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EU announces details of EUR 315 billion investment plan
The European Commission has announced a EUR 315 billion Investment Plan to get Europe growing again and get more people back to work. The plan announced on 26 November is built on three main strands: a new European Fund for Strategic Investments (EFSI), guaranteed with public money, to mobilise at least € 315 billion of additional investment over the next three years (2015 - 2017); a credible project pipeline coupled with an assistance programme to channel investments where they are most needed; and an ambitious roadmap to make Europe more attractive for investment and remove regulatory bottlenecks. Europe is facing an investment gap, with the current level of investment EUR 230 billion to EUR 370 billion below historical norms. The plan is to use available public funds to leverage additional capital that would otherwise not be mobilised, with an expected multiplier of 15 times. The money comes on top of the EUR 630 billion in structural and regional development funds that are about to be unlocked, as well as funds made available by the European Investment Bank and by EU programmes. As next steps, the European Council of 18-19 December and the European Parliament are invited to endorse the plan, including the decision to set up the EFSI and to agree to fast-track the adoption of the relevant regulation, scheduled to enter into force by June 2015.
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| Today Europe is turning a page. After years of fighting to restore our fiscal credibility and to promote reform, today we are adding the third point of a virtuous triangle: An ambitious, yet realistic 'Investment Plan for Europe'. Europe needs a kick-start and today the Commission is supplying the jump cables. |
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Jean-Claude Juncker, President of the European Commission
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Commission assesses euro area Member State draft budgetary plans, finds 5 compliant, 4 broadly compliant, 7 risk non-compliance
The European Commission has completed its assessment of 16 euro area countries’ 2015 draft budgetary plans, focusing on their compliance with the provisions of the Stability and Growth Pact. In opinions made public on 28 November, the Commission found that the draft budgetary plans of five countries (Germany, Ireland, Luxembourg, the Netherlands and Slovakia), are compliant with the Pact, while four countries’ (Estonia, Latvia, Slovenia and Finland) plans are broadly compliant, and seven countries’ (Belgium, Spain, France, Italy, Malta, Austria and Portugal) plans risk non-compliance. The Commission has asked the latter two groups of countries to take the necessary measures within their national budgetary procedures to ensure that their 2015 budgets will be compliant with the Pact. The exercise covered all euro area countries except Greece and Cyprus, which are under economic adjustment programmes. It is rooted in the so-called Two-Pack legislation, which entered into force in May 2013, and aims to increase the effectiveness of economic and budgetary policy coordination in the euro area.
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Fourth Alert Mechanism Report on macroeconomic imbalances released; in-depth reviews warranted for 16 Member States
EU economies continue to progress in correcting their external and internal imbalances, according to the Fourth Alert Mechanism Report on macroeconomic imbalances in EU Member States, which was released on 28 November. The report initiates the fourth annual round of the Macroeconomic Imbalance Procedure, which aims to identify imbalances that hinder the smooth functioning of Member States’ economies, of the euro area, or of the EU as a whole. The report finds that high and unsustainable current account deficits have been considerably reduced, eliminated, or turned into surpluses and the process of balance sheet repair is progressing in most countries. Nonetheless, high levels of private and public debt, and high external liabilities still constitute substantial vulnerabilities for growth, jobs and financial stability in many countries. Moreover, slow growth and low inflation weigh on the reduction of imbalances and macroeconomic risks. The Commission found that in-depth reviews are warranted of the imbalances in 16 Member States.
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Review of economic governance framework: its working well, but improvement is always possible
The Commission has published a review of various pieces of legislation that make up the "Six Pack" and the "Two Pack", the EU’s reformed framework of economic governance. The review published on 28 November finds that, although they have only been in operation for a limited period of time, the new rules have already played a role in achieving closer coordination of economic policies and correcting excessive deficits. In the EU, the average fiscal deficit has fallen steadily from 4.5% of GDP in 2011 to a forecast of around 3% of GDP in 2014. Moreover, the number of countries subject to the Excessive Deficit Procedure has decreased from 23 out of 27 Member States to 11 out of 28, and under the Macroeconomic Imbalances Procedure imbalances are being corrected. While the regulations have significantly strengthened the EU’s economic governance framework, the review also reveals possible areas for improvement concerning the transparency and complexity of the rules-based framework and its impact on growth and imbalances. The Commission plans to discuss these with the European Parliament and the Council in the coming months.
