The Commission has presented a Communication reviewing the EU’s Economic governance framework. Specifically, this includes an assessment of the application of the six- and two-pack legislation.
The Communication also sets out how the Commission plans to consult interested parties to receive their views on the functioning of the economic framework so far and the possible ways to enhance its effectiveness.
Why is the Commission presenting this review now?
The legislation in the six-pack and two-pack requires the Commission to review and report on the application of the legislation every five years.
The start of a new political cycle at European level is an opportune moment to assess the effectiveness of the current rules.
The economic context has changed considerably since these measures were introduced in response to the vulnerabilities exposed by the economic and financial crisis. Meanwhile, Europe is aiming to become the world’s first climate-neutral continent and to seize the new opportunities of the digital age, as set out in the Annual Sustainable Growth Strategy
What are the main findings of the review?
The review considers the effectiveness of the different surveillance elements as regards the achievements of the three key objectives, namely:
ensuring sustainable government finances, growth and avoiding macroeconomic imbalances;
enabling closer coordination of economic policies; and
promoting convergence of economic performances of the Member States.
The review has revealed strengths as well as possible areas for improvement.
The surveillance framework has supported the correction of existing macroeconomic imbalances and the reduction of public debt. This, in turn, has helped to create the conditions for sustainable growth, strengthened resilience and reduced vulnerabilities to economic shocks.
The implementation of recommended policies by Member States has contributed to the gradual strengthening of the EU economies and to job creation.
The establishment of a common budgetary timeline and the policy guidance issued on the basis of Member States’ draft budgetary plans has led to a closer coordination of fiscal policies within the euro area.
The surveillance framework has also promoted the gradual convergence of Member States’ economic performances. All Member States have returned to growth since the economic and financial crisis and experienced declining unemployment rates. Public finances have also improved, with public deficits and debt levels falling.
At the same time, potential growth has not recovered to its pre-crisis level and there has been persistently low inflation. Public debt levels remain high in some Member States. Reform efforts are waning. Member States’ economies remain vulnerable to an economic slowdown with risks of spill-overs that would affect the functioning of the euro area as a whole.
The fiscal stance at Member State-level has frequently been pro-cyclical. The composition of public finances has not become more growth-friendly, with Member States consistently opting to increase current expenditure rather than protect investment.
The ability to steer the fiscal stance for the euro area as a whole rests exclusively on coordination of national fiscal policies in the absence of a central stabilisation capacity.
The fiscal framework has grown excessively complex. This complexity has resulted in those rules becoming less transparent, hampering predictability, communication and political ownership.
What are the review’s findings on the Macroeconomic Imbalance Procedure?
The MIP has widened and complemented the scope of economic surveillance and raised awareness about economic challenges beyond fiscal policy.
It has allowed a greater focus on macro-structural and macro-financial issues relevant to macroeconomic stability, such as external imbalances, productivity, competitiveness, the housing market and private indebtedness.
The MIP has helped to focus national debates on policy action. It has also helped to deepen the dialogue between the EU institutions and national authorities about key economic challenges and priorities. The report finds that implementation of country-specific recommendations linked to the MIP was stronger compared with other recommendations, and that imbalances accumulated during the crisis are receding. However, implementation has waned in more recent years. The review also finds that the MIP has been more successful in reducing current account deficits than it has been in reducing persistent and large current account surpluses.
The reports concludes that the MIP has complemented other surveillance instruments. In particular, it provided the basis for prioritising policies not dealt with by the SGP, but relevant to public finances. This is the case for policies helping competitiveness and the growth potential in high-debt countries.
Will the Commission come forward with any new proposals on the basis of this review?
The next step is to engage openly with interested parties to seek their views on how to strengthen the economic governance framework.
The Commission will consider all those views and on that basis complete its internal reflections on the scope for possible future steps by the end of 2020.
When and how does the Commission plan to engage with the other institutions and interested parties on the functioning of EU fiscal rules?
The Commission looks forward to an inclusive debate, involving interested parties including the European Parliament, the Council, the European Central Bank, the European Economic and Social Committee, the Committee of the Regions, national governments and parliaments, national central banks, independent fiscal institutions, national productivity boards, social partners, as well as academic institutions.
This engagement will take place through various means including dedicated meetings, workshops and an online consultation platform.
These consultations will take place over the first half of 2020.
The debate will consider, among others, the following questions:
How can the framework be improved to ensure sustainable public finances in all Member States and to help eliminate existing macroeconomic imbalances and avoid new ones arising?
How to ensure responsible fiscal policies that safeguard long-term sustainability, while allowing for short-term stabilisation?
What is the appropriate role for the EU surveillance framework in incentivising Member States to undertake key reforms and investments needed to help tackle today and tomorrow’s economic, social, and environmental challenges while preserving safeguards against risks to debt sustainability?
How can one simplify the EU framework and improve the transparency of its implementation?
How can surveillance focus on the Member States with more pressing policy challenges and ensure quality dialogue and engagement?
How can the framework ensure effective enforcement? What should be the role of pecuniary sanctions, reputational costs and positive incentives?
