Overview of the procedure
The macroeconomic imbalance procedure (MIP) aims to identify, prevent and address the emergence of potentially harmful macroeconomic imbalances that could adversely affect economic stability in a particular EU country, the euro area, or the EU as a whole.
The MIP was introduced in 2011, after the financial crisis showed that macroeconomic imbalances - such as a large current account deficit or a real estate bubble - in one country can affect others.
Under the MIP, when a country is found to have an excessive imbalance, it is subject to enhanced monitoring known as the excessive imbalance procedure (EIP). In addition to the increased monitoring countries in the euro area can also face sanctions.
The annual MIP cycle
Macroeconomic imbalances are monitored as part of the EU’s annual cycle of economic monitoring and guidance (the European Semester).
The cycle begins around November with the European Commission's alert mechanism report (AMR), which analyses the economies of all EU countries. Countries whose situation requires deeper analysis are subject to an in-depth review (IDR), included in the annual country report, issued around February.
The in-depth review aims to identify any macroeconomic imbalances and assess their severity. A country may be found to have ‘no imbalances’, ‘imbalances’, ‘excessive imbalances’, or ‘excessive imbalances with corrective action’, which may trigger the excessive imbalance procedure.
Countries with imbalances or excessive imbalances may receive policy recommendations for reducing them in their country-specific recommendations. Depending on the nature and severity of their imbalances, their policy commitments will be monitored through specific monitoring, which involves dialogue with the national authorities and progress reports.