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European Commission Economic and Financial Affairs
E-NEWS - Issue 147
In this issue - 25 November 2016
 

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Press conference by Valdis Dombrovskis, Marianne Thyssen and Pierre Moscovici on the European Semester Autumn Package 2016 © European Union
European Semester Autumn Package: Working for a stronger and more inclusive economic recovery

The European Commission released its Autumn Package on 16 November, marking the start of the 2017 European Semester cycle of economic governance. The package sets the EU’s economic and social priorities for the year ahead, and confirms the need to move towards a more positive fiscal stance for the euro area. It calls on Member States to redouble their efforts along the principles of the “virtuous triangle” of boosting investment, pursuing structural reforms and ensuring responsible fiscal policies, and in doing so, to put the focus on social fairness and delivering more inclusive growth. The package includes the 2017 Annual Growth Survey; a Recommendation for a Council Recommendation on the economic policy of the euro area; a Communication “Towards a positive fiscal stance for the euro area”; the 2017 Alert Mechanism Report; the 2017 draft Joint Employment Report ; and the assessment of euro area Member States’ Draft Budgetary Plans for 2017. It will be discussed with the other EU institutions and stakeholders and once agreed its guidance should be reflected in the Member States’ policies, in particular in their national programmes to be presented next spring. The Commission intends to intensify the dialogue with the Member States to develop a common understanding of shared priorities and successful reform implementation and sequencing. Recently it presented its priorities for action at the EU level in its Work Programme for 2017, including the strengthening of the Investment Plan for Europe.  

See also : Setting the priorities
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Pierre Moscovici, the European Semester Autumn Package 2016 © European Union
Commission recommends positive fiscal stance for euro area

As part of the European Semester Autumn Package, and in order to complete the Economic and Monetary Union as outlined in Stage 1 of the follow-up to the Five Presidents' Report of June 2015, the Commission has recommended a positive fiscal stance for the euro area. In its Communication "Towards a positive fiscal stance for the euro area", the Commission recommends a fiscal expansion of up to 0.5% of GDP in 2017 for the euro area as a whole. Such an expansion would reduce the share of unused productive capacity in the euro area, while supporting monetary policy and avoiding unnecessary overheating of the economy. The findings are reflected in the fiscal aspects of the Recommendation for a Council Recommendation on the economic policy of the euro area that is also part of the autumn package. The fiscal expansion would be achieved by adopting a more collective approach that takes into account differences across countries: Member States which are over-achieving their fiscal objectives would use their fiscal space to support domestic demand and quality investments, including cross-border ones, as part of the Investment Plan for Europe, while Member States that need further fiscal adjustments under the preventive arm of the Stability and Growth Pact (SGP), would make sure to be broadly compliant with the requirements of the SGP, and those under its corrective arm would ensure a timely correction of excessive deficits, including by creating fiscal buffers.

See also : Setting the priorities
Pierre Moscovici, the European Semester Autumn Package 2016 © European Union
Commission completes assessment of euro area Member States' Draft Budgetary Plans for 2017

The Commission has completed its assessment of euro area Members States' Draft Budgetary Plans (DBPs) for 2017, taking into account its recent Autumn Economic Forecast and consultations with Member States. It adopted Opinions for 18 Member States (all but Greece) on 16 November. The assessment evaluates whether the euro area Member States’ DBPs comply with the provisions of the Stability and Growth Pact (SGP). In several cases, the Commission found that the planned fiscal adjustments fall short, or risk doing so, of what is required by the SGP. Five countries (Germany, Estonia, Luxembourg, Slovakia and the Netherlands), were found to be compliant with the requirements for 2017 under the SGP, four countries (Ireland, Latvia, Malta, Austria), were found to be broadly compliant, and six countries’ (Belgium, Italy, Cyprus, Lithuania, Slovenia, Finland), DBPs pose a risk of non-compliance. For the three countries currently in the corrective arm of the SGP, France’s DBP was found to be broadly compliant, Spain’s DBP was found to be at risk of non-compliance and Portugal’s DBP was found to be slightly at risk of non-compliance.

