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European Semester: Commission keeps focus on fiscal responsibility, structural reforms and investment
The European Commission has sent a strong signal to Member States to carry out structural reforms and to continue consolidating their public finances. The surveillance package presented in the new format of Country Reports on 25 February follows the adoption of the Annual Growth Survey last November and sets out the analytical basis for the adoption of Country-Specific Recommendations in May. The Commission chose the new format and earlier date of publication by three months to allow for more time for discussions with stakeholders and better ownership by EU Member States. The package focuses on how to strengthen economic growth and job creation in Europe by boosting investment, accelerating structural reforms and pursuing fiscally responsible policy in line with the guidance from the Commission’s Communication of 13 January 2015 on best use of the flexibility within the existing rules of the Stability and Growth Pact. As part of the European Semester of annual economic policy coordination, the package assesses growth challenges and progress towards the implementation of the 2014 Country-Specific Recommendations adopted by the Council in July 2014 and includes recommendations for 16 EU countries for correcting macroeconomic imbalances that the Commission identified in in-depth reviews. The package also includes new steps under the Stability and Growth Pact for some Member States that will be discussed by Economic and Finance Ministers in March.
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This is an important and balanced set of decisions which fully reflects the current economic situation. The Commission is demonstrating both the importance of structural reforms and the respect of our fiscal rules.
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Pierre Moscovici, Commissioner responsible for Economic and Financial Affairs, Taxation and Customs
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European Semester 2015: country-specific updates on macroeconomic imbalances and fiscal efforts
Forming part of the surveillance package as the next step in the 2015 European Semester policy coordination cycle, the Commission has presented a series of recommendations that describe its analysis and update its guidance. The recommendations integrate the results of reviews conducted under the Macroeconomic Imbalance Procedure (MIP) and the Excessive Deficit Procedure (EDP). Of the 16 countries identified in November as experiencing macroeconomic imbalances, the Commission recommended that the Council step up the procedure for France, Germany and Bulgaria; opened the Macroeconomic Imbalance Procedure for Portugal and Romania; and de-escalated the procedure for Slovenia. The other 10 EU countries will see no change in their status. Taking into account other factors including the medium-term economic and budgetary position of the Member State as stipulated under the EU Treaty, the Commission did not recommend triggering an excessive deficit procedure for Belgium, Italy and Finland. The Commission recommended giving France until 2017 to correct its excessive deficit, and included strict milestones for the fiscal adjustment path that will be assessed regularly, starting in May.
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EFSF Board of Directors extends financial assistance for Greece until 30 June 2015
Following a letter of the European Commission and the Eurogroup statement of 24 February, the Board of Directors of the European Financial Stability Facility (EFSF) decided on 27 February to amend the Master Financial Assistance Facility Agreement (MFFA) for Greece to extend the availability of EFSF funds for Greece by four months. Instead of expiring on 28 February 2015, the MFFA now will expire on 30 June 2015. The amended MFFA was signed by EFSF CEO Klaus Regling, and the Greek Finance Minister Yanis Varoufakis, the Hellenic Financial Stability Fund and the Bank of Greece. Following this decision, EUR 1.8 billion that is still available under the MFFA can be disbursed to Greece up until 30 June 2015. The disbursement of this last loan tranche is conditional on the successful conclusion of the final review under the current arrangement and a unanimous decision by the EFSF Board of Directors. So far, the EFSF has disbursed EUR 141.8 billion in financial assistance to Greece.
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Energy Union: secure, sustainable, competitive, affordable energy for every European
On 25 February, the European Commission announced plans to complete the single energy market in Europe. Its strategy for this Energy Union aims to improve the EU’s energy security; ensure the free flow of energy across borders; boost energy efficiency and treat it as an energy source in its own right; and make energy more affordable for every EU citizen. The Energy Union also aims to speed the transition to a low-carbon economy by ensuring that locally produced energy – including from renewables – can be easily and efficiently absorbed into the grid, and by promoting EU technological leadership in renewable energy and electro-mobility. The strategy to achieve a resilient Energy Union is closely integrated with a forward-looking climate change policy.
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Flash estimate: February 2015 Euro area annual inflation up to
-0.3%
Euro area annual inflation is expected to be -0.3% in February 2015, up from -0.6% in January, according to a flash estimate from Eurostat, the statistical office of the EU. Looking at the main components of euro area inflation, the services sector is expected to have the highest annual rate in February (1.1%, compared with 1.0% in January), followed by food, alcohol & tobacco (0.5%, compared with -0.1% in January), non-energy industrial goods (-0.2%, compared with -0.1% in January) and energy (-7.9%, compared with -9.3% in January).