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Annual growth survey sets out pillars of economic and social policy; recommends reforms to European Semester
The 2015 Annual Growth Survey (AGS) published by the European Commission on 28 November focuses on putting Europe firmly back on a path of sustainable job creation and economic growth. It recommends pursuing an economic and social policy based on three main pillars: (1) a boost to investment; (2) a renewed commitment to structural reforms; and (3) the pursuit of fiscal responsibility. The Commission has also proposed giving the European Semester a sharper focus and a more political role based on the three pillars of the AGS. A more focused European Semester should strengthen the social market economy and increase the effectiveness of economic policy coordination at the EU level through increased accountability and improved ownership by all actors, including social partners. The new economic policy cycle will also simplify Commission outputs and reduce the reporting requirements of Member States, while making the process more open and multilateral.
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Ireland: 2nd Post-programme mission notes improving economic situation
Staff teams from the European Commission and European Central Bank (ECB) visited Ireland to carry out the second post-programme surveillance (PPS) mission on 17-21 November. This was coordinated with the IMF's second post-programme monitoring (PPM) mission. The European Stability Mechanism also participated in the meetings on aspects related to its Early Warning System. The economic situation has continued to improve in Ireland since the end of the EU/IMF-financial assistance programme. Economic growth picked up in the first half of 2014, particularly in the labour market, and exports rebounded strongly. Overall, real GDP growth of 4.6% and 3.6% is projected for 2014 and 2015 respectively. The main downside risks to the short-term outlook are linked to a weakening in economic momentum in the euro area and the sustainability of high export growth. The general government deficit in 2014 is likely to turn out slightly above the authorities' most recent budgetary forecast of 3.7% of GDP, although remain well within the original ceiling of 5.1%, and down from 5.7% of GDP in 2013.
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Commission staff conclude sixth Post-Programme Surveillance mission to Latvia with overall positive assessment
Following the successful conclusion on 20 January 2012 of the three-year financial support programme by the EU, the sixth and most likely last Post-Programme Surveillance (PPS) mission to Latvia was carried out by staff of the European Commission from 11-14 November, together with the European Central Bank. Overall, the assessment of post-programme developments is positive, although developments between Ukraine and Russia present downside risks to the growth of Latvia’s economy. The euro changeover has been completed, the fiscal position is under control, and the financial sector has been strengthened. On the other hand, reforms to tackle high social inequality and inadequate healthcare access for the poorest, improve general and higher education outcomes, deal decisively with corruption cases, and modernise the public administration have barely advanced. Provided that repayment of the second EU loan tranche takes place as scheduled in January, a consultation with Member States on 28 November lays the ground for Latvia to become the first EU country to graduate from PPS and return to regular EU country surveillance. This would represent a clear achievement as Latvia has gone through a remarkable turn-around since the depths of the crisis in 2008-2009.
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G20 Leaders discuss measures to boost the global recovery
Presidents Juncker and Van Rompuy, as well as Vice-President Dombrovskis, participated in the G20 Summit on 15-16 November in Brisbane. G20 Leaders’ discussions focused on raising global growth to deliver better living standards and quality jobs for people across the world, as well as the economic impact of the outbreak of Ebola. At a press conference before the Summit, Juncker said the EU would push for agreement on a Global Infrastructure Hub to help implement the Global Investment Initiative by matching investors with projects, and for the automatic exchanging of tax information, particularly on tax rulings. Key deliverables coming out of Brisbane include reaching the ambition to lift the G20's GDP by at least an additional two per cent by 2018, endorsing the global Common Reporting Standard for the automatic exchange of tax information, progress to address the transparency of taxpayers' rulings, and a G20 Global Infrastructure Initiative to lift public and private infrastructure investment.
