European Commission
Europe 2020

The European Semester

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 ensure 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

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 Preventive Arm calls for Member States to submit an annual Stability (for euro area countries) or Convergence (for other Member States) Programme, which is submitted along with the National Reform Programme. This programme sets out how the Member State intends to achieve and maintain sound public finances in the medium term. The Commission can then offer policy recommendations (in June, as part of the European Semester), or, if necessary, make a proposal to the Council to issue an early warning of an excessive deficit
• The Corrective Arm governs the Excessive Deficit Procedure (EDP). Under the EDP, if a Member State breaches the 3% budget deficit as described in the Treaty, the Council will issue recommendations on how to address this problem. Non-compliance with these recommendations may lead to sanctions for euro area Member States.

The SGP is currently being reinforced with a range of proposed changes designed to:

• Allow the corrective arm of the SGP to take greater account of the interplay between debt and deficit, specifically in high debt countries (where public debt exceeds 60% of GDP)
• Speed up the EDP and make the imposition of sanctions on Member States semi-automatic, by requiring a qualified majority in the Council to reject a sanctions proposal from the Commission, rather than to approve it
• Improve national budgetary frameworks, addressing accounting and statistical issues as well as forecasting practices

Addressing macro-economic imbalances

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.

Repairing the financial sector

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 will be carried out, including more systematic and rigorous bank stress tests. A healthy financial sector is essential to allow businesses and households access to credit.

Top