2 European Semester
| Committee's assessment
| Politically important |
| Committee's decision | Not cleared from scrutiny; for debate in European Committee B
|
| Document details | (a) Joint employment report; (b) Annual Growth Survey 2015; (c) European Economic Forecast, Autumn 2014
|
| Legal base | —
|
| Department
Document numbers
| HM Treasury
(a) (36530), 15953/14 + ADD 1, COM(14) 906
(b) (36542), 15985/14, COM(14) 902; (c) (36560), —
|
Summary and Committee's conclusions
2.1 The European Semester is an EU-level framework
for coordinating and assessing Member States' structural reforms
and fiscal/budgetary policy and for monitoring and addressing
macroeconomic imbalances. The semester cycle begins with an Annual
Growth Survey by the Commission, followed by a series of overarching
and country specific documents from the Commission and culminating
in examination of the overall and country-specific situations
by the European Council. The Annual Growth Survey is accompanied
by a draft Joint Employment Report which is based on employment
and social developments in the European Economic Forecast.
2.2 The Commission's Annual Growth Survey for 2015
sets out its priorities for action at national and EU level over
the next 12 months to support economic growth and employment.
It is accompanied by a draft Joint Employment Report, an annual
set-piece report which takes stock of employment reforms in Member
States and expands on key employment messages contained in the
Annual Growth Survey. The third document considered in this chapter
is the Autumn 2014 European Economic Forecast, on which much of
the data and comment in semester documentation is based.
2.3 The Government gives us a relatively welcoming
assessment of the documents, noting particularly some positive
comments on the UK situation.
2.4 The Annual Growth Survey is one important
document in the opening stage of the 2015 European Semester. So
we recommend that it be debated in European Committee B, together
with the other important document, the Alert Mechanism Report,
which we expect to deal with in our first meeting in the New Year.
We recommend also that the documents accompanying the Annual Growth
Survey, the draft Joint Employment Report and the 2014 EU Autumn
Forecast, be included in the debate.
2.5 This debate should take place before the relevant
functional Councils consider the documents in preparation for
the March 2015 European Council.
Full details of the documents:
(a) Draft Joint Employment Report from the Commission and the
Council, accompanying the Commission Communication on the Annual
Growth Survey 2015: (36530), 15953/14 + ADD 1, COM(14) 906; (b)
Commission Communication: Annual Growth Survey 2015: (36542),
15985/14, COM(14) 902; (c) Commission's European Economic Forecast,
Autumn 2014: (36560), —.
Background
2.6 In March 2010 the Commission proposed a "Europe
2020 Strategy", to follow on from the Lisbon Strategy. This
strategy is aimed at promoting smart, sustainable and inclusive
economic growth. It was endorsed by the March 2010 European Council.
During the latter half of 2010 the Council adopted, in the context
of the Europe 2020 Strategy, broad guidelines for the economic
policies of the Member States and the EU and guidelines for the
employment policies of the Member States, together the "Europe
2020 integrated guidelines".
2.7 The June, September and October 2010 European
Councils considered and endorsed measures to increase coordination
of EU economic governance, including strengthening the Stability
and Growth Pact and introducing a "European Semester".
2.8 The European Semester is an EU-level framework
for coordinating and assessing Member States' structural reforms
and fiscal/budgetary policy and for monitoring and addressing
macroeconomic imbalances. It attempts to exploit the synergies
between these policy areas by aligning their reporting cycles,
which would tie together consideration of National Reform Programmes
(reports on progress and plans on structural reforms, under the
Europe 2020 Strategy) and Stability and Convergence Programmes
(reports on fiscal policy, under the Stability and Growth Pact).
2.9 The European Semester cycle begins with an Annual
Growth Survey by the Commission, followed by a series of overarching
and country specific documents from the Commission and culminating
in examination of the overall and country-specific situations
by the European Council. The Annual Growth Survey is accompanied
by a draft Joint Employment Report which is based on employment
and social developments in the European Economic Forecast, commonly
referred to as the EU Autumn Forecast.
