Documents considered by the Committee on 21 July 2015 - European Scrutiny Contents


78 European Semester 2015: Country Specific Recommendations

Committee's assessment Politically important
Committee's decisionCleared from scrutiny
Document details(a) Commission Communication about the Country Specific Recommendations for the 2015 European Semester; (b) Draft Council Recommendation about broad economic guidelines for the Eurozone; (c) Draft Council Recommendation about Belgium's National Reform and Stability Programmes for 2015; (d) Draft Council Recommendation about Bulgaria's National Reform and Convergence Programmes for 2015; (e) Draft Council Recommendation about the Czech Republic's National Reform and Convergence Programmes for 2015; (f) Draft Council Recommendation about Denmark's National Reform and Convergence Programmes for 2015; (g) Draft Council Recommendation about Germany's National Reform and Stability Programmes for 2015;

(h) Draft Council Recommendation about Estonia's National Reform and Stability Programmes for 2015

(i) Draft Council Recommendation about Ireland's National Reform and Stability Programmes for 2015

(j) Draft Council Recommendation about Spain's National Reform and Stability Programmes for 2015

(k) Draft Council Recommendation about France's National Reform and Stability Programmes for 2015; (l) Draft Council Recommendation about Croatia's National Reform and Convergence Programmes for 2015; (m) Draft Council Recommendation about Italy's National Reform and Stability Programmes for 2015; (n) Draft Council Recommendation about Latvia's National Reform and Stability Programmes for 2015; (o) Draft Council Recommendation about Lithuania's National Reform and Stability Programmes for 2015; (p) Draft Council Recommendation about Luxembourg's National Reform and Stability Programmes for 2015; (q) Draft Council Recommendation about Hungary's National Reform and Convergence Programmes for 2015; (r) Draft Council Recommendation about Malta's National Reform and Stability Programmes for 2015; (s) Draft Council Recommendation about the Netherlands' National Reform and Stability Programmes for 2015; (t) Draft Council Recommendation about Austria's National Reform and Stability Programmes for 2015; (u) Draft Council Recommendation about Poland's National Reform and Convergence Programmes for 2015; (v) Draft Council Recommendation about Portugal's National Reform and Stability Programmes for 2015; (w) Draft Council Recommendation about Romania's National Reform and Convergence Programmes for 2015; (x) Draft Council Recommendation about Slovenia's National Reform and Stability Programmes for 2015; (y) Draft Council Recommendation about Slovakia's National Reform and Stability Programmes for 2015; (z) Draft Council Recommendation about Finland's National Reform and Stability Programmes for 2015; (aa) Draft Council Recommendation about Sweden's National Reform and Convergence Programmes for 2015

Legal base(a) —; (b)-(aa) Articles 121(2) and 148(4) TFEU; —; QMV
Department

Document numbers

HM Treasury

(a) (36843); 8886/15; COM(15) 250; (b) (36844); 8888/15; COM(15) 251; (c) (36845); 8890/15; COM(15) 252; (d) (36846); 8891/15; COM(15) 253;

(e) (36848); 8893/15; COM(15) 254; (f) (36849); 8894/15; COM(15) 255; (g) (36850); 8895/15; COM(15) 256; (h) (36851); 8896/15; COM(15) 257;

(i) (36852); 8898/15; COM(15) 258; (j) (36853); 8899/15; COM(15) 259; (k) (36854); 8900/15; COM(15) 260; (l) (36855); 8901/15; COM(15) 261;

(m) (36856); 8902/15; COM(15) 262; (n) (36857); 8903/15; COM(15) 263; (o) (36860); 8920/15; COM(15) 264; (p) (36861); 8923/15; COM(15) 265;

(q) (36862); 8924/15; COM(15) 266; (r) (36863); 8926/15; COM(15) 267; (s) (36864); 8927/15; COM(15) 268; (t) (36865); 8929/15; COM(15) 269;

(u) (36866); 8931/15; COM(15) 270; (v) (36867); 8932/15; COM(15) 271; (w) (36868); 8934/15; COM(15) 272; (x) (36869); 8936/15; COM(15) 273;

(y) (36870); 8938/15; COM(15) 274; (z) (36871); 8940/15; COM(15) 275; (aa) (36872); 8941/15; COM(15) 276

Summary and Committee's conclusions

78.1 The annual European Semester is an EU-level system for coordinating and assessing Member States' structural reforms and fiscal/budgetary policy and for monitoring and addressing macroeconomic imbalances. On the previous Committee's recommendation the four documents for the first stage of the 2015 European Semester, the Annual Growth Survey, the draft Joint Employment Report, the EU Autumn Forecast, an economic report, and the Alert Mechanism Report, the first stage of the Macroeconomic Imbalance Procedure, were debated in European Committee B on 4 March, prior to their consideration by the European Council on 19-20 March.[ 510]

78.2 In March, as the second stage of the 2015 European Semester, the Commission published its Communication about an assessment of growth challenges, prevention and correction of macroeconomic imbalances, and results of in-depth reviews of Member State economies. It was accompanied by Commission Staff Working Documents giving Country Reports for all Member States (including the UK), apart from Greece. The Commission also published in March a draft Council Recommendation on broad guidelines for economic policies of Member States and the EU and a draft Council Decision on guidelines for the employment policies of Member states and the EU.

