European Semester Spring Package: Paving The Way for a Strong and Sustainable Recovery
On 2 June 2021, the European Commission has presented the European Semester Spring Package, which focuses on providing fiscal guidance to Member States as they continue the process of gradually reopening their economies. This guidance aims to help Member States strengthen their economic recoveries, making the best possible use of the Recovery and Resilience Facility (RRF), the key instrument at the heart of NextGenerationEU. The European Semester has been adapted this year, given the links to Member States' recovery and resilience plans, laying out the investments and reforms that the RRF will finance.
Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People, said: “We are presenting this ‘Special Edition' of the Spring Package at a pivotal moment, with our recovery around the corner but with the road ahead still paved with unknowns. We will therefore continue to use all tools to get our economies back on track. We are prolonging the general escape clause in 2022, with a view to deactivating it in 2023. We are encouraging Member States to maintain supportive fiscal policies this year and next, preserving public investment and making the most of the funding from the Recovery and Resilience Facility to boost growth. A sound mix of expenditure - focused on investments while keeping other expenses under control - will facilitate the return to more prudent positions in the medium-term, which will be especially important for high-debt countries.”
Fiscal policy guidance and the continued application of the general escape clause
The activation of the general escape clause of the Stability and Growth Pact in March 2020 allowed Member States to react swiftly and adopt emergency measures to mitigate the economic and social impact of the pandemic.
On March 3 2021, the Commission's Communication on fiscal policy clarified that the decision to deactivate the general escape clause should be taken based on an overall assessment of the state of the economy based on quantitative criteria, with the level of economic activity in the EU compared to pre-crisis levels as the key quantitative criterion. On the basis of the Commission's Spring 2021 Economic Forecast, the general escape clause will continue to be applied in 2022 and is expected to be deactivated as of 2023.
Fiscal policy needs to remain supportive in 2021 and 2022. Member States should avoid a premature withdrawal of support and make full use of the RRF funding. The implementation of investments and reforms within the RRF will help to support the economic recovery, foster higher potential growth and employment, reduce imbalances and improve public finances. In 2022, national fiscal policies should become increasingly differentiated, while all Member States should preserve investments to support the recovery. Once conditions allow, Member States should pursue policies to ensure fiscal sustainability in the medium term.
Addressing macroeconomic imbalances
The Commission has identified macroeconomic vulnerabilities related to imbalances and excessive imbalances for the 12 Member States selected for in-depth reviews in the 2021 Alert Mechanism Report. Three Member States continue to experience excessive imbalances (Cyprus, Greece, and Italy) and nine others are experiencing imbalances (Croatia, France, Germany, Ireland, the Netherlands, Portugal, Romania, Spain, and Sweden).
Enhanced surveillance report and post-programme surveillance reports
The Commission has adopted the tenth enhanced surveillance report for Greece. The report concludes that, despite the challenging circumstances caused by the COVID-19 pandemic, Greece has taken the necessary actions to achieve its specific commitments. The Commission has also adopted the post-programme surveillance reports for Ireland, Spain, Cyprus, and Portugal. The reports conclude that the repayment capacities of each of the Member States concerned remain sound.
Employment Guidelines set common priorities for national employment policies with a view to making them more inclusive and fair. The Guidelines, adopted in October 2020, were updated to integrate the environmental sustainability and digital dimensions, reflecting the Strong Social Europe for Just Transitions Communication and integrating the UN Sustainable Development Goals (SDGs). They also addressed the consequences of the COVID-19 crisis, providing specific guidance aimed at mitigating the employment and social impact of the crisis.
The European Pillar of Social Rights Action Plan sets out concrete actions to strengthen the social dimension across all policies of the Union and will help ensure an inclusive recovery. At the Social Summit in Porto on 7-8 May 2021, EU leaders recognised the European Pillar of Social Rights as a fundamental element of the recovery and underlined in the Porto declaration their determination to continue deepening its implementation at the EU and national level. ECOPNET (European Cooperation and Partnership Network) reiterates that these packages recovery plans are crucial to strengthen the Union's drive towards a digital, green and fair transition and contribute to achieving upward social and economic convergence.
The Commission invites the Eurogroup and Council to discuss the package and endorse the guidance. It looks forward to engaging in a constructive dialogue with the European Parliament on the contents of this package and each subsequent step in the European Semester cycle.
Source: European Commission Press Corner