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European Semester: scope for democratic oversight

On 30 May, the European Commission made public a list of policy recommendations for each EU Member State following assessment of their Stability or Convergence Programmes and of their National Reform Programmes. On 22 June, the ECOFIN Council is expected to discuss the Commission proposal. The next step will be the endorsement of the country-specific […]

By: Date: June 20, 2012 Topic: European Macroeconomics & Governance

On 30 May, the European Commission made public a list of policy recommendations for each EU Member State following assessment of their Stability or Convergence Programmes and of their National Reform Programmes. On 22 June, the ECOFIN Council is expected to discuss the Commission proposal. The next step will be the endorsement of the country-specific recommendations at the European Council of 28-29 June, before these are finally adopted by the Council.  

The exercise in which EU Member States report on their economic policy programmes already in the Spring, the European Commission assesses their commitments and the Council of Ministers eventually adopts specific recommendations is part of the European Semester process. Prior to 2011 Member States were thoroughly reporting on their plans but mostly ex post and certainly not before decisions were approved by National Parliaments, as it happens instead under the Semester (for a detailed description of the process, see /nc/blog/detail/article/797-the-importance-of-the-european-semester-in-its-second-cycle/).

By providing early guidance and exercising full integrated monitoring of all economic policy decisions taken at the national level, the EU uses the Semester with the aim of strengthening economic policy coordination in the EU. There are but some weak points in the process.

First, the European Commission provides a number of recommendations for each Member State but the rationale for preferring some areas of intervention over others is not clear nor is there a prioritization across the suggested measures. This was the case in 2011, the first year in which the Semester was activated, and the same approach was repeated this year.

Second, last year the Council of Ministers made some amendments to the proposals by the Commission and no explanation was provided for the gap between the Commission’s and the Council’s final text. In some cases, national governments sitting in the Council were just bringing fiscal recommendations back under the umbrella of the excessive deficit procedure (EDP), but in the area of structural reform some of them have been downsizing EU recommendations.

Third, the track record of implementation of EU recommendations at the national level is modest. Member States are of course diligent when it comes to fiscal policy because non-compliance leads to sanctions, but less so in the area of structural reform, as here failure to implement the suggested measures is not associated with any form of punishment and the only instrument for forcing compliance is peer review and pressure at the Council- and European Council level. But peer pressure is typically not enough for forcing policy change.

The good news this year is that the European Parliament – following the approval of the six-pack in December 2011 – can exercise some form of democratic oversight through the so-called Economic Dialogue on the Semester. The Economic Dialogue allows the European Parliament to invite mainly EU Institutions for an exchange of views on different aspects and stages of the European Semester process. On 11 June, the Economic and Monetary Affairs Committee of the European Parliament used this instrument to discuss country-specific recommendations with Commissioner Olli Rehn. Would the Council of 22 June amend the Commission’s text, then the European Parliament may also ask the Council Presidency for clarification. Finally, the European Parliament has also faculty to invite for discussion national representatives of all countries that have been told to correct excessive deficits and/or other macroeconomic imbalances.

Whilst it may not have an impact on the actual effectiveness of the European-Semester cycle of policy coordination, the Economic Dialogue is an important instrument of democratic oversight in a multi-actor and multi-level process, which otherwise would risk being very opaque.


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