Is there scope to strengthen national fiscal frameworks and improve their interaction with the EU fiscal framework?
How should the framework take into consideration the euro area dimension and the agenda towards deepening the Economic and Monetary Union?
Within the context of the European Semester, how can the SGP and the MIP interact and work better together, so as to improve economic policy coordination among Member States?
What is the link between the review and the European Green Deal?
This review was conducted in the context of the ambitions set out in the European Green Deal to make Europe the world’s first climate-neutral continent.
This includes re-assessing the appropriateness of the current flexibility clauses in terms of their scope and eligibility, in order to facilitate the right type and level of investment while preserving debt sustainability.
‘Green budgeting’ could also play a role in improving the quality of public finances and helping to deliver on the objectives of the European Green Deal. However, it is too soon to say whether the review will lead to the development of such tools.
The Commission will consider the input from interested parties in its reflections on the scope of any possible future steps in this regard.
Does the existing economic governance framework facilitate green investments?
The EU’s fiscal rules aim to ensure the credibility and sustainability of public finances, thereby ensuring financial stability and smooth access to financial markets at low interest rates. These are necessary factors to ensure sustainable public investment over the medium term.
In principle, the Stability and Growth Pact (SGP) is neutral as regards to the composition of public revenue and expenditure, focusing on deficit and debt. Member States are therefore free to prioritise their public expenditures in favour of investment. The rules recognise in several instances the importance of protecting investment. They also provide support for investment through the so-called “investment clause” and other flexibility provisions provided for in the Commonly Agreed Position on Flexibility contained within the SGP.
What is the link between the review and the Commission’s agenda to further deepen Europe’s Economic and Monetary Union (EMU)?
Our deep economic links and interdependence mean that sound economic and fiscal governance are critically important to the Economic and Monetary Union. The governance framework needs to ensure the sustainability of public finances, support the strength and resilience of Member State economies and promote effective policy coordination.
At the same time, further EMU reforms such as the introduction of a stabilisation capacity of appropriate size would allow fiscal policy to contribute more to macroeconomic stabilisation at the level of the euro area as a whole.
The completion of the financial union (Banking Union and Capital Markets Union) could facilitate market discipline and allow to simplify the design of an effective fiscal surveillance framework.
Does the review include any recommendations on how to reduce the complexity of the EU’s fiscal rules?
In general the review does not include any recommendations as it is an assessment of how the rules have worked so far.
The review acknowledges that the current EU fiscal governance framework has grown excessively complex. This complexity results from the framework pursuing multiple objectives and the need to cater for a wide variety of evolving circumstances, including by the use of flexibility, in a context of divergences of views among Member States. It is reflected in a very detailed codification, encompassing several operational indicators of which a number are non-observable and frequently revised, as well as a variety of escape clauses.
As a result, the fiscal rules have become less transparent, hampering predictability, communication and political ownership.
To what extent does the review take on board the recent reports from the European Court of Auditors and the European Fiscal Board?
This reviewdraws on the assessment of the EU fiscal rules by the European Fiscal Board, as well as on existing reports and views of other interested parties, such as Member States, the European Parliament, the European Court of Auditors on the SGP and the MIP, and academia.
Those references are made explicit in the accompanying staff working documents.
Newsweek: “Putin scores a win in Turkey’s election”
Russian President Vladimir Putin secured a victory in Turkey’s presidential election results on Sunday, writes ‘Newsweek’.
Turkish President Recep Tayyip Erdoğan appeared to beat back a challenge from Kemal Kilicdaroglu, the head of the center-left Republican People’s Party (CHP), winning his third five-year term since taking office in 2014. Erdoğan claimed victory on Sunday, telling supporters in a speech, “I thank each member of our nation for entrusting me with the responsibility to govern this country once again for the upcoming five years,” the Associated Press reported.
He ultimately prevailed by roughly 5 percentage points, according to unofficial data from state-run Anadolu Agency. Turkey’s election has been defined by high voter turnout, but has also led to questions about the fairness of Turkey’s electoral system.
Erdoğan’s victory is viewed as good news for Putin, whose relations with many world leaders grew strained after he launched the invasion of Ukraine last February. Many governments viewed the “special military operation” as lacking justification and a violation of international norms, leading to swift backlash and economic sanctions against Moscow.
Turkey, however, has taken an important role in the conflict, often serving as a mediator between Kyiv and Moscow. Erdoğan himself has walked a fine line between support for Ukraine while also maintaining close diplomatic relations with Russia. Both countries lie along the Black Sea, so maintaining strong economic ties has remained a priority for both governments.
Erdoğan’s victory likely guarantees a continuation of the status quo.
Notably, Turkey’s actions in the North Atlantic Treaty Organization (NATO) have aligned with the interests of Russia. Turkey has previously blocked bids from Sweden and Finland to join NATO, which would bring the alliance to Putin’s doorstep. The Russian leader has also opposed the expansion of NATO, an issue that has sparked tensions with the West.
Putin congratulated Erdoğan on his victory, writing in a statement that he appreciates the Turkish president’s “personal contribution to strengthening friendly Russian-Turkish relations, mutually beneficial cooperation in various areas.”