78.3 These, together with a package of recommended Country Specific Recommendations reflecting the analysis in the Country Reports and material submitted by Member States in their National Reform Plans, which the Commission was expected to present in May, were to be considered by the June European Council. The previous Committee recommended that the Commission Communication and the UK Country Report, together with, once available, the Commission's draft 2015 Country Specific Recommendations and the two documents concerning economic and employment guidelines be debated in European Committee B. It suggested that these debates should take place before the documents were considered at the June European Council.[ 511]

78.4 The first of the present documents is a Commission Communication about the 2015 Country Specific Recommendations. The second concerns broad economic guidelines for the eurozone. The remaining 25 documents are the draft Country Specific Recommendations for all Member States, bar Cyprus, Greece and the UK.[ 512]

78.5 The Government comments favourably on the Commission Communication concerning the 2015 Country Specific Recommendations. As for the other documents the Government tells us that they have no direct policy implications for the UK. But it adds that it encourages all Member States to enact positive changes in the light of the Country Specific Recommendations.

78.6 In normal circumstances we would recommend the Commission Communication and the draft Council Recommendation on broad economic guidelines for inclusion in a debate on a number of documents to be considered in preparation for or at the European Semester debate. However, consideration of all relevant documents has now been completed by the Council and the European Council and the 2015 European Semester process has itself been completed. We think therefore that there is little purpose now in debating these documents and accordingly clear them from scrutiny and rescind the predecessor Committee's debate recommendations on the earlier documents. Nevertheless, we note that we will wish to revert to the normal pattern of debates on the documents for the 2016 European Semester.

78.7 As for the draft Country Specific Recommendations for the other Member States, whilst clearing them from scrutiny, we draw them to the attention of the Treasury Committee for the information they give about the economic developments the Commission thinks necessary for them.

Full details of the documents: (a) Commission Communication: 2015 European Semester: Country-specific recommendations: (36843), 8886/15, COM(15) 250; (b) Draft Council Recommendation on the implementation of the broad guidelines for the economic policies of the Member States whose currency is the euro: (36844), 8888/15, COM(15) 251; (c) Draft Council Recommendation on the 2015 National Reform Programme of Belgium and delivering a Council opinion on the 2015 Stability Programme of Belgium: (36845), 8890/15, COM(15) 252; (d) ) Draft Council Recommendation on the 2015 National Reform Programme of Bulgaria and delivering a Council opinion on the 2015 Convergence Programme of Bulgaria: (36846), 8891/15, COM(15) 253; (e) Draft Council Recommendation on the 2015 National Reform Programme of the Czech Republic and delivering a Council opinion on the 2015 Convergence Programme of the Czech Republic: (36848), 8893/15, COM(15) 254; (f) Draft Council Recommendation on the 2015 National Reform Programme of Denmark and delivering a Council opinion on the 2015 Convergence Programme of Denmark: (36849), 8894/15, COM(15) 255; (g) Draft Council Recommendation on the 2015 National Reform Programme of Germany and delivering a Council opinion on the 2015 Stability Programme of Germany: (36850), 8895/15, COM(15) 256; (h) Draft Council Recommendation on the 2015 National Reform Programme of Estonia and delivering a Council opinion on the 2015 Stability Programme of Estonia: (36851), 8896/15, COM(15) 257; (i) Draft Council Recommendation on the 2015 National Reform Programme of Ireland and delivering a Council opinion on the 2015 Stability Programme of Ireland: (36852), 8898/15, COM(15) 258; (j) Draft Council Recommendation on the 2015 National Reform Programme of Spain and delivering a Council opinion on the 2015 Stability Programme of Spain: (36853), 8899/15, COM(15) 259; (k) Draft Council Recommendation on the 2015 National Reform Programme of France and delivering a Council opinion on the 2015 Stability Programme of France: (36854), 8900/15, COM(15) 260; (l) Draft Council Recommendation on the 2015 National Reform Programme of Croatia and delivering a Council opinion on the 2015 Convergence Programme of Croatia: (36855), 8901/15, COM(15) 261; (m) Draft Council Recommendation on the 2015 National Reform Programme of Italy and delivering a Council opinion on the 2015 Stability Programme of Italy: (36856), 8902/15, COM(15) 262; (n) Draft Council Recommendation on the 2015 National Reform Programme of Latvia and delivering a Council opinion on the 2015 Stability Programme of Latvia: (36857), 8903/15, COM(15) 263; (o) Draft Council Recommendation on the 2015 National Reform Programme of Lithuania and delivering a Council opinion on the 2015 Stability Programme of Lithuania: (36860), 8920/15, COM(15) 264; (p) Draft Council Recommendation on the 2015 National Reform Programme of Luxembourg and delivering a Council opinion on the 2015 Stability Programme of Luxembourg: (36861), 8923/15, COM(15) 265; (q) Draft Council Recommendation on the 2015 National Reform Programme of Hungary and delivering a Council opinion on the 2015 Convergence Programme of Hungary: (36862), 8924/15, COM(15) 266; (r) Draft Council Recommendation on the 2015 National Reform Programme of Malta and delivering a Council opinion on the 2015 Stability Programme of Malta: (36863), 8926/15, COM(15) 267; (s) Draft Council Recommendation on the 2015 National Reform Programme of the Netherlands and delivering a Council opinion on the 2015 Stability Programme of the Netherlands: (36864), 8927/15, COM(15) 268; (t) Draft Council Recommendation on the 2015 National Reform Programme of Austria and delivering a Council opinion on the 2015 Stability Programme of Austria: (36865), 8929/15, COM(15) 269; (u) Draft Council Recommendation on the 2015 National Reform Programme of Poland and delivering a Council opinion on the 2015 Convergence Programme of Poland: (36866), 8931/15, COM(15) 270; (v) Draft Council Recommendation on the 2015 National Reform Programme of Portugal and delivering a Council opinion on the 2015 Stability Programme of Portugal: (36867), 8932/15, COM(15) 271; (w) Draft Council Recommendation on the 2015 National Reform Programme of Romania and delivering a Council opinion on the 2015 Convergence Programme of Romania: (36868), 8934/15, COM(15) 272; (x) Draft Council Recommendation on the 2015 National Reform Programme of Slovenia and delivering a Council opinion on the 2015 Stability Programme of Slovenia: (36869), 8936/1/15, COM(15) 273; (y) Draft Council Recommendation on the 2015 National Reform Programme of Slovakia and delivering a Council opinion on the 2015 Stability Programme of Slovakia: (36870), 8938/15, COM(15) 274; (z) Draft Council Recommendation on the 2015 National Reform Programme of Finland and delivering a Council opinion on the 2015 Stability Programme of Finland: (36871), 8940/15, COM(15) 275; (aa) Draft Council Recommendation on the 2015 National Reform Programme of Sweden and delivering a Council opinion on the 2015 Convergence Programme of Sweden: (36872), 8941/15, COM(15) 276.

