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European Commission - Economic and Financial Affairs European Commission - Economic and Financial Affairs
Annual growth survey – © Thinkstock Release of Annual Growth Survey kicks off new "European Semester"
- Conference marks launch of European Semester
- Estonia joins the euro – changeover smooth
- January brings new EU Presidency, new supervisory authorities
- European Council backs creation of euro-area stability mechanism
- Tributes paid to euro architect Tommaso Padoa-Schioppa
- Commission and IMF encourage Latvia on deficit reduction
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Annual growth survey – © Thinkstock Release of Annual Growth Survey kicks off new "European Semester"

The adoption by the European Commission on 12 January of its Annual Growth Survey (AGS) marks the beginning of the first cycle of coordination of EU Member States' macroeconomic, budgetary and structural-reform policies known as the "European Semester". The Semester is expected to represent a significant step forward for European economic governance. The AGS – which evaluates the economic situation and the main challenges the EU must address – finds that medium-term potential growth in Europe is projected to remain low, at around 1.5% up to 2020, if no structural action is taken. Given the urgency of the policy context, the Commission recommends 10 priority actions, as part of an integrated approach to recovery encompassing three main areas:  1) The need for rigorous fiscal consolidation to enhance macroeconomic stability; 2) Labour-market reforms for higher employment; 3) Growth-enhancing measures. But, the Commission argues, such a response will also have to include other elements – notably a review of the European Financial Stability Facility to reinforce its financing capacity and widen its scope.

Viewpoint
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A new phase of European integration begins with the Annual Growth Survey. We are setting out to break new ground and to decisively improve the way in which we manage and coordinate our interdependent economies in the European Union. This is the EU model. This is our economic governance in action.

José Manuel Barroso, President of the European Commission
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Conference on European semester – © European Union, 2011
Conference marks launch of European Semester

The EU’s first European Semester was introduced at the conference "Towards integrated economic governance in the EU: The European Semester" which took place on 12 January in Brussels. The main focus of the event was on reinforced economic surveillance, which under the European Semester will be based on three integrated strands: fiscal surveillance; macro-structural surveillance (growth bottlenecks and macro-imbalances); and thematic surveillance (towards Europe 2020 targets and flagships). Keynote addresses were delivered by European Commission President Barroso, Economic & Monetary Affairs Commissioner Rehn, and former Competition Commissioner Mario Monti, now President of Bocconi University, Italy.
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Estonians disguised as New Year's gift, representing the single currency, the euro - © European Union, 2011
Estonia joins the euro – changeover smooth

Estonia adopted the euro on 1 January 2011, becoming the 17th member of the euro area and taking the number of people sharing Europe’s single currency to over 330 million. Nearly a week into the changeover from the kroon, the European Commission reported that – thanks to careful preparations – the introduction of euro banknotes and coins was proceeding smoothly and according to plan. No major problems had been encountered and banks, post offices and retailers were generally coping well with the extra workload, although there had been some queues in banks and post offices during the first weekdays of the changeover. The kroon is being phased out during a transitional two-week dual circulation period in which both kroon and euro are legal tender. Prices must be displayed both in kroon and euro until 30 June 2011.
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Viktor Orbán, Hungarian Prime Minister, on the left, receiving the EU Council Presidency flag from Yves Leterme, acting Belgian Prime Minister - © European Union, 2011 G20 leaders in Seoul 2010 © G20 Seoul Summit - All rights reserved
January brings new EU Presidency, new supervisory authorities

Hungary took over the rotating EU Presidency from Belgium on 1 January 2011, with the economy expected to remain high on the EU agenda during Budapest’s six-month turn at the helm. Speaking after the 7 January joint session of the European Commission and the Hungarian Government, Prime Minister Viktor Orbán named a stronger euro and greater EU economic competitiveness among the top priorities. Commission President Barroso welcomed the new Presidency's commitment to fast-tracking the legislative proposals for reinforced economic governance tabled by the Commission in 2010. “We will support the Hungarian Presidency in steering the proposals safely to port by summer”, he said. Meanwhile, also on 1 January, three new European financial supervisory authorities started work – the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA). This follows the launch on 16 December of the European Systemic Risk Board.
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Mr Viktor ORBAN, Hungarian Prime MinisterMs Catherine ASHTON, High Representative for Foreign Affairs and Security PolicyMr Yves LETERME, Belgian Prime MinisterMr Herman VAN ROMPUY, President of the European Council Mr Jerzy BUZEK, President of the European Parliament - © Council of the EU – photo Mario Salerno
European Council backs creation of euro-area stability mechanism