See also : Draft budgetary plans of euro area Member States
Image taken from the Investment Plan webpage © European Union
Investment Plan for Europe expected to trigger investments of EUR 154 billion

Just under two years since it was first announced by the Juncker Commission, the Investment Plan for Europe is expected to trigger investments of EUR 154 billion, almost half the originally earmarked EUR 315 billion. Operations approved under the European Fund for Strategic Investments (EFSI) now represent a total financing volume of EUR 27.5 billion and are located in 27 Member States. These figures were released on 17 November following a meeting of the European Investment Bank (EIB) Board of Directors, which approved 17 new projects to be financed under the EFSI. The EIB has now approved 151 infrastructure projects for financing under the EFSI, which represent a volume of financing of EUR 19.8 billion. The European Investment Fund (EIF) has approved 234 SME financing agreements, with total financing under the EFSI of EUR 7.7 billion. Close to 377,000 SMEs and Midcaps are expected to benefit. Recently concluded EIB deals include EUR 100 million to upgrade energy networks in Italy; EUR 105 million to help finance a gas-fired thermal power plant in Kiel, Germany; a EUR 150 million loan to support energy efficient building in Finland; a EUR 50 million guarantee to help finance medium-sized companies in Croatia; a EUR 75 million loan to support Spanish innovation projects and the first public-sector EFSI transaction in Poland: a PLN 238m (around EUR 57 million) loan to finance the renovation of a hospital, as well as EIF support of EUR 20 million for Portuguese SMEs and EUR 40 million for innovative companies in Luxembourg.

See also : Investment Plan
Bank column © iStockphoto
EU Banking Reform: Package to support lending capacity, financial stability and completion of Capital Markets Union

On 23 November, the Commission presented a comprehensive package of reforms to further strengthen the resilience of EU banks. The Commission proposals build on existing EU banking rules and aim to complete the post-crisis regulatory agenda, while ensuring that banks can continue to support the real economy. They include measures to increase the resilience of banks and enhance financial stability; improve banks’ lending capacity; and facilitate the role of banks in achieving deeper and more liquid EU capital markets to support the creation of a Capital Markets Union. The proposals also fine-tune some aspects of the new regulatory framework when necessary to make it more growth-friendly and proportionate to banks’ complexity, size and business profile. They include measures that will support SMEs and investment in infrastructure. The proposals are part of the Commission's on going work to reduce risk in the banking sector, as set out in the Communication "Towards the Completion of the Banking Union" of November 2015 and are also in line with the conclusions of the ECOFIN Council meeting held in June.

See also : CRR/CRD IV Review
EU Ministers of Finance preparing the negotiations with the EPon the 2017 EU budget  © European Union
EU budget deal focuses on strengthening the economy and responding to the refugee crisis

The EU institutions have reached an agreement on the 2017 EU budget. Under the agreement reached on 17 November, the EU will spend more money on making Europe more competitive and more secure, as proposed by the Commission earlier this year. Likewise, more money will go to providing support for the reception and integration of refugees and to addressing the root causes of migration in the countries of origin and transit. The 2017 EU budget is set at EUR 157.9 billion in commitments and EUR 134.5 billion in payment credits. Nearly half of the funds – EUR 74.9 billion in commitments – will stimulate growth, employment and competitiveness, while European farmers will receive support of EUR 42.6 billion and nearly EUR 6.0 billion will be used to reinforce external borders and to address the migration and refugee crisis. 

 

See also : Documents 2017
Inflation © iStockphoto
Annual inflation up to 0.5% in both the euro area and the EU

Euro area annual inflation was 0.5% in October 2016, up from 0.4% in September. In October 2015 the rate was 0.1%. EU annual inflation was 0.5% in October 2016, up from 0.4% in September. A year earlier the rate was 0.0%. These figures come from Eurostat, the EU statistical office. In October 2016, negative annual rates were observed in six Member States. The lowest annual rates were registered in Bulgaria and Cyprus (both -1.0%). The highest annual rates were recorded in Belgium (1.9%) and Austria (1.4%). Compared with September 2016, annual inflation fell in six Member States, remained stable in one and rose in twenty-one. The largest upward impacts to euro area annual inflation came from restaurants & cafés (+0.07 percentage points), rents and tobacco (both +0.04 pp), while gas (-0.12 pp), vegetables (-0.06 pp) and milk, cheese & eggs (-0.05 pp) had the biggest downward impacts.