Background

78.8 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 ties 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).

78.9 The annual European Semester cycle begins with an Annual Growth Survey (AGS) 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 AGS 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. 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 (AMR).

78.10 On the previous Committee's recommendation the four documents for the first stage of the 2015 European Semester, the AGS, the draft Joint Employment Report, the EU Autumn Forecast and the AMR, were debated in European Committee B on 4 March, prior to their consideration by the European Council on 19-20 March.[ 513]

78.11 As the second stage of the 2015 European Semester the Commission published its Communication about an assessment of growth challenges, prevention and correction of macroeconomic imbalances, and results of in-depth reviews. It was accompanied by Commission Staff Working Documents giving Country Reports for all Member States (including the UK) apart from Greece. These reports contained an in-depth review of macroeconomic imbalances (where applicable), and an assessment of Member State progress in addressing their 2014 Country Specific Recommendations (CSRs), approved by the June 2014 European Council. These documents, together with a package of recommended CSRs reflecting the analysis in the Country Reports and material submitted by Member States in their National Reform Plans, which the Commission was expected to present in May, were to be considered by the June European Council.

78.12 The accompanying Commission Staff Working Document, entitled Country Report United Kingdom 2015, comprised an assessment of the general UK economic situation and its outlook, the in-depth reviews of possible macroeconomic imbalances identified in the AMR and a statement of the UK progress regarding the completion of 2014 CSRs. The Commission's view was that the UK was experiencing macroeconomic imbalances, which required policy action and monitoring — this was the lowest of the five categories of imbalances the Commission made use of in its Communication.

78.13 The Commission also published in March a draft Council Recommendation on broad guidelines for economic policies of Member States and the EU and a draft Council Decision on guidelines for the employment policies of Member states and the EU.

78.14 The predecessor Committee recommended that these four documents be debated in European Committee B together with, once available, the Commission's draft 2015 CSRs. It suggested that these debates should take place before the documents were considered at the June European Council and urged the Government to schedule the debates as soon as possible in this Parliament. It added that in the debates Members might discuss the Commission's overall and Member State specific assessments of economic, particularly macroeconomic, issues.[ 514]

The documents

Commission Communication

78.15 In the introduction to its Communication about the CSRs for the 2015 European Semester, document (a), the Commission:

·  says that growth is returning to the EU, with low oil prices and steady global growth;

·  observes that these positive developments are short-term, and that greater efforts are needed to overcome weaknesses; and

·  notes that 2015 CSRs focus on investment, ambitious structural reform, striking a balance between short-term stabilisation and long term sustainability and improving employment policy and social protection.

78.16 In the second section the Commission elaborates on its new approach for the European Semester, saying that:

·  changes made include focussing on the priorities in the AGS, publishing the Commission's country-specific and eurozone analysis three months earlier and more intensive outreach with national authorities and social partners;

·  the changes have been welcomed; and

·  the streamlining has continued in the CSRs, where fewer recommendations have been made.

78.17 In the third section, about the focus of the 2015 Semester, the Commission:

·  notes that some progress was made overall on the 2014-15 CSRs, but that there was limited progress in areas such as opening product and services markets;

·  says macroeconomic imbalances are being corrected, but risks remain high in some Member States;

·  notes that there is a time lag between the introduction of labour market reforms and their full effect on job creation, which may help explain why unemployment remains high;

·  points out that the EU and its Member States have recognised the need to boost investment, and that as part of its work to strengthen the links between investment, structural reforms and fiscal responsibility, it has clarified the flexibility in the Stability and Growth Pact; and

·  says that for Croatia and France it has analysed their reform commitments and concluded there is no need to escalate the MIP.