2.10 An element of the European Semester process
is the Macroeconomic Imbalances Procedure (MIP). The MIP is a
mechanism designed to identify and, if necessary, correct harmful
macroeconomic imbalances across the EU, which were a key cause
of the current sovereign debt crisis. The first stage of the MIP
is publication by the Commission of an annual Alert Mechanism
Report. We expect to consider the Alert Mechanism Report
for the 2014 cycle at our first meeting in the New Year.
The documents
The Annual Growth Survey
2.11 The Commission's Annual Growth Survey for 2015,
document (b), sets out its priorities for action at national and
EU level over the next 12 months to support economic growth and
employment. In its introduction the Commission notes that while
the global economic environment explains some of the current slowdown,
domestic factors are also preventing faster growth. Among them
are fragmented financial markets, the need to reduce debt, incomplete
adjustment of macroeconomic imbalances and low confidence. Low
productivity gains, low investment and high structural unemployment
also limit the EU's growth prospects. In light of these considerations
the Commission has set three priorities for the coming year.
Priority 1: Boosting investment
2.12 The Commission:
· sees an investment gap of at least €230
billion per annum below long term trend;
· believes much can be done at the national
and regional level and that Member States with more fiscal room
to manoeuvre need to invest more;
· argues that the best possible use must
be made of EU funds; and
· draws attention to an Investment Plan
for Europe[9] which it
has presented alongside the AGS and which is intended to reverse
recent downward investment trends, boost competitiveness in strategic
areas and strengthen the EU's human capital and physical infrastructure.
Priority 2: Renewed commitment to structural reform
2.13 The Commission view is that structural reform
can be carried out both at the EU and at the Member State level.
For the EU level, it cites implementing the Single Market in goods
and services, the Digital Single Market, energy markets and a
better EU regulatory framework as areas where a contribution can
be made. At the Member State level, the Commission notes reform
efforts in some countries, but also that additional further reform
is needed. It suggests that key reforms include improving labour
markets, pension reforms, modernising social protection systems,
improving the flexibility of product and services markets, improving
framework conditions for business investment, improving the quality
of research and innovation investment and improving efficiency
in public administration.
Priority 3: Pursuing fiscal responsibility.
2.14 For the Commission a significant degree of fiscal
consolidation was necessary to restore confidence in the sustainability
of Member State finances and it says considerable improvements
have been made. According to the Commission, the pace of fiscal
adjustment must be differentiated according to the challenges
faced by each Member State, and the composition of the adjustment
must be growth friendly. It says that on the revenue side, this
could mean stimulating employment and growth by shifting taxation
away from labour. On the expenditure side, the Commission encourages
spending reviews such as those carried out in the UK.
Conclusion
2.15 In the final section of the AGS, the Commission
says it is the right time to streamline and reinforce the European
Semester, keeping in view the mid-term review of the Europe 2020
Strategy, which will be presented at the Spring 2015 European
Council. In an Annex to the AGS, the Commission proposes simplifying
Commission output on the semester and allowing more time for feedback,
streamlining reporting requirements by Member States, enhancing
the multilateral nature of the process and opening up the process
and engaging more with other actors.
DRAFT JOINT EMPLOYMENT REPORT
2.16 As is usual, the AGS is accompanied by a draft
Joint Employment Report (JER), document (a), an annual set-piece
report as mandated by Article 148 TFEU and drawn up by the Commission.
The JER takes stock of employment reforms in Member States and
expands on key employment messages contained in the AGS.
2.17 The 2015 draft JER:
· describes a continuing poor employment
situation in many other Member States, although, generally, a
slight improvement on last year;
· acknowledges the UK's progress;
· for the EU as a whole, identifies key
priorities including tackling youth unemployment, active labour
market programmes and vocational education and training; and
· includes a small set of publicly available
headline indicators presented as a "Social and Employment
Scoreboard" — a number of Member States are sceptical
about the validity and value of the choice of indicators, the
UK among them.
EUROPEAN ECONOMIC FORECAST: AUTUMN 2014
2.18 The 2014 EU Autumn Forecast, document (c), reviews
developments at the EU, eurozone and country-specific levels.
