THE STATE OF THE EUROPEAN UNION. Europe at the political crossroads

THE STATE OF THE EUROPEAN UNION

monitored, treated equally seriously and correc-

tive measures on both sides be formulated in

the relevant country-specific recommendations.

The European Parliament adopted its three

reports relating to the 2016 European

Semester

on 25 February 2016, i.e. three

weeks before the Spring European Council:

– The ECON Committee report (rapporteur:

M.J. Rodrigues) emphasizes the need for a

coordinated effort by all Member States to

strengthen internal demand and reduce

macroeconomic imbalances without resort-

ing to harmful internal devaluation. It out-

lines a new agenda of reforms and invest-

ments (including social investments and the

energy/ecological transition) and emphasizes

that the European Semester should be much

more in line with the Europe 2020 Strategy.

It calls for fully using the existing flexibility of

the SGP, also to deal with new security

threats and the refugees crisis. Moreover, it

pays particular attention to the euro area

recommendation, stressing that the

Eurozone is one economic entity, and calls

for further democratizing the European

Semester. It calls for regular monitoring of

the Eurozone’s aggregate fiscal stance in

view of the existing investment gap and

notes that a current account surplus which is

too high due to underinvestment and sup-

pressed domestic demand has adverse con-

sequences for growth and employment. On

this basis, the report highlights the possible

contribution which high-surplus countries

could make towards stronger domestic de-

mand and stronger recovery in the Eurozone.

– The EMPL Committee report (rapporteur: S.

Ribeiro) calls for socially responsible reforms

based on solidarity, integration, social justice

and a fair distribution of wealth. It highlights

that investment in people is an important

objective in itself, not just a means to eco-

nomic development. Moreover, it identifies

several actions to strengthen the social di-

mension of the Eurozone, notably enhanced

democratic accountability mechanisms at

both EU and national levels; wage floors set

at adequate levels and with the involvement

of social partners; joint meetings between

the EPSCO Council and ECOFIN; and meet-

ings of the euro area Labour and Social

Ministers;

– Finally, the report of the IMCO

Committee (rapporteur: C. Stihler) highlights

that underinvestment over the past years

has significantly held back Europe’s econom-

ic development. It calls for regular monitor-

ing during the European Semester of coun-

try-specific barriers to the Single Market and

evaluation of Single Market integration and

competitiveness, focused on a set of priori-

ties where action would generate the most

impact in growth and jobs.

A better macroeconomic policy mix will not

be achieved without a new approach towards

stability and growth-oriented Eurozone debt

management, focusing on long-term sustaina-

bility, while avoiding risks of moral hazard. First

of all, this will require a more favourable macro-

economic framework made up of higher

growth, limited inflation and financial stability

generating the lowest possible interest rates,

within which the ECB will have to play an es-

sential part. Within such a frame, a new debt

management approach could encompass:

– A European long-term borrowing facility for

major investments corresponding to EU and

EMU priorities.

– A more cyclically-sensitive approach to debt

reduction than what is currently laid down in

the Fiscal Compact (debt rule), which may in-

clude the possibility for short-term borrowing.