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The crisis exposed fundamental problems and unsustainable trends in many European countries. It also made clear just how interdependent the EU's economies are. Greater economic policy coordination across the EU will help us to address these problems and boost growth and job creation in future.
Emerging stronger from the crisis: the European vision
More united than ever: how the EU has found solutions to tackle the financial crisis, how it is reinforcing its economic and monetary union and how this is paving the way towards a strong political union.
The new EU economic governance is based on three main blocks:
The following focuses on some key aspects of this new EU economic governance.
The European semester is a six-month period each year when Member States' budgetary, macro-economic and structural policies are coordinated effectively so as to allow Member States to take EU considerations into account at an early stage of their national budgetary processes and in other aspects of economic policymaking.
The key stages in the European semester are as follows:
In January, the Commission issues its Annual Growth Survey, which sets out EU priorities for the coming year to boost growth and job creation.
In March, EU Heads of State and Government issue EU guidance for national policies on the basis of the Annual Growth Survey.
In April, Member States submit their plans for sound public finances (Stability or Convergence Programmes) and reforms and measures to make progress towards smart, sustainable and inclusive growth (National Reform Programmes).
In June, the Commission assesses these programmes and provides country-specific recommendations as appropriate. The Council discusses and the European Council endorses the recommendations.
Finally, end of June or in early July, the Council formally adopts the country-specific recommendations.
The Stability and Growth Pact (SGP) is a set of rules that encourages Member States to maintain sound public finances.
The SGP has two 'arms':
The SGP is currently being reinforced with a range of proposed changes designed to:
Over the past decade, Member States have experienced divergent economic trends, which have , exacerbated competitiveness gaps and led to macro-economic imbalances within the EU. To avoid this happening in the future, the Commission has proposed a new surveillance mechanism to identify and correct such issues much earlier. Through this mechanism, Member States' economies will be monitored for emerging macroeconomic imbalances (e.g. property bubbles, growing current account deficits or surpluses or falls in competitiveness). Where Member States breach the "alert thresholds", the Commission will carry out in-depth studies to analyse whether the imbalances are harmful and if necessary it will issue recommendations.
A complementary agenda with additional reforms – called the Euro Plus Pact – has been agreed among euro area Member States, as a reflection of their deeper interdependence, as well as six non euro area countries that have chosen to sign up: Bulgaria, Denmark, Latvia, Lithuania, Poland and Romania. It focuses on four areas: competitiveness, employment, sustainability of public finances and reinforcing financial stability.
The Pact was endorsed by EU leaders in March 2011. All 23 signatories are committed to implementing the reforms in details. The remaining four Member States are free to sign up if they wish. It is fully embedded in the new economic governance framework and the commitments taken therein are included in the National Reform Programmes of the concerned Member States.
The EU has established new rules and agencies to prevent any problems earlier and make sure all financial players are properly regulated and supervised. Further work is underway, in particular to ensure Europe's banks have sufficient capital reserves to enable them to withstand any future shocks to the financial system, so that they can continue functioning and providing credit to households and businesses.