Time to focus

Europe’s tardiness to come to agreement on Greece let alone the EU budget shows worrying degree of focus. This week, the European Commission has the opportunity to concentrate European economic governance on the countries and the problems that really matter. Wednesday, the European Commission is releasing its annual growth survey (AGS) and its alert mechanism report (AMR). The AGS is supposed to be the central document guiding European economic governance in the next year. It is supposed to set priorities for fiscal, macroeconomic and structural policies for the EU as a whole. The problem with such a document is that it easily is too broad and misses the focus on the real priorities. In recent papers (see An Assessment of the European Semester, October 2012; On the effectiveness and legitimacy of EU economic policies, November 2012[1]) with colleagues, we have therefore proposed to simultaneously release the AMR. The AMR is the first step of the new macroeconomic imbalance procedure that is supposed to identify countries early on that could be a source of trouble.

The last AMR of February this year failed to trigger focus in the subsequent policy debate. The AMR report had indentified 12 countries beyond the programme countries that should be observed carefully: Belgium, Bulgaria, Denmark, Spain, France, Italy, Cyprus, Hungary, Slovenia, Finland, Sweden and the United Kingdom. For all 12 countries, an in-depth report was produced.

At the same time however, European economic governance in the course of the European Semester continued to be a process putting all countries’ problems essentially on equal footing. All 27 countries of the EU received their recommendations which were discussed and endorsed in the council. Giving recommendations on fiscal and structural issues to all 27 countries makes little sense. In fact, it suggests that all countries have somehow problems and that all these problems are equally relevant.

The simultaneous release of the AMR and AGS should be used as an opportunity to re-focus European governance. Structural and macroeconomic policy recommendations should only be given to countries that are considered to have serious macroeconomic imbalances. In addition, countries such as Germany, whose actions have serious implications for the entire euro zone, should be in focus. Fiscal policy recommendations should only be given to countries under severe fiscal surveillance. That would create a European Semester that really makes sense and puts focus back on the center stage.

[1] B. Marzinotto, G. B. Wolff, M. Hallerberg, An Assessment of the European Semester, October 2012, http://www.bruegel.org/publications/publication-detail/publication/751-an-assessment-of-the-european-semester/

B. Marzinotto, G. B. Wolff, M. Hallerberg, On the effectiveness and legitimacy of EU economic policies, November 2012,

http://www.bruegel.org/publications/publication-detail/publication/758-on-the-effectiveness-and-legitimacy-of-eu-economic-policies/