A permanent mechanism to safeguard the financial stability of the euro-zone – the European Stability Mechanism (ESM) – could become operational from June 2013 after EU leaders endorsed its creation at their summit on 16-17 December. Heads of State or Government agreed on the general features of the mechanism and on a draft decision to introduce the limited Treaty amendment required to establish it. The envisaged amendment will have formally to be approved by all EU Member States in accordance with their respective constitutional requirements. The ESM would be activated by mutual agreement of the euro-area countries in cases where the stability of the euro area as a whole was at risk, with any financial assistance subject to strict conditions.
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Tommaso Padoa-Schioppa - © EP
Tributes paid to euro architect Tommaso Padoa-Schioppa

The European Commission and DG ECFIN have paid tribute to Tommaso Padoa-Schioppa, one of the founding fathers of the euro and a former Director General of DG ECFIN, who died in December aged 70. The Italian economist played a key role in the launch of the Exchange Rate Mechanism at the end of the 1970s and, in 1988, was rapporteur for the Delors committee on the European single currency. After contributing decisively to the vision, design and launch of the euro, Padoa-Schioppa was a central figure in running Economic and Monetary Union as a member of the Board of the European Central Bank. More recently, he supported the strengthening of economic governance as a response to the financial and economic crisis. Padoa-Schioppa was Director General of DGII (the forerunner of DG ECFIN) between 1979 and 1983. DG ECFIN announced that it would launch an annual lecture in his honour.
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IMF/EC joint statement on Latvia – © Thinkstock
Commission and IMF encourage Latvia on deficit reduction

Latvia is being encouraged to step up its deficit-reduction efforts after the Baltic state adopted on 20 December a budget for 2011 targeting fiscal consolidation measures worth LVL 280 million (roughly €400 million). A joint European Commission (EC)/International Monetary Fund (IMF) visit to Riga during 7-14 December concluded that some of the measures were not sufficiently high-quality. The Latvian authorities are therefore being asked to approve a supplementary budget in early 2011 with additional high-quality structural measures and fiscal consolidation to the tune of LVL 50 million (roughly €70 million). The next EC/IMF performance review mission to the country – assessing fulfilment of policy commitments under a multilateral financial assistance programme for Latvia worth €7.5 billion – is expected to take place in the first quarter of the year.
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Publications
Practical preparations for the euro © Liane M - Fotolia.com

Quarterly report on the euro area, December 2010
As part of the effort to broaden macroeconomic surveillance, the report from DG ECFIN argues that supervisory and regulatory reforms can help avoid harmful future credit and asset price booms in the euro area by keeping banks' leverage in check and by establishing more stringent lending standards. Reflecting the prominence in recent months of financial market issues, the report also looks at a number of related topics including the impact of the financial crisis on cross-border mergers-and-acquisitions activity in the banking sector.
The Economic Adjustment Programme for Greece – Second review – autumn 2010
The Stability and Growth Pact: Lessons from the Great Recession, Economic Paper 429
China’s External Surplus: Simulations with a Global Macroeconomic Model, Economic Paper 430
The portfolio balance effect and reserve diversification: an empirical analysis, Economic Paper 431
Rules and risk in the euro area: does rules-based national fiscal governance contain sovereign bond spreads? Economic Paper 433
The forecasting horizon of inflationary expectations and perceptions in the EU – Is it really 12 months? Economic Paper 435
European Commission/Economic Policy Committee Joint Report on Health Systems, Occasional Paper 74
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Agenda Calls
17-18 January
Brussels, Belgium
Eurogroup/ECOFIN meetings
25 January
Brussels, Belgium
Ready to grow? Shaping future EU support for business – Conference on the future of the Competitiveness and Innovation Framework Programme
26-30 January
Davos-Klosters, Switzerland
World Economic Forum annual meeting
18 May
Brussels, Belgium
BEF 2011 – The Brussels Economic Forum 2011
Public consultation on a possible successor to the Competitiveness and Innovation Framework Programme (CIP): Specific Questionnaire on Financial Instruments for SMEs (closing date 4 February 2011)
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Directorate-General for Economic and Financial Affairs