The Commission:
· forecast growth in 2014 of 0.8% in the
eurozone and 1.3% in the EU;
· forecasts economic activity to gradually
strengthen in 2015 with growth of 1.1% and 1.5% expected in the
eurozone and EU respectively;
· has revised up government deficit forecasts
for France and Italy;
· says the unemployment rate is expected
to be 11.6% in 2014 in the eurozone and 10.3% in the EU;
· says in 2015 the unemployment rate is
expected to further decline to 11.3% in the eurozone and 10.0
per cent in the EU;
· says consumer price inflation is expected
to be 0.5% in the eurozone in 2014 and 0.8% in 2015 and to stand
at 0.6% and 1.0% respectively in the EU;
· believes that risks to the EU economic
outlook remain tilted towards the downside;
· identifies the main risks as the external
environment and lower-than-expected inflation; and
· suggests that on the domestic side, further
disappointment about the pace of the implementation of reforms
in the EU may also hurt the growth outlook.
2.19 On the UK the Commission:
· notes that 'the UK is set to register
robust growth, as both investment and consumption expand at a
fast pace' with GDP growth of 3.1% in 2014 and 2.7% in 2015, reflecting
an upward revision compared to the spring forecast of 0.4% for
2014 and 0.2% for 2015;
· expects robust private consumption to
remain the main contributor to growth in the UK;
· notes also that the labour market is set
to continue to perform strongly as both labour supply and labour
demand continue to rise;
· notes, however, weakening tax receipts
in 2014 and argues that this is possibly due to low wage growth,
increased employment in relatively lower paid jobs and self-employment,
or potentially a timing issue related to the reduction in the
top rate of personal income tax; and
· forecasts, on fiscal policy, a deficit
under EU rules of 5.2% of GDP in 2014-15 falling to 4.2% in 2015-16.
The Government's view
2.20 In his Explanatory Memorandum of 15 December
the Financial Secretary to the Treasury (Mr David Gauke) comments
first on the AGS. Noting that no sections of the document are
directed specifically at the UK, he says that:
· the Government welcomes the publication
and broadly agrees with the priorities identified in it of boosting
investment, renewed commitment to structural reform and fiscal
responsibility;
· the AGS puts a welcome focus on the Single
Market, which it identifies as the most powerful engine of growth
at EU level;
· further progress on the EU's services
and energy markets and the creation of a Digital Single Market
should bring significant benefits to both business and consumers;
· the Government also welcomes the emphasis
on better regulation, whether at the level of the EU or of Member
States; and
· it welcomes the Commission's proposals
to strengthen the European Semester process by increasing national
ownership and streamlining procedures.
2.21 On the draft JER the Minister says that:
· the Government welcomes the continuing
focus on the major challenges facing labour markets and the need
for specific reforms;
· the report focuses on the most important
issues — youth employment and skills are all important areas
for concentrated effort;
· it is good to see recognition of the UK's
progress; and
· while the Government can broadly support
the analysis and priorities presented by the Commission, it will
continue to insist that effective policy solutions are best devised
by individual Member States.
2.22 Turning to the 2014 EU Autumn Forecast the Minister
says merely that the Government takes note of its publication
and notes that the UK is forecast to be the fastest growing major
economy in 2014 and is the only major economy to have upward revisions
to growth in 2014 and 2015.
2.23 Finally the Minister sets out the timetable
for the 2015 European Semester, as follows:
· the AGS, which was published on 28 November,
is due to be discussed at the 2015 Spring European Council;
· in advance of that European Council, it
will be discussed in the following Council formations: Economic
and Financial Affairs; Employment, Social Policy, Health and Consumer
Affairs; Competitiveness; Environment; Education, Youth, Culture
and Sport; Justice and Home Affairs; and General Affairs;
· in March 2015, the Commission will publish
a single analytical document for each Member State, covering the
reform agenda and an in-depth analysis of macroeconomic imbalances,
if needed;
· the document for the UK will cover both
items;
· in the spring of 2015, Member States will
submit National Reform Programmes and Stability or Convergence
Programmes to the Commission;
· based on these reports and follow-up recommendations
from the Commission, the Council will issue country-specific policy
guidance for Member States to take into account when preparing
their 2016 budgets and in implementing their national growth strategies;
and
· these country-specific recommendations
will be considered at the European Council in June or July 2015.
Previous Committee Reports
None.
9 (36540) 16115/14, which we report on in chapter
7 of this Report. Back
| 
