Winter Package puts competitive sustainability at the heart of the European Semester

The Commission has today published country reports analysing each Member State’s key socio-economic challenges.

The analysis in the country reports reflects the Annual Sustainable Growth Strategy, presented in December 2019, focusing on competitive sustainability with the aim to build an economy that works for people and the planet. Implementation of the European Pillar of Social Rights and performance on its accompanying social scoreboard is also assessed for each Member State. The country reports focus on four dimensions: environmental sustainability, productivity gains, fairness and macroeconomic stability.

For the first time, the reports assess Member States’ progress towards the United Nations Sustainable Development Goals (SDGs), highlighting the macro-economic and employment policies that can help to achieve them. They also analyse the challenges and opportunities for each country arising from the climate and energy transition. In the same vein, they identify priorities for support by the Just Transition Fund.

Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People, said: “The good news is that imbalances in the EU are receding. Member States should build on this positive trend. They must continue reforms to make our economy future-proof. They need to bring down debt, boost productivity and make the right investments to achieve a fair transition to a sustainable and inclusive economy.  We’re today also providing a dedicated analysis of environmental sustainability challenges to help Member States move towards a climate-neutral economy.”

Nicolas Schmit, Commissioner for Jobs and Social Rights, said:“Employment is at a record high in Europe, but inequalities persist. We need to step up our fight for more equality by strengthening the social dimension of the European Semester and fully implementing the European Pillar of Social Rights, by, among others, proposing a framework for fair minimum wages, reinforcing the skills agenda and revamping the youth guarantee. This is a prerequisite for a successful green and digital transition that leaves no one behind.”

Paolo Gentiloni Commissioner for Economy, said: “Today, we are taking the first step towards putting sustainability at the heart of EU economic policy and action. The 2020 country reports track progress towards the UN’s Sustainable Development Goals and include a dedicated section on environmental sustainability. This goes hand in hand with the European Semester’s focus on economic and social issues and the correction of macroeconomic imbalances. The reduction of public and private debt levels is proceeding at an uneven pace – and while current account deficits have for the most part been corrected, large surpluses remain a concern.”

Key findings of country reports

The European Green Deal aims to make Europe the first continent to achieve climate- neutrality by 2050. The reports contain a dedicated analysis of environmental sustainability issues. The analysis in the country reports on reforms and the most significant investment needs, in areas such as energy, transport and buildings, can guide Member States’ policy actions in line with this priority.

The country reports highlight that unemployment levels continue to differ considerably across Member States while poverty and social exclusion keep declining on the back of good labour market conditions. That said, it will be crucial to deliver on the implementation of the European Pillar of Social Rights to ensure the climate and digital transitions are just and socially fair.

Productivity growth remains a challenge, even more so in the light of demographic change. Insufficient investment, the ageing of the labour force and skills shortages or mismatches are holding back potential growth.

Member States continue to have very different positions in terms of debt and sustainability challenges. Government deficits in the EU have, on average, started rising again, reversing the declining trend of recent years. Current high levels of public debt represent a source of vulnerability in some Member States.

Integration of UN Sustainable Development Goals

One of the new features in the European Semester is the integration of the SDGs. Each country report now includes a summary assessment of Member States’ progress towards achieving the SDGs as well as a dedicated annex setting out the individual Member State’s SDG performance and the trend over the past five years. Taken together, progress has been made towards almost all of the 17 SDGs.

In the coming years, work will continue to further deepen the analysis to monitor the implementation of the SDGs and to capture the transition to a climate-neutral and resource-efficient economy.

Identifying priorities for the Just Transition Fund

The transition to a sustainable and climate-neutral economy needs to be fair and socially just. The country reports zoom in on those regions and sectors that are most affected by the transition towards a climate-neutral economy. They include an analysis of the transition challenges and present priorities for support by the Just Transition Fund to make sure no one is left behind in the EU’s efforts to achieve climate-neutrality.

Progress with reforms

The uncertain economic outlook underscores the importance of reforms to enhance potential growth. The country reports assess Member States’ progress in implementing country-specific recommendations (CSRs), the tailored policy guidance the Commission provides each year.

The country reports find that the implementation of the recommendations adopted in 2019 has been strong in the areas of financial services and active labour market policies. Reform implementation has remained low in areas such as competition in services and ensuring the long-term sustainability of public finances.

Overall, Member States have achieved at least some progress with the implementation of about two-thirds of the recommendations since the introduction of the European Semester in 2011.

Member States are assisted in the design and implementation of reforms by the Structural Reform Support Programme (SRSP). Today, the Commission adopts the annual work programme of the SRSP for 2020 which will see it provide support in all 27 Member States for the first time, carrying out more than 240 reform projects.

Addressing macroeconomic imbalances

The macroeconomic imbalances procedure aims to identify, prevent and address the emergence of potentially harmful macroeconomic imbalances that could adversely affect economic stability in a particular Member State, the euro area, or the EU as a whole.

The 2020 Alert Mechanism Report published last December identified 13 Member States for an in-depth review to assess whether they are, or may be at risk of being affected by imbalances. The analysis looks at the gravity of the imbalances, their evolution and the policy responses.

The results of these in-depth reviews, contained in the country reports for the Member States concerned, have found that:

•        Greece, Italy and Cyprus are still experiencing excessive imbalances;
•        Germany, Ireland, Spain, Netherlands, France, Croatia, Portugal, Romania and Sweden are still experiencing imbalances;
•        Bulgaria is no longer experiencing imbalances.

Updated employment guidelines

The Commission has adopted a proposal to update the employment guidelines, which present the common priorities for national employment policies. With a strong focus on the objective of achieving a sustainable social market economy, the proposal aligns the employment guidelines with the four dimensions of the Annual Sustainable Growth Strategy, and with the Commission’s Communication on A Strong Social Europe for Just Transitions. It also integrates the UN Sustainable Development Goals. The updated guidelines introduce references to fair, transparent and predictable working conditions, the improvement of labour conditions of platform workers, an enhanced role for social partners, and the need for more attention to lower and middle-income groups when it comes to fair wages that provide for a decent standard of living.

Enhanced surveillance report for Greece

The Commission has adopted the fifth enhanced surveillance report for Greece.

This report concludes that Greece has progressed well in implementing its specific reform commitments for the end of 2019. The supplementary measures that are being implemented or announced by the government should allow for their completion in time for the sixth enhanced surveillance report scheduled for May 2020. This requires the continuous engagement of the Greek authorities, in particular in the financial sector, where significant further action is needed. The report will now be discussed by the Eurogroup but will not lead to debt measures.

Next steps

The Council is expected to discuss the country reports together with the results of the in-depth reviews. The Commission will discuss the summary findings of the country reports with the European Parliament. In the coming months, the Commission will engage with Member States to seek the views of national parliaments, governments, social partners and other stakeholders on the analysis and conclusions of the country reports.

In April, Member States are expected to present their National Reform Programmes, detailing structural reform priorities, and their Stability Programmes (for euro area countries) or Convergence Programmes (for non-euro area countries), setting out their multi-annual fiscal strategies.

The Commission will present its proposals for a new set of Country-Specific Recommendations in spring 2020.