“Winning the election was a natural result of your selfless work as head of the Republic of Turkey, evidence of the Turkish people’s support for your efforts to strengthen the state sovereignty and the pursuit of an independent, independent foreign policy,” the Russian leader wrote.
Erdoğan has previously touted his relationship with Putin during his reelection bid.
“We are not at a point where we would impose sanctions on Russia like the West have done. We are not bound by the West’s sanctions,” he told CNN earlier this month. “We are a strong state and we have a positive relationship with Russia.”
Larry Johnson: The aftermath of Bakhmut and why the CIA is in trouble
The West is desperate to avoid having any meaningful discussion or review of the Battle of Bakhmut because it was such a massive loss. Think about it — a small “private” paramilitary force backed by former Chef with no military experience, forced Ukraine’s NATO-trained and supplied Army to retreat, notes Larry C. Johnson, a veteran of the CIA and the State Department’s Office of Counter Terrorism.
This is a very important point. Conventional military doctrine stipulates that an army attacking an entrenched force will need at least three times more soldiers than the defending force. Looks like Russia is very unconventional.
The Wagner Group’s 50,000 fighters defeated a Ukrainian force that employed over 120,000 troops, inflicting 70% casualties on the Ukrainians. Russia is writing new chapters for military academies and war colleges on how to attack and defeat a numerically superior force entrenched in fortifications.
Russia was not fighting Afghan shepherds or Iraqi tribesmen armed with AK-47s. It faced off with a NATO proxy force, equipped with modern weaponry, and beat it.
…Even more, I chatted with a retired CIA buddy who filled me in on the personnel disaster that is transforming the CIA into a fully woke institution. Thirty years ago an aspiring employee had to pass a polygraph and had to be drug free. Prior use of marijuana or other recreational drugs could be a show stopper. That was then. Now?
The CIA only asks if the applicant has smoked pot or taken other illicit drugs in the year prior to applying to the Agency. I would not be surprised to learn that once a former drug user is brought on board that there is no obstacle for him or her to continue to indulge the guilty pleasure of getting buzzed (hopefully while not at work).
More disturbing is the current hiring practice — in a recent class for new analysts, 92% of the new hires came from one State. If you guessed Alabama or Virginia you would be wrong. 92% of the analysts hail from one of the most liberal states in the United States. The Agency hiring standard is welcoming the Woke crowd and eschewing men and women who profess traditional values. If you hold Conservative values you need not apply. You probably will not be hired.
I have written previously about the pressure CIA managers face when they write the yearly evaluation on their employees, which plays a key role in determining who gets promoted. If an employee is a minority or openly homosexual or transgender and does not get promoted the manager is required to write an explanation why he or she did not promote said person.
Guess what happens? People get promoted because of their social justice status rather than the quality of their work. Is it any wonder that the quality of the CIA analytical product is succumbing to political pressure, writes Larry C. Johnson.
Drone attack on Moscow
The Russian Defence Ministry:
– This morning, the Kiev regime has launched a terrorist drone attack on the city of Moscow. Eight aircraft-type drones were employed in the attack, informs Russian MoD.
– All enemy drones were downed.
– Three of them were suppressed by electronic warfare, lost control, and deviated from the intended targets.
– Five more UAVs were shot down by the Pantsir-S SAM system in Moscow region.
TASS has gathered the main facts about the incident
– Moscow and the Moscow Region were attacked by drones early on Tuesday morning, TASS informs.
– Several buildings sustained minor damage, Moscow Mayor Sergey Sobyanin said.
– According to the authorities, there were no casualties and emergency services are continuing to work at the scene.
– Early on Tuesday morning, Russia’s Emergencies Ministry told TASS that ministry staff were investigating an incident in the Moscow suburbs, in which windows in a high-rise apartment building had been blown out. Fire and rescue units arrived at the scene. There were no signs of fire. According to eyewitnesses, the sound of an explosion was heard at the time of the incident.
– Emergency services told TASS that drone-like fragments were found around the house. The windows of apartments on three floors were shattered.
– It later became known that law enforcement personnel were verifying information about explosions in two other multi-story apartment buildings in the west and southwest of Moscow. There were also broken windows in some apartments.
Reaction of authorities
– Sobyanin confirmed the drone attack on Tuesday morning. As a result, according to him, several buildings sustained minor damage.
– According to the mayor, there are no casualties in the capital and all of the city’s emergency services are working at the scene.
– Emergency services evacuated the residents of two apartment buildings damaged by the drones. Once all necessary work is completed, the residents will be able to return to their homes. “According to information from municipal medical services, at this time, none of the residents of the buildings damaged by UAVs [unmanned aerial vehicles] have been seriously injured. Two individuals requested medical aid. Nobody had to be hospitalized and the necessary help was provided on site. Also, the emergency services and several ambulance crews continue to work at the sites of incidents,” the mayor wrote.
– Several drones were shot down as they approached the capital, Moscow Region Governor Andrey Vorobyov said.
– Domodedovo, Vnukovo and Zhukovsky airports are operating as usual, representatives of two of the airports told TASS.
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