That is why the Commission maintains its balanced strategy for growth and jobs, and its focus on five main priorities over the coming year:
- Pursuing differentiated, growth-friendly fiscal consolidation
- Restoring bank lending to the economy
- Promoting growth and competitiveness for today and tomorrow
- Tackling unemployment and the social consequences of the crisis
- Modernising public administration
President Barroso said: “This is a turning point for the EU economy. The EU's hard work is starting to pay off and growth is slowly coming back. The 2014 Annual Growth Survey points out where we need to be bolder to tackle reforms that are needed to build a lasting and job-rich recovery.”
The AGS shows how Member States are adjusting to the recently reinforced economic policy-coordination process under the European Semester, and are working better together according to common rules.
Budgetary coordination in the euro area has reached an unprecedented level this year: for the first time, the Commission will assess euro area draft budgetary plans for 2014 before the budgets are adopted by national parliaments, and will present an overview of the fiscal stance in the euro area as a whole. The results of this assessment will be published on 15 November.
Annual Growth Survey: A progress report
Member States have made progress on each of the five priorities identified by the Commission in 2013. The same priorities are proposed for 2014, although with different areas highlighted for attention to reflect the changing EU and international economic environment:
Fiscal consolidation: Substantial progress has been made and the average budget deficit in the EU has been reduced by around half since a peak of almost 7% of GDP in 2009. However, debt levels are still high and set to peak at almost 90% of GDP in 2014 before starting to decline. Early action has created room for Member States to slow the pace of consolidation and to focus more on improving the quality of public expenditure and modernising public administration at all levels. Countries with more fiscal room for manoeuvre should stimulate private investment and consumption while long-term investment in education, research and innovation, energy and climate protection should be protected from budget cuts. Taxes should be shifted from labour to consumption, property or pollution.
Restoring lending: Some progress has been made to repair the financial sector and market tensions have eased considerably since mid-2012. The EU’s efforts to build a Banking Union will strengthen banks’ ability to manage risks in the future. However, more needs to be done in the short-term to reduce high private debt (for instance, by introducing or improving corporate and personal insolvency regimes), prepare banks for new capital requirements and stress tests and ease companies’ access to finance.
Growth and competitiveness: A significant rebalancing is taking place across Europe as a result of the crisis, with a shift towards more export-led growth. However, progress is insufficient when it comes to opening up product and services markets to competition, particularly when it comes to the energy market and regulated professions. Research systems also need to be modernised.
Unemployment and social developments: Progress has been made by Member States to modernise their labour markets and over time this should help to integrate more people into the workforce. The focus should now be on stepping up active support and training for the unemployed – including by improving public employment services and introducing Youth Guarantees – as well as modernising education systems. Member States should also monitor wages so that they support both competitiveness and domestic demand, and should ensure that social protection systems reach the most vulnerable.
Public administration: Several Member States are looking to make their public sectors more efficient, including by improving cooperation between different layers of government. The focus should be on shifting public services online and reducing red tape.
The AGS also makes recommendations on how to deepen the European Semester. National ownership of EU level country specific recommendations needs to be strengthened so Member States should involve national parliaments, social partners and citizens more in the process to ensure key reforms are understood and accepted. Euro area Member States should devote more time to coordinating major reforms - particularly in labour and product markets - before they are adopted at national level. And Member States need to better implement the country-specific recommendations they receive each spring. The Commission will provide input on these issues for the European Council in December.