Documents considered by the Committee on 4 May 2016 Contents

1EU economic governance: the European Semester

Committee’s assessment

Politically important

Committee’s decision

(a) Debate recommendation of 13 April 2016 rescinded; cleared from scrutiny

(b) Not cleared from scrutiny; recommended for debate in European Committee B, to be held once proposed Country-Specific Recommendations for the UK are available

Document details

(a) Commission Communication: 2016 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews; (b) Revised Commission Communication: 2016 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews

Legal base

Department

HM Treasury

Document Numbers

(a) (37583), 7076/16, COM(16) 95; (b) (37673), 7076/1/16, COM(16) 95/2

Summary and Committee’s conclusions

1.1The European Semester is an annual cycle of economic policy coordination. It 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 align their reporting cycles for the various programmes, so tying together consideration of National Reform Programmes and Stability and Convergence Programmes.

1.2Various stages of the annual cycle are based on documents published by the Commission. As a further stage in the current European Semester the Commission published in February 2016 Country Reports for all Member States, except Greece and Cyprus. These reports contained the conclusion of a Member State’s In Depth Review of macroeconomic imbalances, where applicable, and an assessment of progress in addressing the 2015 Country-Specific Recommendations, agreed by the Council in July 2015, as the final stage of the 2015 European Semester.

1.3In early March 2016 the Commission published a Communication summarising the Country Reports and its assessment, were appropriate, of the level of imbalances in each Member State subject to an In Depth Review. As this document would be relevant background to the proposed 2016 Country-Specific Recommendations for the UK, which should be published in June 2016, we recommended that it be debated in European Committee B with the proposed recommendations, once available.

1.4The Commission has now published a revised version of its Communication summarising the 2016 Country Reports, which includes a summary of the recently available Country Report on Cyprus.

1.5Accordingly, we rescind the debate recommendation for the original Commission Communication and, instead, recommend that the new Commission Communication be debated in European Committee B, once proposed Country-Specific Recommendations for the UK are available.

Full details of the documents

(a) Commission Communication: 2016 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No. 1176/2011 (SWD(2016) 71 to SWD(2016) 96): (37583), 7076/16, COM(16) 95; (b) Commission Communication: 2016 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No. 1176/2011 (SWD(2016) 71 to SWD(2016) 96) and (SWD(2016) 120): (37673), 7076/1/16, COM(16) 95/2.

Background

1.6In 2010 the EU created an additional instrument for preventive surveillance of the economic and fiscal policies of Member States—the European Semester, an annual cycle of economic policy coordination. It 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 align their reporting cycles for the various programmes, so tying together consideration of National Reform Programmes and Stability and Convergence Programmes. Elements of the cycle focus particularly on the eurozone and its Member States. The first annual cycle was in 2011.

1.7The European Semester process has been refined since it began. The key stages in the annual cycle are now as follows:

1.8In autumn 2011 a Macroeconomic Imbalance Procedure was introduced as part of the response to the economic and financial crisis. Its processes are a slightly separate part of the European Semester and it is designed to prevent and correct risky macroeconomic developments, such as high current account deficits, unsustainable external indebtedness and housing bubbles. The procedure aims to reinforce the monitoring and surveillance of macroeconomic policies in the EU, particularly in relation to the eurozone. The first step of the annual cycle is the Commission’s Alert Mechanism Report, published at the same time as the Annual Growth Survey. In the report the Commission identifies the Member States and issues which require In Depth Reviews for further economic analysis. The In Depth Reviews are reported, where if undertaken, in the Commission’s Country Reports on each Member State, which are published in the following spring. In the case of Member States where an imbalance exists, but is not of an excessive nature, the follow-up to the In Depth Review will take place under the preventive arm of the Macroeconomic Imbalance Procedure. This means that a relevant recommendation would be integrated in the package of proposals for Country Specific Recommendations, in the Semester process. If the Commission in their In Depth Review were to find existence of an excessive imbalance, this might trigger an Excessive Imbalance Procedure under the corrective arm of the Macroeconomic Imbalance Procedure.

The Government’s view of the new document

1.9In his Explanatory Memorandum of 25 April 2016 the Financial Secretary to the Treasury (Mr David Gauke) says that the modifications to the Commission Communication do not alter his comment about the earlier version, which was that the Government notes the publication of other Member States’ Country Reports, as well as the Commission’s decisions under the Macroeconomic Imbalance Procedure.

Previous Committee Reports

Twenty-eighth Report, HC 342-xxvii (2015–16), chapter 3 (13 October 2016).





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10 May 2016