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EU financial assistance: Final disbursement to Portugal, further tranche for Ukraine
On 12 November, the EU disbursed EUR 400 million to Portugal as a last loan under the European Financial Stabilisation Mechanism (EFSM) assistance programme. It was the final disbursement under the EUR 26 billion EFSM financial assistance programme (2011-2014) for Portugal, which has been successfully concluded. Portugal exited its three-year Economic Adjustment Programme in June 2014. A loan of EUR 260 million was also disbursed to Ukraine on 12 November, as a further tranche from the EU Macro-Financial Assistance (MFA) facility for the country. The loan disbursement to Ukraine was another tranche from the two EU MFA programmes for the country, totalling EUR 1.61 billion. It follows disbursements totalling EUR 600 million made earlier this year, with EUR 750 million remaining available. To fund the disbursements on the financial markets, on 5 November the European Commission issued a EUR 660 million benchmark bond with a 15-year maturity, yielding about 1.5%.
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GDP up by 0.2% in the euro area and by 0.3% in the EU
A Flash Estimate for the third quarter of 2014 confirms that a gradual but still fragile recovery is underway in Europe. Seasonally adjusted GDP rose by 0.2% in the euro area and by 0.3% in the EU during the third quarter of 2014, compared with the previous quarter, according to flash estimates published on 14 November by Eurostat, the statistical office of the EU. In the second quarter of 2014, GDP grew by 0.1% in the euro area and by 0.2% in the EU. Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 0.8% in the euro area and by 1.3% in the EU in the third quarter of 2014, after +0.8% and +1.3% respectively in the previous quarter.
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Business Climate Indicator increases slightly in November, Economic Sentiment broadly stable in both euro area and EU
In November, the Business Climate Indicator (BCI) for the euro area increased slightly by 0.12 points to +0.18. Managers’ evaluation of overall order books, past production and export order books improved markedly. Also their appraisal of the stocks of finished products brightened somewhat. By contrast, production expectations remained broadly unchanged. Meanwhile, also in November, the Economic Sentiment Indicator (ESI) remained broadly stable in both the euro area (+0.1 points to 100.8) and the EU (-0.1 points to 104.1). Following October's increase, the declining trend of the ESI observed since June has ground to a halt for the second month in a row. In the euro area, confidence improved in industry and retail trade, remained flat in services and worsened in construction and among consumers, while at the country level, the ESI increased in France (+1.5) and Spain (+0.9), remained virtually unchanged in the Netherlands (+0.1) and decreased in Germany (-0.7) and Italy (-1.5). The headline indicator remained broadly stable in the EU as a whole (-0.1) and in the two largest non-euro area economies, the UK (+0.3) and Poland (±0.0).
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Latvia: benefiting from the euro, facing new challenges. Country Focus 12/2014.
This Country Focus analyses price dynamics, unit labour costs, business and investment sentiments, banking sector developments and structural reforms in Latvia shortly before and after the introduction of the euro on 1 January 2014, comparing actual outcomes with expectations or public perceptions. Latvia appears to be already reaping a number of benefits from its changeover to the euro in January 2014. Enhanced competition, bank intermediation and the low-interest rate environment are bringing immediate and long-term benefits to the economy. Moreover, despite concerns that businesses might take advantage of the introduction of the new currency to raise prices, consumer price inflation has turned out lower than expected. However, the successful changeover to the euro should not give ground for complacency as policy makers are still facing challenges, such as how to cope with accelerated labour-cost growth at a time when the external environment is worsening.
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Draft Budgetary Plans
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Commission opinions on the Draft Budgetary Plans of euro area Member States.
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| Directorate-General for Economic and Financial Affairs |
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