The European Commission has today adopted recommendations to EU Member States designed to move Europe beyond the crisis and strengthen the foundations for growth. These recommendations are based on detailed analyses of each country's situation and provide guidance to governments on how to boost their growth potential, increase competitiveness and create jobs in 2013-2014.
Taken together, they represent an ambitious set of reforms for the EU economy. As part of today's package, which marks the culmination of the third European Semester of policy coordination, the Commission has also adopted several decisions under the Excessive Deficit Procedure.
President Barroso said: "Now is the time to step up the fundamental economic reforms that will deliver growth and jobs, which our citizens, especially our young people, anxiously expect. This is the only way to address the two lasting legacies of this crisis – the serious loss of competitiveness in many of our Member States, and persistent unemployment, with all its social consequences. The recommendations issued by the Commission today are part of our comprehensive strategy to move Europe beyond the crisis. They are concrete, realistic, and adapted to the situation of each of our Member States."
A number of key messages have emerged from this round of country-specific recommendations (CSRs). The Commission's analysis shows that rebalancing is underway in the EU. Most Member States are making progress on fiscal consolidation and are implementing reforms to increase competitiveness. However, the pace and impact of these efforts varies. Some Member States need to accelerate reforms or to implement them with greater urgency.
A major challenge is to tackle rising unemployment, especially youth unemployment, by increasing the use of active labour market policies or by reforming education and training systems to make sure jobseekers are equipped with the right skills for the jobs we have. More can also be done to create the conditions for businesses to invest and create jobs, including by improving competition in product and service markets and promoting investment in research, innovation and resource efficiency. Moreover, fiscal consolidation should continue, albeit at a different pace, while remaining pockets of vulnerability in the banking sector need to be addressed.
What are the challenges still facing Member States?
In the current circumstances, the most pressing reforms are structural. These are the kinds of fundamental economic reforms – to pension and tax systems, labour law, or product and service markets – that change the way our economies function, grow and create jobs.
Member States with high levels of unemployment need to step up active labour market measures, such as training for the unemployed and individualised job-search advice. Youth unemployment, which tops 23% in the EU, is particularly worrying and action is recommended along the lines of the agreed EU Youth Guarantee (in 17 Member States). Labour costs play an important role and must be kept in line with productivity growth (in 7 Member States). Women and disadvantaged groups should be assisted and encouraged to stay in or return to the labour market (in all 23 Member States).
Member States need to do more to create the conditions for businesses to invest and create jobs. The lack of the right skills, products and services poses a serious threat to Europe's future growth. Rapid, remedial action is needed to: improve competition in network industries such as transport, energy and broadband (in 16 Member States); remove restrictions in service markets (in 16 Member States); promote investment in education and skills (22 Member States) and research and innovation (9 Member States); and measures need to be taken to improve resource efficiency (11 Member States). Increased competitiveness will also allow the EU to tap trade opportunities abroad.
Will the CSRs help to boost growth?
Implementation of the recommendations will bring tangible benefits for Member States. In the short term, putting public finances in order will help to reduce borrowing costs, which frees up extra spending for growth-boosting policies, such as innovation, education and infrastructure.
How do the CSRs tackle the problem of high unemployment?
Unemployment rates differ greatly across Member States, with youth unemployment in Spain and Greece rising well above 50% (compared to an EU average of 23.4%), while overall unemployment in Austria remains the lowest in the EU at 4.7% (compared to the EU average of 10.9%).
Major reforms to improve the resilience of the labour market have been introduced in several Member States, but it will take time before Europe will feel the effects of these reforms. More focus needs to be put on encouraging women, older workers and other disadvantaged groups to take up work. This can be done by making sure tax and benefit systems provide the right incentives to return to and stay in work, and by providing quality and affordable childcare and education.
In the short term, the capacity of public employment services to cope with the rising number of unemployed people is being heavily tested. More effective job-search assistance and training opportunities are needed in several countries, particularly for young people, and education systems should be overhauled to reduce early school leaving and ensure students get the skills they need to succeed in today's jobs market.
The Commission has made recommendations to 17 Member States on youth unemployment, emphasising the importance of putting in place a Youth Guarantee along the lines of the Council Recommendation adopted formally in April 2013. This will address the increasing problem of youth unemployment and inactivity, giving every young person an opportunity to contribute to the economy. This improves future productivity, growth and competitiveness and strongly contributes to the Europe 2020 Strategy.
The EU's €6 billion Youth Employment Initiative under the future seven-year budget can play a key role in supporting the implementation of the Youth Guarantee, as can the European Social Fund.