Macroeconomic imbalances in one Member State, such as a large current account deficit or a real estate bubble, can have detrimental effects on other Member States. This eventuality became evident after the financial crisis. For this reason, the Macroeconomic Imbalance Procedure (MIP), which aims to identify, prevent and address the emergence of potentially harmful macroeconomic imbalances that could adversely affect economic stability in a particular Member State, the euro area, or the EU as a whole, was introduced in 2011. The MIP foresees the possibility of enhanced surveillance for countries identified with excessive imbalances named the Excessive Imbalance Procedure. The MIP is also endowed with an enforcement mechanism, under which euro area Member States under the EIP face the possibility of sanctions.
Following the 2016 Alert Mechanism Report, In-Depth Reviews were carried out for 19 countries. Austria and Estonia were analysed with IDRs for the first time, while 16 countries were analysed with IDRs to assess the evolution of the imbalances that were identified in 2015. For Cyprus, an IDR was issued on 31 March 2016 after exiting its financial adjustment program.
In the 2016 IDRs seven countries have been identified with imbalances, six countries with excessive imbalances. Six countries were found no to have imbalances in the sense of the MIP.
The monitoring of macroeconomic imbalances is integrated into the European Semester, the EU’s annual cycle of economic monitoring and guidance.
The MIP cycle begins around November with the European Commission's annual Alert Mechanism Report (AMR), which analyses the economies of all Member States partly on the basis of a scoreboard of relevant indicators. The Alert Mechanism Report identifies countries whose situations require deeper analysis, to be carried out in In-Depth Reviews (IDRs) that are included in the annual Country Reports, issued around February.
In-Depth Reviews provide the analysis for the identification of the presence of macroeconomic imbalances and for the assessment of their severity. A Member State may be found to have ‘no imbalances’, ‘imbalances’, ‘excessive imbalances’, or ‘excessive imbalances with corrective action’ implying the activation of the Excessive Imbalance Procedure.
Member States with ‘imbalances’ or ‘excessive imbalances’ may receive policy recommendations targeting their imbalances in their annual Country-Specific Recommendations. They are also subject to a process of specific monitoring of their policy commitments adapted to the degree and nature of their imbalances, involving intensified dialogue with national authorities, and progress reports.