78.18 The fourth section concerns the key objectives of the 2015 CSRs. The Commission says that these are:

·  removing barriers to financing and supporting investment, with the UK specifically noted to have made progress last year;

·  improving the business environment and productivity;

·  adapting public finances to make them more supportive of growth, with the new deadline for the UK's Excessive Deficit Procedure being noted;[ 515] and

·  improving employment policy and social protection.

78.19 The Commission also notes the reduction in the number of recommendations, which means that some areas will be monitored as part of other processes and in the Country Reports.

78.20 The Commission concludes by calling on the Council to endorse the approach for the 2015 CSRs, and for Member States to implement them strictly. It also says it is working on the mid-term review of the Europe 2020 Strategy and intends to present it by the end of this year.

Broad guidelines for economic policies of eurozone Member States

78.21 The draft Council Recommendation on implementation of the broad guidelines for the economic policies of eurozone Member States, document (b), suggests:

·  using peer pressure to promote structural reforms that facilitate the correction of large internal and external debts and support investment;

·  regularly assessing delivery of reforms in those Member States with serious imbalances;

·  continuing regular assessment of structural reforms;

·  taking decisions, by spring 2016, on the follow-up to the coordination exercise on reducing the high tax wedge on labour and on reforming services markets;

·  coordinating fiscal policies to ensure that the aggregate eurozone fiscal stance is in line with sustainability risks and cyclical conditions;

·  holding, by spring 2016, discussions on improvements in the quality and sustainability of public finances, focussing in particular on the prioritisation of investment at national and EU levels and on making tax systems more growth friendly;

·  monitoring effective functioning of national fiscal frameworks;

·  ensuring timely finalisation of the follow up of the Comprehensive Assessment by the European Central Bank, implementation of the Bank Recovery and Resolution Directive, completion of ratification of the Intergovernmental Agreement on the Single Resolution Fund and making the Fund fully operational as from January 2016;

·  promoting measures to deepen market-based finance, to improve access to finance for SMEs and to develop alternative sources of finance;

·  encouraging further reforms of national insolvency frameworks;

·  taking forward work on deepening Economic and Monetary Union; and

·  contributing to improvement of the economic surveillance framework in the context of a planned report from the Presidents of the European Council, the European Parliament, the Commission, the European Central Bank, and the Eurogroup.

Council Recommendations and Opinions for Member States other than the UK

78.22 In May the Commission published CSRs for Member States, containing draft Council Recommendations and Opinions. We report on the UK CSR in a separate chapter in this report.[ 516]

78.23 In the CSR for Belgium, document (c), the draft Council Recommendation and Opinion suggest:

·  achieving a fiscal adjustment of at least 0.6% of GDP towards the medium-term objective in 2015 and in 2016;

·  using windfall gains to put the general government debt ratio on an appropriate downward path;

·  complementing the pension reform by linking the statutory retirement age to life expectancy;

·  agreeing on an enforceable distribution of fiscal targets among all government levels;

·  adopting and implementing a comprehensive tax reform broadening the tax base;

·  improving functioning of the labour market by reducing financial disincentives to work; and

·  restoring competitiveness by ensuring that wages evolve in line with productivity.

78.24 In the CSR for Bulgaria, document (d), the draft Council Recommendation and Opinion suggest:

·  avoiding a structural deterioration in public finances in 2015 and achieving an adjustment of 0.5% of GDP in 2016;

·  taking measures to improve tax collection and addressing the shadow economy;

·  improve cost-effectiveness of the health care system;

·  completing, by December 2015, a system-wide independent asset-quality review and a bottom-up stress test of the banking sector;

·  performing a portfolio screening for the pension fund and insurance sectors;

·  reviewing and fortifying banking and non-banking financial sector supervision;

·  improving corporate governance in financial intermediaries;

·  developing an integrated approach for groups at the margin of the labour market, in particular older workers and young people not in employment, education or training;

·  establishing a transparent mechanism for setting the minimum wage and minimum social security contributions;

·  adopting reform of the School Education Act, and increasing participation in education of disadvantaged children, by improving access to good-quality early schooling; and

·  with a view to improving the investment climate, preparing a comprehensive reform of the insolvency framework drawing on international best practice.

78.25 In the CSR for the Czech Republic, document (e), the draft Council Recommendation and Opinion suggest:

·  achieving a fiscal adjustment of 0.5% of GDP in 2016;

·  improving the cost-effectiveness and governance of the healthcare sector;

·  fighting tax evasion, simplifying the tax system and implementing the anti-corruption plan;

·  increasing transparency and efficiency of public procurement;

·  reducing the high level of taxation levied on low-income earners, by shifting taxation to other areas;

·  improving availability of affordable childcare;

·  adopting higher education reform and ensuring adequate training for teachers; and

·  supporting poorly performing schools and taking measures to increase participation among disadvantaged children.

78.26 In the CSR for Denmark, document (f), the draft Council Recommendation and Opinion suggest:

·  avoiding deviating from the medium-term objective in 2016;

·  enhancing productivity, in particular in the services sectors oriented towards the domestic market;

·  easing restrictions on retail establishments; and

·  taking measures to remove remaining barriers posed by authorisation and certification schemes in the construction sector.

