European Union: Annual Growth Survey Adopted

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(Dec 04, 2012)

On November 28, 2012, the European Commission adopted the Annual Growth Survey (AGS), which serves to provide guidance to the European Union (EU) Member States to ensure that their budgetary and economic policies are in line with the Stability and Growth Pact. The Pact is designed to assist countries in the euro zone through the coordination of their fiscal policies and to ensure that the national deficit does not exceed 3% of the Gross domestic product, in conformity with the broad European 2020 Strategy. (Communication from the European Commission: Annual Growth Survey 2013 (Nov. 28, 2012), COM(2012) 750 (final), European Commission website.)

Taking into account that there are signs in Europe that the EU Member States are emerging from the deepest level of the economic recession, the AGS establishes five priorities: (a) pursuing growth-friendly fiscal consolidation; (b) restoring normal lending to the economy; (c) promoting growth and competitiveness for the present and future; (d) tackling unemployment and the social consequences of the economic crisis; and (e) modernizing public administration. (Id. at 2.)

In order to achieve the first objective, the Commission made the following recommendations:

  • modernize the social security system, in particular by reforming pension systems to align retirement age with life expectancy and limiting access to early retirement schemes;
  • invest in education, energy, research, and innovation and ensure training for the unemployed;
  • reduce the tax burden on labor, because it inhibits job creation, in countries where personal income taxes have been increased, and focus more on increasing consumption tax, recurrent property tax, and environmental taxes;
  • to increase revenue, broaden the tax base rather than increasing tax rates;
  • reform real estate and housing taxation to prevent the recurrence of financial risks in the housing sector; and
  • review the possibility of eliminating tax relief for mortgages. (Id. at 5.)

In connection with the second objective, to improve normal lending in the economy, because the crisis had a big impact on private and public actors, the Commission is making efforts to assess the risks in the banking sector and to recapitalize the banks. The Commission has also proposed the formation of a banking union, with a "Single Supervisory Mechanism," under the authority of the European Central Bank. (Id. at 6.)

In order to meet the objective of promoting growth and competitiveness, the Commission emphasized that while there is no "one size-fits-all-agenda," the EU Members should follow common goals and objectives. Some of the common objectives are to:

· strengthen and improve the green economy;

· improve the business environment by reducing red tape;

· strengthen innovation and new technologies; and

· improve competition in the retail sector. (Id. at 8-9.)

As for dealing with unemployment and the social consequences of the crisis, the Commission noted that during the previous year, unemployment had increased by two million people, to reach about 25 million. (Id. at 9.) Countries in the euro zone are experiencing higher unemployment rates than European countries outside the euro zone, the Commission pointed out. In order to improve the labor market and assist companies in hiring people, the Commission made the following recommendations to Member states:

· simplify employment legislation and develop flexible working conditions, including short-time working schemes;

· review and monitor unemployment eligibility requirements;

· establish and implement "youth guarantee" schemes, under which young adults below the age of 25 are provided with job opportunities, continued education, and an apprenticeship or a traineeship within four months of leaving formal education or becoming unemployed; and

· improve access to life-long learning, including for older workers. (Id. at 11.)

In regard to modernizing the public sector, the Commission noted that the financial crisis requires fresh ideas on cutting down public expenditures. The public sector represents about 17% of total employment and public expenditures account for almost 50% of Gross Domestic Product. (Id. at 12.) The Commission also noted that several EU Members that are undergoing dire economic crises have already taken measures to reorganize the public sector and improve its efficiency. The Commission advanced the following recommendations:

· institute "full and correct" transposition and implementation of EU law;

· improve the efficiency of the tax system and ensure effective implementation of tax collection and sound management of health care systems;

· simplify the business regulatory framework and reduce the burden on businesses;

· ensure government-wide digitalization of services and interoperability of such services; and

· improve the quality of the judicial systems by ensuring quick and effective settlement of claims and espousing alternate dispute settlement mechanisms. (Id. at 12-13.)

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Last updated: 12/04/2012