Documents considered by the Committee on 18 March 2015 - European Scrutiny Contents

2 Broad guidelines for economic policies

Committee's assessment Politically important
Committee's decisionNot cleared from scrutiny; recommended for debate in European Committee B
Document detailsDraft Council Recommendation on broad guidelines for economic policies of Member States and the EU
Legal baseArticle 121(2) TFEU; —; QMV

Document numbers

HM Treasury

(36712), 6813/15 + ADD 1, COM(15) 99

Summary and Committee's conclusions

2.1 EU "integrated guidelines", for economic and employment policies, underpin the Europe 2020 Strategy and are relevant to the annual European Semester. The Commission has proposed four broad guidelines for economic policies, as part of new "integrated guidelines", for consideration by the June European Council.

2.2 The Government tells us that it is broadly supportive of the Commission's proposed text, but is critical of some of the detail, concerning third country labour migration and taxation.

2.3 The broad guidelines for economic policies are important in the context of both the Europe 2020 Strategy and the European Semester. So we recommend that this document be debated in European Committee B and we urge the Government to ensure that the debate takes place before the June European Council.

2.4 We suggest that in the debate Members will want to examine particularly the texts concerning labour migration and taxation.

Full details of the documents: Draft Council Recommendation on broad guidelines for the economic policies of the Member States and the Union: (36712), 6813/15 + ADD 1, COM(15) 99.


2.5 In 2005 EU "integrated guidelines", for economic and employment policies, were introduced. The Lisbon Treaty contains the present legal base for integrated guidelines — Article 121 TFEU for broad economic policy guidelines and Article 148 TFEU for employment policy guidelines. The latter article provides that the employment guidelines must be consistent with the economic guidelines. The guidelines are to be taken into account by Member States in preparing and annually updating their National Reform Programmes.

2.6 In March 2010 the European Council endorsed a "Europe 2020 Strategy" for the coming decade, to follow on from the Lisbon Strategy. The strategy was to continue with integrated guidelines and the associated reporting and monitoring process. It set out the challenges facing the EU over the coming decade and the need for "a strategy to turn the EU into a smart, sustainable and inclusive economy delivering high levels of employment, productivity and social cohesion" and proposed:

·  policy priorities that focused on smart, sustainable and inclusive growth;

·  seven flagship initiatives to deliver on those policy priorities;

·  mobilising EU instruments and policies such as the single market to pursue the strategy's objectives; and

·  a governance structure that included five headline targets that the EU should aim to achieve by 2020.

2.7 Alongside the Europe 2020 Strategy has been the Growth and Stability Pact. The Pact, adopted in 1997, emphasised the obligation of Member States to avoid excessive government deficits, defined as the ratio of a planned or actual deficit to gross domestic product (GDP) at market prices in excess of a "reference value" of 3%. Each year the ECOFIN Council issues an Opinion on the updated stability or convergence programme of each Member State. The economic content of the programmes is assessed with reference to the Commission's current economic forecasts.

2.8 In endorsing the Europe 2020 Strategy the European Council said that "The timing of the reporting and assessment of the National Reform Programmes and Stability and Convergence Programmes should be better aligned, in order to enhance the overall consistency of policy advice to Member States". In June, September and October 2010 the European Council considered and endorsed measures to increase coordination of EU economic governance, including strengthening the Stability and Growth Pact and a "European Semester" which would tie together annual consideration of National Reform Programmes and Stability and Convergence Programmes.

2.9 More generally 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 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 document

2.10 The previous Council Recommendation on broad economic policy guidelines was adopted in July 2010 and it was indicated that they would remain stable until 2014. The Commission now proposes these new guidelines to underpin the Europe 2020 Strategy.

2.11 The draft Recommendation itself is largely a preamble with seven recitals and the draft guidelines are annexed to the draft Recommendation.