78.27 In the CSR for Germany, document (g), the draft Council Recommendation and Opinion suggest:

·  increasing public investment in infrastructure, education and research, including by using the available fiscal space;

·  fostering private investment by improving the efficiency of the tax system;

·  using the ongoing review to improve the design of fiscal relations between the federation, Länder and municipalities, particularly with a view to ensuring adequate public investment at all levels of government;

·  increasing incentives for later retirement;

·  taking measures to reduce high labour taxes and social security contributions and to address the impact of fiscal drag;

·  revising the fiscal treatment of mini-jobs to facilitate the transition to other forms of employment;

·  taking measures to stimulate competition in the services sector; and

·  removing the remaining barriers to competition in the railway markets.

78.28 In the CSR for Estonia, document (h), the draft Council Recommendation and Opinion suggest:

·  avoiding deviating from the fiscal medium-term objective in 2015 and 2016;

·  improving labour market participation;

·  improving incentives to work through measures targeting low-income earners;

·  taking action to narrow the gender pay gap;

·  ensuring high-quality social and childcare services at local level;

·  increasing participation in vocational education and training, and its labour market relevance, in particular by improving the availability of apprenticeships; and

·  focusing public support for research and innovation on a limited number of smart specialisation areas.

78.29 In the CSR for Ireland, document (i), the draft Council Recommendation and Opinion suggest:

·  ensuring a correction of the excessive deficit in 2015;

·  achieving a fiscal adjustment of 0.6% of GDP towards the medium-term objective in 2016;

·  using windfall gains from better-than-expected economic and financial conditions to accelerate deficit and debt reduction;

·  limiting discretionary powers to change expenditure ceilings beyond predefined contingencies;

·  broadening the tax base and reviewing tax expenditures;

·  increasing cost-effectiveness of the healthcare system;

·  rolling out activity-based funding throughout the health system;

·  increasing the work-intensity of households and addressing the poverty risk of children by tapering the withdrawal of benefits and supplementary payments upon return to employment and through better access to affordable full-time childcare;

·  finalising restructuring solutions for a vast majority of mortgages in arrears by end-2015 and strengthening the monitoring arrangements by the Central Bank of Ireland;

·  ensuring that restructuring solutions for loans to distressed SMEs and residual commercial real-estate loans are sustainable; and

·  ensuring that a central credit registry is operational by 2016.

78.30 In the CSR for Spain, document (j), the draft Council Recommendation and Opinion suggest:

·  ensuring correction of the excessive deficit by 2016 by taking the necessary structural measures in 2015 and 2016 and using windfall gains to accelerate the deficit and debt reduction;

·  strengthening transparency and accountability of regional public finances;

·  improving cost-effectiveness of the healthcare sector;

·  completing reform of the saving banks' sector and completing restructuring and privatisation of state owned savings banks;

·  promoting alignment of wages and productivity, taking into account differences in skills and local labour market conditions as well as divergences in economic performance across regions, sectors and companies;

·  taking steps to increase the quality and effectiveness of job search assistance and counselling to tackle youth unemployment;

·  streamlining minimum income and family support schemes and fostering regional mobility;

·  removing the barriers preventing businesses from growing, including size-contingent regulations;

·  adopting the planned reform on professional services; and

·  accelerating implementation of the law on market unity.

78.31 In the CSR for France, document (k), the draft Council Recommendation and Opinion suggest:

·  ensuring action under the excessive deficit procedure and a correction of the excessive deficit by 2017 by reinforcing the budgetary strategy;

·  taking measures for all years and using all windfall gains for deficit reduction;

·  specifying the expenditure cuts planned for these years and providing an independent evaluation of the impact of key measures;

·  making the spending review effective and identifying savings opportunities across government;

·  limiting the rise in local authorities' administrative expenditure;

·  taking measures by March 2016 to bring the pension system into balance;

·  ensuring that the labour cost reductions stemming from the tax credit for competitiveness and employment and from the responsibility and solidarity pact are sustained;

·  evaluating the effectiveness of these schemes in the light of labour and product market rigidities;

·  reforming wage-setting to ensure that wages evolve in line with productivity;

·  ensuring that minimum wage developments are consistent with the objectives of promoting employment and competitiveness;

·  reducing, by the end of 2015, regulatory impediments to companies' growth;

·  removing restrictions on access to and the exercise of regulated professions;

·  simplifying and improving the efficiency of the tax system;

·  taking action to reduce the taxes on production and the corporate income statutory rate, while broadening the tax base on consumption;

·  taking measures as from 2015 to abolish inefficient taxes that are yielding little or no revenue;

·  reforming labour law to provide more incentives for employers to hire on open-ended contracts;

·  facilitating take up of derogations at company and branch level from general legal provisions;

·  reforming the law creating the accords de maintien de l'emploi by the end of 2015 in order to increase their take-up by companies; and

·  taking action to reform the unemployment benefit system in order to bring the system back to budgetary sustainability and to provide more incentives to return to work.

