submit three strategic programming documents to the Commission for assessment. Stability and convergence programmes set out how countries plan to get their deficits and debts down to the required levels, while national reform programmes set out the structural reforms designed to boost competitiveness, growth and job creation.
After the Commission has assessed these programmes, finance ministers or EU leaders may issue guidance to any country with budget plans deemed unrealistic or that fails to address the main economic challenges.
Commission publishes annual growth survey
Discussion in Council of Ministers and European Parliament
EU leaders identify main economic challenges and agree strategic advice
Member states submit stability and convergence programmes and national reform programmes for assessment by European Commission
Finance ministers or leaders may issue guidance to countries whose policies and budgets are out of line
European Council and Council of Ministers provide policy advice before member states finalise draft budgets for the following year. Draft budgets are sent by governments to national parliaments
In July, ministers or leaders meeting at EU level will issue advice before member states finalise their draft budgets for the following year. National parliaments will retain the right to decide national budgets. But the intention is that if countries fail to take sufficient action to reduce deficits and debts, it will now be easier – as a result of changes to the stability and growth pact rules – to impose EU-level sanctions, including penalty deposits, and at an earlier stage than before.
The necessary changes to the stability and growth pact and economic governance rules need to be approved by the Council of Ministers and MEPs. But both institutions have pledged to agree the changes by the summer so that they will apply in the second half of 2011.
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