2.12 The Commission's draft preamble:

·  notes that the EU has developed policy coordination measures, combined under the European Semester;

·  says that the financial crisis revealed weaknesses in the economy of the EU and of the Member States;

·  says that moving the EU to a state of job creation and growth is the key challenge faced today, and that this requires ambitious and coordinated policy action;

·  suggests that these actions should encompass a boost to investment, a renewed commitment to structural reform, and exercising fiscal responsibility;

·  suggests that Member States and the EU should address the social impact of the crisis, and says Member States should make sure the benefits of growth reach all citizens and all regions;

·  suggests that action in line with the guidelines would contribute to reaching the goals of the Europe 2020 Strategy;

·  continues that the guidelines are addressed to the Member States and the EU, and should be implemented in partnership with national, regional and local authorities, parliaments, social partners and civil society; and

·  says that the proposed guidelines are in line with the Stability and Growth Pact and should form the basis of the European Semester's Country-Specific Recommendations.

2.13 The Commission proposes four broad economic policy guidelines:

·  boosting investment;

·  enhancing growth by the Member States implementation of structural reform;

·   removing key barriers to growth and jobs at the EU level; and

·  improving the sustainability and growth-friendliness of public finances.

2.14 With respect to the investment guideline, the Commission's proposed text says:

·  increasing the level of investment is key to boosting demand, and improving competitiveness and the growth potential in the EU;

·  the potential of EU funds to finance investment should be exploited, and making finance reach the real economy calls for increasing transparency and information provision; and

·  macroeconomic and financial stability, as well as regulatory predictability and financial sector openness and transparency, are critical elements for keeping the Union an attractive host for foreign investment.

2.15 The Commission's proposed text for the guideline on structural reform says:

·  ambitious implementation of reform by Member States in product and labour markets and social welfare systems is crucial to the recovery, correcting imbalances, and unleashing the potential of EU economies;

·  Member States should coordinate reform closely;

·  labour market and social systems reforms need to be pursued closely, and actions on legal migration should make the EU an attractive destination for talent;

·  reforming and integrating product markets should be continued, and efforts should continue to streamline the regulatory environment; and

·  information and communication technologies and the digital economy, and in-depth reform to modernise research and innovation systems are emphatically important.

2.16 On the third recommended guideline, on removing key barriers to growth and jobs at the EU level, the importance of further integration of the single market is highlighted, specifically mentioning the Digital Single Market, the Capital Markets Union and the Energy Union as areas where the EU can make a contribution. The Commission's text also says EU legislation should focus on those issues that are best dealt with at the EU level.

2.17 The Commission's proposed text for the guideline on improving the sustainability and growth-friendliness of public finances starts by saying stable finances are key for growth and job creation. It then says that:

·  Member States should secure long term control over the deficit and debt levels, through the EU rules based framework, and this should be complemented by national budgetary arrangements;

·  budgetary consolidation should prioritise growth-enhancing expenditure items and expenditure reforms should target efficiency gains;

·  a common consolidated tax base should be pursued, and taxes should be shifted from labour to consumption, property and environmental taxes; and

·  broadening tax bases should also be considered.

2.18 After a written procedure, the ECOFIN Council is expected to endorse draft broad economic policy guidelines in May. These are expected to be the base for a discussion at June European Council. (The Commission has also proposed new employment guidelines as the other half of new integrated guidelines, which will also be processed for the June European Council.[1])

The Government's view

2.19 In his Explanatory Memorandum of 13 March 2015 the Financial Secretary to the Treasury (Mr David Gauke) says that:

·  the Government welcomes the emphasis in the recommendation on structural reform at both the Member State and EU levels, the importance of investment, and the need for fiscal responsibility;

·  it supports the statement that EU legislation should focus on those issues that are best dealt with at the EU level;

·  while the Government broadly supports the case for labour market reform set out in the Annex, it believes, however, regarding the references to legal migration, that the regulation of labour migration from outside the EU should be a matter for Member States to determine on the basis of national assessments of economic need;

·  it also does not support the recommendations on taxation, which the Government believes is overly prescriptive, in particular the need to pursue a common consolidated tax base, which contravenes the principles of proportionality and subsidiarity; and

·  the Government believes decisions on specific matters of taxation are best made by Member States taking into account country-specific circumstances.

Previous Committee Reports


1   (36703), 6144/15 + ADD 1, for which we are awaiting the Government's Explanatory Memorandum. Back

previous page contents next page

© Parliamentary copyright 2015
Prepared 27 March 2015