78.32 In the CSR for Croatia, document (l), the draft Council Recommendation and Opinion suggest:

·  ensuring a correction of the excessive deficit by 2016 by taking measures in 2015 and reinforcing the budgetary strategy for 2016;

·  publishing and implementing the findings of the expenditure review;

·  improving control over expenditure at central and local level, in particular by establishing a sanctioning mechanism for entities breaching budgetary limits;

·  adopting the Fiscal Responsibility Act and strengthening the capacity and role of the State Audit Office;

·  introducing a recurrent property tax and improving VAT compliance;

·  reinforcing public debt management;

·  discouraging early retirement by raising penalties for early exits;

·  improving efficiency of pension spending;

·  tackling fiscal risks in healthcare;

·  tackling weaknesses in the wage-setting;

·  fostering alignment of wages with productivity and macroeconomic conditions;

·  strengthening incentives for the unemployed and inactive to take up paid employment;

·  carrying out the reform of the social security system, based on the 2014 review, and further consolidating social benefits by improving targeting and eliminating overlaps;

·  reducing the extent of fragmentation and overlap between levels of central and local government;

·  increasing transparency and accountability in the public corporate sector;

·  advancing the listing of minority packages of shares of public companies and privatisations;

·  reducing parafiscal charges and removing excessive barriers for service providers;

·  improving the efficiency and quality of the justice system;

·  reinforcing the pre-insolvency and insolvency frameworks for businesses in order to facilitate debt restructuring and putting in place a personal insolvency procedure; and

·  strengthening the capacity of the financial sector to support the recovery.

78.33 In the CSR for Italy, document (m), the draft Council Recommendation and Opinion suggest:

·  achieving a fiscal adjustment of at least 0.25% of GDP towards the medium-term objective in 2015 and of 0.1% of GDP in 2016 by taking the necessary structural measures in both 2015 and 2016, taking into account the allowed deviation for the implementation of major structural reforms;

·  implementing the privatisation programme and using windfall gains to make further progress towards putting the general government debt ratio on a downward path;

·  implementing the enabling law for tax reform by September 2015;

·  adopting the planned national strategic plan for ports and logistics;

·  ensuring that the management of EU funds improves;

·  adopting and implementing laws modernising the public administration;

·  revising the statute of limitations by mid-2015;

·  ensuring that the reforms adopted to improve the efficiency of civil justice help reduce the length of proceedings;

·  tackling, by the end of 2015, remaining weaknesses in the corporate governance of banks and taking measures to accelerate the reduction of non-performing loans;

·  strengthening active labour market policies;

·  establishing an effective framework for wage bargaining;

·  as part of efforts to tackle youth unemployment, adopting and implementing planned school reform and expanding vocationally-oriented tertiary education;

·  implementing the simplification agenda for 2015-17 to ease the administrative and regulatory burden;

·  adopting competition-enhancing measures in all the sectors covered by the competition law, and taking decisive action to remove remaining barriers; and

·  ensuring that local public services contracts not complying with the requirements on in-house awards are rectified by end-2015.

78.34 In the CSR for Latvia, document (n), the draft Council Recommendation and Opinion suggest:

·  ensuring that the deviation from the medium-term objective in 2015 and 2016 is limited to the allowance linked to the systemic pension reform;

·  improving vocational education and training;

·  speeding up the curricula reform and increasing the offer of apprenticeships;

·  ensuring that the new financing model of the higher education system rewards quality;

·  better targeting of research financing and incentivising private investment in innovation;

·  reforming social assistance and increasing employability;

·  reducing the high tax wedge for low-income earners by shifting tax burden to other sources less detrimental to growth;

·  improving accessibility, cost-effectiveness and quality of the healthcare system and linking hospital financing to performance mechanisms;

·  improving efficiency of the judicial system by providing adequate means to fight tax evasion and by strengthening the role of the Judicial Council; and

·  improving public service legislation to strengthen the conflict of interest regime and link remuneration to responsibilities.

78.35 In the CSR for Lithuania, document (o), the draft Council Recommendation and Opinion suggest:

·  avoiding deviation from the medium-term objective in 2015 and ensuring that the deviation in 2016 is limited to the allowance linked to the systemic pension reform;

·  broadening the tax base and improving tax compliance;

·  addressing the challenge of a shrinking working-age population by improving the labour-market relevance of education, increasing attainment in basic skills, and improving the performance of the healthcare system;

·  reducing the high tax wedge for low income earners;

·  adopting a comprehensive reform of the pension system that also addresses the challenge of pension adequacy;

·  improving the coverage and adequacy of unemployment benefits and cash social assistance; and

·  improving the employability of those looking for work.

78.36 In the CSR for Luxembourg, document (p), the draft Council Recommendation and Opinion suggest:

·  broadening the tax base, in particular on consumption, recurrent property taxation and environmental taxation;

·  closing the gap between the statutory and effective retirement age; and

·  reforming the wage-setting system with a view to ensuring that wages evolve in line with productivity.

78.37 In the CSR for Hungary, document (q), the draft Council Recommendation and Opinion suggest:

·  achieving a fiscal adjustment of 0.5% of GDP towards the medium-term objective in 2015 and of 0.6% of GDP in 2016;

·  restoring normal lending to the real economy and removing obstacles to market-based portfolio cleaning;

·  reducing liability risks linked to increased state ownership in the banking sector;

·  reducing distortive sector-specific taxes;

·  removing entry barriers in the service sector;

·  reducing the tax wedge for low-income earners, including by shifting taxation to areas less distortive to growth;

·  continuing to fight tax evasion;

·  reducing compliance costs and improving efficiency of tax collection;

·  strengthening structures in public procurement that promote competition and transparency and improving the anti-corruption framework;

·  reorienting the budget resources to active labour market measures to foster integration into the primary labour market;

·  improving the coverage of social assistance and unemployment benefits;

·  increasing participation of disadvantaged groups in education and improving the support offered to these groups through targeted teacher training;

·  strengthening measures to facilitate the transition between different stages of education and to the labour market; and

·  improving the teaching of essential competences.

