EU launches economic governance package for 2017

The European Commission on Wednesday launched its economic governance package for 2017, the so-called European Semester, setting out economic and social priorities for the year ahead in the European Union (EU), the euro area, and at the member state level.

The package, which starts the 2017 cycle of economic governance, was designed for a stronger and more inclusive economic recovery, the European Commission said in a statement.

The package the EU executive arm presented includes the 2017 annual growth survey, a communication "Towards a positive fiscal stance for the euro area", the 2017 alert mechanism report, the 2017 draft joint employment report, the assessment of euro area member states' draft budgetary plans for 2017, and a recommendation on the economic policy of the euro area.

The European Commission called on EU member states to redouble their efforts to boost investment, pursue structural reforms and ensure responsible fiscal policies, and in doing so, put the focus on social fairness and delivering more inclusive growth.

At the 28-nation EU level, the package provided guidance for the EU outlined in its work program for 2017, including the strengthening of the investment plan for Europe.

Looking at the euro area in particular, the European Commission called for a significantly more positive fiscal stance for the currency area as a whole to overcome the risk of "low growth, low inflation, and to support the monetary policy of the European Central Bank."

The European Commission argued that a moderately restrictive fiscal stance for the euro area would not seem appropriate given the need to sustain the recovery and in view of the current broader uncertainty.

To deliver such a positive fiscal stance, the euro area must adopt a more collective approach which takes into account the differences in situations across countries, the European Commission said.

Particularly, countries in the single currency bloc which are over-achieving their fiscal objectives, should be encouraged to use their fiscal surplus to support domestic demand and quality investments, including cross-border ones, as part of the investment plan for Europe.

For countries that need further fiscal adjustments, the new approach will make sure they will be broadly compliant with the requirements of the Stability and Growth Pact (SGP).

Meanwhile, for eurozone countries which are under the corrective arm of the SGP, namely France, Spain and Portugal, the new approach will ensure a timely correction of their excessive deficits, including by providing fiscal buffers against unforeseen circumstances.

Besides, in line with the euro area fiscal stance, the European Commission recommended a fiscal expansion of up to 0.5 percent of GDP in 2017 for the euro area as a whole.

"The 2017 European Semester we start today will be decisive for Europe to manage its economic and social turn-around. I believe we can do it. This is why today the Commission is recommending a positive fiscal stance to support the recovery and the monetary policy of the European Central Bank, which should not bear the burden alone," European Commission President Jean-Claude Juncker said about the package.

"Every member state should play its part: those that can afford it need to invest more, while those which have less fiscal space should pursue reforms and growth-friendly fiscal consolidation," he added.

This package will be discussed later among the EU institutions and stakeholders. Once agreed, this guidance should be reflected in member states' policies, in particular in their national programs to be presented next spring.

Europe is experiencing a fragile but relatively resilient and job-intensive recovery. Its GDP is now higher than before the crisis. Unemployment is decreasing and investment is growing again.

However, the European Commission said there was no room for complacency. Some of the tailwinds that have supported the recovery so far are fading. The legacies of the crisis, notably the social impact, high levels of public and private debt, and the share of non-performing loans, are still far-reaching. Endit