Publication - Plans needed to address economic imbalances
Copyright: European Central Bank
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The 2017 macroeconomic imbalance procedure and implementation of the 2016 country-specific recommendations
On 22 February 2017 the European Commission published the European Semester Winter package which includes the conclusions reached following the application of the macroeconomic imbalance procedure (MIP), as well as an assessment of the progress with reforms in each Member State since the adoption of the relevant country-specific recommendations (CSRs) in July 2016.
Outcome of the 2017 MIP assessment by the European Commission
The MIP was introduced in 2011 and is now in its sixth year of application. It seeks to prevent the emergence of harmful macroeconomic imbalances in EU countries and to correct them where they are excessive. Following a screening exercise in autumn each year on the basis of a set of indicators, the European Commission conducts in-depth reviews of selected countries (included in the annual country reports) to assess the severity of any imbalances. If such imbalances are found to exist, the Member State concerned receives policy recommendations from the Council of the European Union – based on recommendations by the European Commission – under the preventive arm of the procedure. Where the imbalances are found to be excessive, the excessive imbalance procedure (EIP) may be initiated following a recommendation to the Council by the Commission.1 Under this corrective arm of the procedure, a corrective action plan must be provided to explain how the excessive imbalances will be addressed. In the event of repeated failures to provide an adequate plan, or if an approved plan is not complied with, the Council may impose financial sanctions on the euro area country in question.
In its assessment, the European Commission identified six countries with excessive imbalances: Bulgaria, France, Croatia, Italy, Cyprus and Portugal (see Table A). Excessive imbalances have been identified in each of these countries, with the exception of Cyprus, since 2015. Cyprus was added to this list in 2016, after exiting its economic and financial adjustment programme in March of that year. Looking back over a longer period, the number of countries assessed by the Commission as having excessive imbalances has increased each year since 2012, and only stabilised this year (see Chart A). This trend has to some extent been driven by countries whose economic adjustment programmes have ended and which have therefore been automatically reintegrated into the regular EU surveillance processes.
While the adjustment programmes have helped to reduce imbalances, overall vulnerabilities in those countries remain high and therefore close monitoring is still essential. Nevertheless, even allowing for such “automatic” inclusions, the number of countries in the “excessive imbalances” category has not declined. This appears to be consistent with the finding from the assessment of the implementation of CSRs made in 2016 (see below) that reform remains slow despite the challenges faced by these countries. Only Spain and Slovenia have managed to move out of the “excessive imbalances” category, while Italy has now been included in it for the fourth year.
Directorate General Communications
Sonnemannstrasse 20, 60314 Frankfurt am Main, Germany
Tel.: +49 69 1344 7455, E-mail: media@ecb.europa.eu
Website: www.ecb.europa.eu
page source http://www.ecb.europa.eu/pub/