78.38 In the CSR for Malta, document (r), the draft Council Recommendation and Opinion suggest:

·  following correction of the excessive deficit, achieving a fiscal adjustment of 0.6% of GDP towards the medium-term objective in 2015 and 2016;

·  improving basic skills and reducing early school-leaving by promoting the continuous professional development of teachers;

·  increasing the statutory retirement age and linking it to life expectancy; and

·  improving small and micro-enterprises' access to finance.

78.39 In the CSR for the Netherlands, document (s), the draft Council Recommendation and Opinion suggest:

·  shifting public expenditure towards supporting investment in Research and Development (R&D) and work on improving private R&D expenditure;

·  decreasing mortgage interest tax deductibility so that tax incentives to invest in unproductive assets are reduced;

·  providing for a more market-oriented pricing mechanism in the rental market and further relating rents to household income in the social housing sector; and

·  reducing the level of contributions to the second pillar of the pension system for those in the early years of working life.

78.40 In the CSR for Austria, document (t), the draft Council Recommendation and Opinion suggest:

·  avoiding deviation from the medium-term objective in 2015 and 2016;

·  ensuring budget neutrality of the tax reform aimed at reducing the tax burden on labour;

·  correcting misalignment between the financing and spending responsibilities of the different levels of government;

·  taking measures to ensure the long-term sustainability of the pension system;

·  strengthening measures to increase the labour market participation of older workers and women;

·  taking steps to improve the educational achievement of disadvantaged young people;

·  removing disproportionate barriers for service providers and impediments to setting up interdisciplinary companies; and

·  addressing the potential vulnerabilities of the financial sector in terms of foreign exposure and insufficient asset quality.

78.41 In the CSR for Poland, document (u), the draft Council Recommendation and Opinion suggest:

·  following correction of the excessive deficit, achieving a fiscal adjustment of 0.5% of GDP towards the medium-term objective both in 2015 and 2016;

·  establishing an independent fiscal council;

·  limiting use of reduced VAT rates;

·  starting the process of aligning pension arrangements for farmers and miners with those for other workers, and adopting a timetable for progressive full alignment;

·  putting in place a system for assessing and recording farmers' incomes;

·  taking measures to reduce the excessive use of temporary and civil law contracts in the labour market; and

·  removing obstacles to investment in railway projects.

78.42 In the CSR for Portugal, document (v), the draft Council Recommendation and Opinion suggest:

·  ensuring a correction of the excessive deficit in 2015;

·  achieving a fiscal adjustment of 0.6% of GDP towards the medium-term objective in 2016;

·  enforcing laws to better control expenditure;

·  improving medium-term sustainability of the pension system;

·  safeguarding financial sustainability of state-owned enterprises;

·  further improving tax compliance and efficiency of the tax administration;

·  promoting alignment of wages and productivity, taking into account differences in skills and local labour market conditions as well as divergences in economic performance across regions, sectors and companies;

·  ensuring that developments relating to the minimum wage are consistent with the objectives of promoting employment and competitiveness;

·  improving efficiency of public employment services; and

·  ensuring effective activation of benefit recipients and adequate coverage of the minimum income scheme.

78.43 In the CSR for Romania, document (w), the draft Council Recommendation and Opinion suggest:

·  taking all necessary measures to complete the financial assistance programme;

·  limiting deviation from the fiscal medium-term objective in 2015 to a maximum of 0.25% of GDP, as specified under the 2013-15 balance-of-payments programme, and returning to the medium-term objective in 2016;

·  implementing the comprehensive tax compliance strategy;

·  tackling undeclared work, and pushing ahead with the equalisation of the pensionable age for men and women;

·  strengthening provision of labour market measures;

·  ensuring that the national employment agency is adequately staffed;

·  establishing clear guidelines for setting the minimum wage transparently;

·  introducing the minimum insertion income;

·  increasing provision and quality of early childhood education and care;

·  reducing early school leaving;

·  pursuing the national health strategy 2014-20 to remedy issues of poor accessibility, low funding and inefficient resources; and

·  adopting the law on reforming corporate governance of state-owned enterprises.

78.44 In the CSR for Slovenia, document (x), the draft Council Recommendation and Opinion suggest:

·  ensuring a durable correction of the excessive deficit in 2015, and achieving a fiscal adjustment of 0.6% of GDP towards the medium-term objective in 2016;

·  adopting the Fiscal Rule Act and revising the Public Finance Act;

·  advancing long-term reform of the pension system;

·  adopting, by the end of 2015, a healthcare and long-term care reform;

·  reviewing the mechanism for setting the minimum wage;

·  increasing employability of low skilled and older workers;

·  addressing long-term unemployment and providing adequate incentives to extend working lives;

·  bringing down the level of non-performing loans;

·  improving credit risk monitoring capacity in banks;

·  continuing corporate restructuring and maintaining strong corporate governance in the Bank Asset Management Company;

·  taking measures to improve access to finance for SMEs and micro companies;

·  adopting a strategy for the Slovenian Sovereign Holding with a clear classification of assets, implementing an annual asset management plan and applying performance criteria; and

·  improving the efficiency of civil justice to reduce the length of proceedings.

