The Commission announced on 4 April that it would publish a reflection paper on completing Europe’s Economic and Monetary Union (EMU) and one on the social dimension of Europe. The reflection paper on completing EMU is scheduled for publication on 31 May. It should sum up the different options and clearly indicate their consequences with an eye to completing EMU by 2025. The Five Presidents’ Report drew lessons from the past and outlined the building blocks for completing EMU: building on economic, financial, fiscal, and democratically accountable political unions. During phase one of the Report, the European Fiscal Board was established; a recommendation was made to Member States on National Productivity Boards; a proposal was made on the European Deposit Insurance Scheme; and work on the Single Resolution Fund continued. During phase two, the EU will focus on completing the financial union and re-launching the euro area convergence process. The two reflection papers are closely linked: digitalisation and robotisation; demographic trends; and mobility and migration mean that inequality and social fragmentation need to be addressed by economic policy.

"We cannot have a strong EU without a resilient Economic and Monetary Union - and vice versa.”

European Commission staff, in liaison with staff from the European Central Bank, visited Cyprus from 27 to 31 March to conduct the second post-programme surveillance mission. Cyprus is currently benefiting from robust growth and improving conditions in the financial sector. Growth is becoming more broad-based, driven by private consumption, investment and strong tourism. Real GDP growth is expected to be close to 2.5% in 2017, an increase over 2016, and is expected to remain strong in 2017, while moderating thereafter. Fiscal consolidation has helped facilitate capital market access by the Cypriot government. Moreover, important structural reforms adopted in recent years have allowed Cyprus to turn the corner, with growth returning and the labour market situation improving. To sustain growth in the future, however, continued fiscal discipline and a renewed structural reform momentum are crucial.

At their meeting on 7 April, euro area finance ministers adopted a statement setting out common principles to guide national policies for promoting investment. The principles concern improvement of the business environment, increasing the efficiency of public administration, using high-quality public investment to boost actual and potential growth, developing market-based sources of business financing and removing regulatory barriers to private investment. Ministers also agreed that reforms to support investment should be complemented by policies aimed at improving the quality and governance of public institutions. Finance ministers were also briefed on developments in the intense talks between the European Commission, the European Central Bank, the International Monetary Fund and the European Stability Mechanism and the Greek government over the past month. The institutions and the Greek authorities have reached an agreement on the policy reforms required to move ahead with the second review of the current macroeconomic adjustment programme, which is a prerequisite for unlocking further financial assistance to Greece.

The European Investment Bank (EIB) announced on 6 April that the Investment Plan for Europe is now expected to trigger more than EUR 183 billion in investments across all 28 Member States. This comes less than two years after the Juncker Commission launched the European Fund for Strategic Investments (EFSI), which lies at the heart of the Plan, and represents well over half of the EUR 315 billion target of total investments mobilised that was originally earmarked. The operations approved under the EFSI represent a total financing volume of just under EUR 34 billion, including 206 EIB-approved infrastructure projects worth over EUR 25 billion, and 271 SME financing agreements approved by the European Investment Fund (EIF) that are worth almost EUR 9 billion. Over 425,000 SMEs and Midcaps are expected to benefit from these agreements. In other news, the EIF and microlux, a microfinance institution, have signed the first agreement to support microbusinesses in Luxembourg under the EU Programme for Employment and Social Innovation (EaSI). The EIF is providing a guarantee that will enable microlux to provide EUR 5 million in loans to around 400 microbusinesses over the next three years.

The euro area seasonally-adjusted unemployment rate was 9.5% in February 2017, down from 9.6% in January 2017 and from 10.3% in February 2016. This remains the lowest rate recorded in the euro area since May 2009. The EU unemployment rate was 8.0% in February 2017, down from 8.1% in January 2017 and from 8.9% in February 2016. This remains the lowest rate recorded in the EU since January 2009. These figures were published on 3 April by Eurostat, the statistical office of the EU. Compared with February 2016, unemployment fell by 1.85 million in the EU and by 1.25 million in the euro area. Among Member States, the lowest unemployment rates in February 2017 were recorded in the Czech Republic (3.4%), Germany (3.9%) and Malta (4.1%). The highest unemployment rates were observed in Greece (23.1% in December 2016) and Spain (18.0%). Compared with a year ago, the unemployment rate in February 2017 fell in 26 Member States, while it increased in Denmark (from 6.0% to 6.4%) and Lithuania (from 8.0% to 8.3%). The largest decreases were registered in Croatia (from 14.4% to 11.6%), Spain (from 20.5% to 18.0%), Portugal (from 12.2% to 10.0%) and Ireland (from 8.4% to 6.6%).

Euro area annual inflation is expected to be 1.5% in March 2017, down from 2.0% in February 2017, according to a flash estimate from Eurostat, the statistical office of the EU. Looking at the main components of euro area inflation, energy is expected to have the highest annual rate in March (7.3%, compared with 9.3% in February), followed by food, alcohol & tobacco (1.8%, compared with 2.5% in February), services (1.0%, compared with 1.3% in February) and non-energy industrial goods (0.2%, stable compared with February). 

The Brussels Economic Forum 2017 will take place on 1 June at Flagey. This annual flagship economic event of the European Commission attracts 1,000 participants every year, including media representatives, and provides a major networking opportunity. It is the place to take stock of economic developments, identify key challenges and debate policy priorities. Now in its 17th edition, this year’s forum is entitled “The EU Economy at a crossroads: Pathways to enhanced cohesion, integration and prosperity”. The event will focus on how to fight inequality in a context of modest growth; the future of the EU economy at 27; and on addressing the question of whether migration is a challenge or an opportunity for the EU economy and society. The opening lecture will be given by François Villeroy de Galhau (Governor, Banque De France) and the keynote speech will be given by George Soros of the Open Society Foundations. Registration is now open.

The latest episode of Real Economy looks at how workers may need to adapt as robots take over more of the work currently performed by human beings. Experts believe that the latest cyber-physical systems and the “Internet of things” demonstrate how we are now in the fourth phase of the Industrial Revolution, and thus need to figure out how to progress. In Germany, the government is looking to the future with a programme called Work 4.0. The new “social compromise” aims to provide more work-life balance for staff and better working conditions, while embracing technology and its advantages. At Audi’s sprawling car factory in Ingolstadt, around 600,000 new cars are made every year by 1,000 different robots, but the company says it will still need all of its 44,000 on-site staff. While this is reassuring, the stark reality is that some 9% of developed world jobs are at a high risk of becoming automated, according to the Organisation for Economic Co-operation and Development. Marianne Thyssen, European Commissioner for Employment, Social Affairs, Skills and Labour Mobility, says that workers must have good working conditions in this new digital era and that we must ensure that everybody is in a social security system. The Commission is now preparing the final launch of this pillar of social rights, according to Thyssen.

How Non-Performing Loans hurt the economy, 5 April