The Macroeconomic Imbalances Procedure (MIP) is a surveillance mechanism that aims to identify potential risks early on, prevent the emergence of harmful macroeconomic imbalances and correct the imbalances that are already in place.
The annual starting point of the MIP is the Alert Mechanism Report: Based on a scoreboard of indicators, it is a filter to identify countries and issues for which a closer analysis (in-depth review) is deemed necessary.
The outcome of these in-depth reviews forms the basis for further steps under the MIP whereby a graduated approach is followed reflecting the gravity of imbalances.
The MIP has a preventive and a corrective arm. The latter is made operational by the Excessive Imbalance Procedure, which can eventually lead to sanctions for euro area Member States if they repeatedly fail to meet their obligations.
The in-depth reviews currently cover 17 Member States, which were identified in the Alert Mechanism Report (AMR) of 13 November 2013 as warranting further economic analysis in order to determine whether macroeconomic imbalances exist or risk emerging.
Each of the 17 in-depth reviews examines the origin, nature and severity of possible macroeconomic imbalances. They assess whether the country is affected by an imbalance, and if it is, what the nature of the imbalance is.
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Over the first decade of the century, the EU has registered serious gaps in competitiveness and major macroeconomic imbalances. Therefore a new surveillance and enforcement mechanism has been set up in December 2011 as part of the so-called "Six-Pack" legislation, which reinforced economic governance in the EU and the euro area. The Macroeconomic Imbalance Procedure (MIP) is based on Article 121.6 of the Treaty and relies on the following main elements:
An early warning system: An alert system is established based on a scoreboard consisting of a set of – recently – eleven indicators covering the major sources of macroeconomic imbalances. The scoreboard is published in the Alert Mechanism Report that marks the starting point of the annual cycle of the MIP. For each indicator, alert thresholds have been defined to detect potential imbalances. The scoreboard and the thresholds are not applied mechanically, as the scoreboard is complemented by an economic reading. The composition of the scoreboard indicators may evolve over time. The aim of the scoreboard is to filter countries that warrant in-depth studies in order to determine whether the potential imbalances identified in the early-warning system are benign or problematic. The Commission can organise missions, with the ECB if appropriate. The in-depth reviews are made public.
Preventive and corrective action: The MIP allows the Commission and the Council to adopt preventive recommendations under article 121.2 of the Treaty. These recommendations are embedded in the package of country-specific recommendations which the Commission puts forward in May/June in the context of the European Semester.
The MIP has also a corrective arm which applies in more severe cases: an Excessive Imbalance Procedure (EIP) may be opened for a Member State if it is found to experience excessive imbalances in the sense of the MIP regulation. The Member State concerned will have to submit a corrective action plan with a clear roadmap and deadlines for implementing corrective action. Surveillance will be stepped up by the Commission on the basis of regular progress reports submitted by the Member State concerned.
Rigorous enforcement: A new enforcement regime is established for euro area countries. The corrective arm consists of a two-step approach:
The decision-making process in the new regulations is streamlined by prescribing the use of reverse qualified majority voting to take all the relevant decisions leading up to sanctions. This semi-automatic decision-making procedure makes it very difficult for Member States to form a blocking majority.