78.45 In the CSR for Slovakia, document (y), the draft Council Recommendation and Opinion suggest:

·  improving cost-effectiveness of the healthcare sector;

·  increasing tax collection;

·  addressing long term unemployment by introducing activation measures, second chance education and high-quality training tailored to individuals' needs;

·  improving incentives for women to remain in or return to employment, by improving the provision of childcare facilities;

·  improving teacher training and the attractiveness of teaching as a profession to stem the decline in educational outcomes;

·  increasing participation of Roma children in mainstream education and in high-quality early childhood education;

·  to boost investment in infrastructure, improving and streamlining administrative procedures for obtaining land-use and construction permits; and

·  increasing competition in public tenders and improve supervisory mechanisms in public procurement.

78.46 In the CSR for Finland, document (z), the draft Council Recommendation and Opinion suggest:

·  ensuring that the excessive deficit is brought below 3% of GDP by 2017;

·  continuing efforts to reduce the fiscal sustainability gap and strengthening conditions for growth;

·  adopting the agreed pension reform and gradually eliminating early exit pathways;

·  ensuring effective design and implementation of administrative reforms concerning municipal structure and social and healthcare services;

·  pursuing efforts to improve the employability of young people, older workers and the long-term unemployed;

·  ensuring that wages evolve in line with productivity; and

·  taking measures to open the retail sector to effective competition.

78.47 In the CSR for Sweden, document (aa), the draft Council Recommendation and Opinion suggest:

·  addressing the rise in household debt by adjusting fiscal incentives; and

·  to alleviate the structural under-supply of housing, fostering competition in the construction sector, streamlining the planning and appeals procedures for construction and revising the rent-setting system to allow more market-oriented rent levels.

The Government's view

78.48 In his Explanatory Memorandum of 3 June 2015 about the Commission's overarching Communication, document (a),[ 517] the Financial Secretary to the Treasury (Mr David Gauke), says that:

·  the Government notes the Communication;

·  it welcomes the changes made by the Commission to the 2015 European Semester, which are in line with the suggestions made by the UK in its response to the consultation on the Europe 2020 Strategy mid-term review; and

·  it welcomes in particular the Commission making fewer CSRs, which are more narrowly focussed on the key issues of jobs and growth.

78.49 In his Explanatory Memorandum of 27 May 2015 about the draft Council Recommendations and Opinions, documents (b)-(aa) the Minister says that they have no direct policy implications for the UK. He adds that:

·  renewed focus on structural reforms — at the EU, eurozone and Member State level — is needed to help embed recovery and address the EU's important medium term growth issues;

·  the Government therefore encourages all Member States to enact positive changes in light of the CSRs.

78.50 The Minister also notes, in connection with the UK's CSR,[ 518] that Member States which received Recommendations and Opinions in similar areas to the UK are:

·  public finances — Austria, Belgium, Bulgaria, the Czech Republic, Denmark, Estonia, Spain, Finland, France, Croatia, Hungary, Ireland, Italy, Lithuania, Latvia, Malta, Poland, Portugal, Romania and Slovenia;

·  housing and private debt — Hungary, Ireland, the Netherlands, Portugal and Sweden;

·  labour market — Austria, Belgium, Germany, Denmark, Estonia, Spain, Finland, France, Croatia, Hungary, Ireland, Italy, Lithuania, Latvia, Poland, Portugal, Romania, Slovakia and Slovenia; and

·  education and skills — Austria, Belgium, the Czech Republic, Germany, Estonia, Hungary, Italy, Lithuania, Latvia, Malta, Romania and Slovakia.

Previous Committee Reports

None.


510   (36530), 15953/14 + ADD 1, (36542), 15985/14, (36543), 15988/14 + ADD 1, (36560): Twenty-seventh Report HC 219-xxvi (2014-15), chapter 2 (17 December 2014), Twenty-eighth Report HC 219-xxvii (2014-15), chapter 3 (7 January 2015) and Gen Co Debs, European Committee B, 4 March 2015, cols. 3-30. Back

511   (36690), 6632/15; (36691), -, SWD(15) 47: see Thirty-sixth Report HC 219-xxxv (2014-15), chapter 2 (11 March 2015); (36712) 6813/15 + ADD 1: see Thirty-seventh Report HC 219-xxxvi (2014-15), chapter 2 (18 March 20150; (36703) 6144/15 + ADD 1: see Thirty-ninth Report HC 219-xxxvii (2014-15), chapter 2 (24 March 2015). Back

512   (36873) 8943/15 is the draft Country Specific Recommendation for the UK: see chapter 79 of this Report. Back

513   Op cit. Back

514   Op cit. Back

515   (36859), 8905/15: see chapter 79 of this report. Back

516   Op cit. Back

517   This Explanatory Memorandum also concerns other documents specific to the UK: see chapter 79 of this report. Back

518   Op cit. Back


 
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