European Union (EU) Economic Governance

The new EU economic governance rules and related monitoring operate within the framework of the European Semester.

The European Semester is the annual cycle of economic and budgetary policy guidance, which culminates in the adoption of Country Specific Recommendations (CSRs).

The CSRs are addressed to each Member State, at the Ecofin Council in July each year.

As part of the 2015 European Semester, CSRs were adopted on 8 July.

Ireland’s 2015 CSRs are available here.

The legislative instruments underpinning the European Semester regime are:

• the Stability and Growth Pact, which was substantially reinforced by the ‘six pack’ legislation
• the Macroeconomic Imbalances Procedure, which seeks to ensure that emerging macroeconomic imbalances are detected

The European Semester also serves to implement the Europe 2020 strategy.

The 2016 European Semester process was launched on 26 November 2015 with the publication of the [Annual Growth Survey ] and [Alert Mechanism Report, ] as well as the Commission’s proposals for a [recommendation] on the economic policy of the Euro Area.

A short description of the European Semester process and timeline is set out below.

The European Semester process is kick-started by the Commission’s publication of the Annual Growth Survey. This survey identifies economic priorities for Member States.

The priority areas identified in the 2016 Annual Growth Survey largely re-state those identified in 2015.

These priorities are:

• responsible fiscal policies
• re-launching investment and structural reform

On 26 November, the Commission also presented its proposals for Euro Area recommendations along with the Annual Growth Survey. The Euro Area recommendations will be endorsed by European Heads of State and Government at the European Council prior to adoption by the Ecofin Council.

Member States will submit their Stability Programme Update (outlining fiscal policies) and their National Reform Programme (outlining structural reforms) to the Commission in April.

These programmes are examined by the Commission which then presents its proposals for CSRs in May/June. These policy recommendations are discussed between Member States in the Council.

EU leaders endorse them in June before Finance Ministers adopt them in the Council in July.

The CSRs cover a wide range of policy areas and provide specific, tailored guidance to each recipient Member State. Each recipient Member State is guided on how to achieve sound public finances and on what structural reforms should be implemented to achieve smart sustainable growth.

The Macroeconomic Imbalance Procedure (MIP), operating within the framework of the European Semester, broadens the EU economic governance framework to include the surveillance of macroeconomic trends.

It aims to identify trends which could lead to ‘booms and busts’ and to help in deciding the appropriate policy reactions.

The MIP is initiated by the publication of the Alert Mechanism Report, along with the Annual Growth Survey, which identifies Member States at risk of experiencing macroeconomic imbalances.

The Country Report, published by the Commission on each Member State in February, will include the Commission’s findings under the ‘in depth review’ of Member States identified in the Alert Mechanism Report as at risk of experiencing imbalances.

Recommendations under the MIP are integrated into the CSRs adopted as part of the European semester process.