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Vice-President Katainen’s investment road show continues with stops in Croatia, the Czech Republic and Spain
European Commission Vice-President Jyrki Katainen, responsible for Jobs, Growth, Investment and Competitiveness, continued his road show to promote the EU’s EUR 315 billion investment plan, with stops in Zagreb, Croatia on 23 February, Prague in the Czech Republic on 24 February, and Madrid and Bilbao, Spain from 26-27 February. During the 28-country #investEU roadshow, Vice-President Katainen typically meets with senior government officials, parliamentarians, business leaders and social partners. He explains why the EU needs a new Investment Plan, where the money comes from and which kinds of investments will be supported. He also describes how private investors can participate in the new European Fund for Strategic Investments (EFSI) and introduces the project pipeline portal. While in Spain, Katainen received the news that the country will contribute EUR 1.5 billion to projects benefiting from EFSI finance via its National Promotional Bank, the Instituto de Crédito Oficial.
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Vice-President Katainen stars in Euronews programme "Real Economy"
Vice-President Katainen was the main guest on Euronews business magazine’s "Real Economy" programme on 24 February. The interview covered the full range of issues that impact Europe: growth, concerns regarding the Greek situation and its potential impact and the EU investment plan. Reflecting on Greece, Katainen said that the Greek authorities needed to boost citizens’ confidence by showing “the courage to do growth-friendly reforms”. He was very confident about the EU investment plan, explaining that the EU “can deliver very fast, so everything should be in place by the end of June, and we can start increasing SME lending already before that.” Each 12-minute episode of “Real Economy” deals with topical EU policy issues, including structural reforms, competitiveness or monetary policy, and every two weeks, a new episode premieres at 10.45 am CET and is repeated 12 times throughout the week. “Real Economy” can also be viewed online. The next episode is scheduled for 10 March to feature youth employment. DG ECFIN co-funds the programme together with other Commission services.
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Citizens’ Dialogue: Vice-President Katainen engages citizens and discusses EU Investment Plan in Bilbao, Spain
In the context of his investment plan roadshow in Spain, Vice-President Katainen on 26 February participated in his first Citizens’ Dialogue in Bilbao, together with the Spanish Secretary of State for European Affairs, Íñigo Méndez de Vigo, and the President of the Basque Government, Íñigo Urkullu. Citizens from a broad spectrum of society participated in the event. The discussion focused on the EU Investment Plan and the new opportunities that it would open up for the Basque region in particular. Vice-President Katainen put a strong emphasis on the need to invest in human capital and to pay attention to the quality of education and vocational training. He also highlighted the need to promote entrepreneurship and job creation, presenting the new European Fund for Strategic Investment (EFSI) as a way to unlock public and private investments and thus contribute to job creation. The event in Bilbao was part of a series of Citizens’ Dialogues that involve the whole European Commission and take place in all EU Member States.
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European Central Bank unveils new €20 banknote
The European Central Bank unveiled a new €20 banknote on 24 February. The new bank note will enter into circulation on 25 November 2015. It includes an innovative security feature in the form of a “portrait window” set in the hologram. When the banknote is held up against a light, the window becomes transparent and reveals a portrait of the mythological figure Europa, visible on both sides of the note. The new €20 banknote, like the new €5 and €10 notes, also includes an “emerald number” and a portrait of Europa in the watermark. The new €20 note is the third in the Europa series that is gradually replacing the original series of euro banknotes introduced in 2002. The Europa series €5 banknote was issued in May 2013, and the €10 note in September 2014. The €20 banknote will be followed, over time, by new versions of the €50, €100, €200 and €500 notes.
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The fiscal effects of work-related tax expenditures in Europe. European Economy. Economic Papers 545.
Work-related tax incentives can have a significant effect on how much, if at all, certain individuals decide to work. This paper examines the fiscal impacts and associated welfare costs of reforms to such tax relief measures in five European countries: France, Spain, the United Kingdom, Hungary and Slovakia. It finds that at least a quarter of the extra tax revenue raised by lowering work-related tax incentives tends to get lost, as individuals react by working less or withdrawing from the workforce altogether. The revenue gain is particularly limited following the removal of tax incentives targeting the very lowest earners, and may even lead to revenue losses in some cases. Reducing work-related tax relief measures also has significant negative welfare effects.
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European Semester 2015 - Macroeconomic imbalances and government deficits
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Directorate-General for Economic and Financial Affairs
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