See also : Annual inflation up to 0.5% in the euro area
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Viewpoint
Jean-Claude Juncker, President of the European Commission

"The 2017 European Semester we start today will be decisive for Europe to manage its economic and social turn-around. I believe we can do it.”

Jean-Claude Juncker, President of the European Commission
Publications
The Macroeconomic Imbalance Procedure. Rationale, Process, Application: A Compendium
The Macroeconomic Imbalance Procedure. Rationale, Process, Application: A Compendium
This Compendium takes stock of the implementation of the Macroeconomic Imbalance Procedure (MIP) five years after it was introduced during the economic and financial crisis in order to strengthen EU macroeconomic surveillance in areas not covered by the Stability and Growth Pact. The experience with the first five years of MIP application suggests that the procedure helped raise awareness of challenges faced by Member States and created a basis for consensus towards policy responses. The track record also suggests that MIP surveillance was associated with stronger progress with the implementat
Read more...
Ex Post Evaluation of the Economic Adjustment Programme. Portugal, 2011-2014. European Economy. Institutional Papers 40.
This report assesses Portugal’s 2011-2014 Economic adjustment programme in order to draw lessons for the future.
Read more...
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Graph of the Week
A positive fiscal stance for the euro area

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Selected Speeches
16 November 2016
Vice-President Dombrovskis. Press conference on the Autumn Economic Package. Speech 16/3734 of 16 November.
16 November 2016
Commissioner Pierre Moscovici. Press conference on the Autumn Economic Package. Speech (in French) 16/3733 of 16 November.
16 November 2016
Commissioner Marianne Thyssen. On the 2017 Joint Employment Report at the European Commission press conference on the Autumn Economic Package. Speech 16/3583 of 16 November.
15 November 2016
Vice-President Valdis Dombrovskis. At Bruegel - What next for Europe's banking system? Speech 16 / 3729 of 15 November.
14 November 2016
Commissioner Pierre Moscovici. Keynote speech - 2016 Summit on the future of Europe - Harvard University Speech 16/ 3712 of 14 November.
9 November 2016
President Jean-Claude Juncker. The ‘Europe Speech' at the Konrad Adenauer Foundation Speech 16/3654 of 9 November.
Classifieds
25 November 2016
Economic Workshop: Fiscal policy and public investment for relaunching potential growth
25 November 2016
Feedback. Corporate Tax Transparency
AGENDA
5-6 December
Brussels
Eurogroup/ECFOFIN meetings
8 December
Germany
ECB Governing Council meeting Frankfurt
12-15 December
Strasbourg
European Parliament Plenary
15-16 December
Brussels
European Council
1 January 2017
Brussels
Start of Malta Presidency of the Council of the European Union
16-19 January
Strasbourg
European Parliament Plenary
19 January
Germany
ECB Governing Council meeting Frankfurt
17-22 January 2017
Switzerland
World Economic Forum annual meeting, Davos-Klosters
23-24 January
Brussels
Eurogroup/ECOFIN
13-16 February
Strasbourg
European Parliament Plenary
date to be confirmed
Brussels
EU Economic forecasts, winter 2017
9-10 March
Brussels
European Council
13-16 March
Strasbourg
European Parliament Plenary
20-21 February
Brussels
Eurogroup/ECOFIN
9 March
Germany
ECB Governing Council meeting Frankfurt
20-21 March
Brussels
Eurogroup/ECOFIN
3-6 April
Strasbourg
European Parliament Plenary
21-23 April
Washington, D.C.
World Bank Group / IMF 2017 spring meetings
27 April
Germany
ECB Governing Council meeting Frankfurt
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