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MOTION FOR A EUROPEAN PARLIAMENT RESOLUTION

P9_TA(2024)0156

on the European Semester for economic policy coordination 2024

(2023/2063(INI))

Committee on Economic and Monetary Affairs

PE757.014

European Parliament resolution of 13 March 2024 on the European Semester for economic policy coordination 2024 (2023/2063(INI))

– having regard to the Treaty on the Functioning of the European Union (TFEU), in particular Articles 121(2) and 136 thereof,

– having regard to the Commission communication of 21 November 2023 entitled ‘Annual Sustainable Growth Survey 2024’ (COM(2023)0901),

– having regard to the Commission communication of 21 November 20222023 entitled ‘Alert Mechanism Report 2024’ (COM(2023)0902) and to the Commission recommendation of 21 November 20222023 for a Council recommendation on the economic policy of the euro area (COM(2023)0903),

– having regard to the proposal for a joint employment report from the Commission and the Council of 21 November 20222023 (COM(2023)0904),

– having regard to the Commission’s Autumn 2023 Economic Forecast of 15 November 2023,

A. whereas the European Semester plays an essential role in coordinating economic, budgetary, structural, social and employment policies in the Member States, thereby safeguarding the macroeconomic stability of the Economic and Monetary Union;

B. whereas according to the Commission’s winter 2024 forecast, economic activity in 2023 is estimated to have expanded by only 0.50,5 % in both the EU and the euro area in the face of high inflation and tighter financing conditions, after a strong recovery in 2022; whereas expected GDP growth has been revised down to 0.90,9 % (from 1.31,3 %) in the EU and 0.80,8 % (from 1.21,2 %) in the euro area for 2024; whereas in 2025, economic activity is still expected to expand by 1.71,7 % in the EU and 1.51,5 % in the euro area;

C. whereas the EU labour market continued to perform strongly in the first half of 2023, despite the slowdown in economic growth; whereas according to the Commission’s autumn 2023 forecast, however, labour shortages continued to be acute across many sectors and occupations, in particular in fields related to the scale-up and implementation of net-zero and low-emission technologies; whereas unemployment hit a historic low in the EU as a whole, with variation across Member States; whereas youth unemployment reached 14.714,7 % in the EU and 14.414,4 % in the euro area in December 2023, according to Eurostat;

D. whereas inflation is projected to fall from 6.36,3 % in 2023 to 3.03,0 % in 2024 and 2.52,5 % in 2025 in the EU and from 5.45,4 % in 2023 to 2.72,7 % in 2024 and 2.22,2 % in 2025 in the euro area, according to the Commission’s winter 2024 forecast; whereas fiscal policy needs to support monetary policy in reducing inflation and safeguarding fiscal sustainability, while providing sufficient space for additional investments and supporting long-term growth;

E. whereas inflation affects income groups disparately and low-income groups suffer disproportionately; whereas inflation could create a genuine cost-of-living crisis for certain population segments, posing challenges to social cohesion;

F. whereas the debt-to-GDP ratio is expected to decrease to 83.183,1 % in the EU in 2023 (90.4(90,4 % in the euro area); whereas the debt-to-GDP ratio is expected to marginally decline in the EU to around 82.782,7 % in 2024 and 82.582,5 % in 2025; whereas the euro area debt-to GDP ratio is expected to decrease to around 89.789,7 % in 2024 and 89.589,5 % in 2025; whereas there is a high variation in the debt levels of different Member States; whereas high debt-to-GDP ratios combined with high interest rates and an uncertain macroeconomic situation may jeopardise long-term debt sustainability and economic stability;

G. whereas according to the Commission’s autumn 2023 forecast, the general government deficit in the EU and the euro area is expected to decline to 3.23,2 % of GDP in 2023 and to further decrease to 2.82,8 % of GDP in 2024 and 2.72,7 % in 2025; whereas the general escape clause of the Stability and Growth Pact was deactivated at the end of 2023; whereas the Commission has announced that it will submit a proposal to the Council on initiating the deficit-based excessive deficit procedure in spring 2024 on the basis of the out-turn data for 2023, in line with existing legal provisions;

H. whereas in 2023 and 2024, the aggregate fiscal stance is expected to turn contractionary, by 0.50,5 % of GDP in both years, primarily due to the near complete phase out of crisis-related energy measures;

I. whereas a swift, decisive and coordinated policy response allowed the EU economy to rebound and tackle the socioeconomic consequences of the COVID-19 pandemic and Russia’s war of aggression against Ukraine, and to navigate through the resulting energy crisis; whereas the economy slowed down in 2023; whereas the outlook remains characterised by high uncertainty and risks related to the evolution of Russia’s ongoing war of aggression against Ukraine and the conflict in the Middle East;

18. Instructs its President to forward this resolution to the Council and the Commission.

EXPLANATORY STATEMENT

The European Semester is a yearly exercise to coordinate the member state’s economic and budgetary policies and has a wide impact on social policies. The own-initiative report on the European Semester for economic policy coordination in 2024 expresses concerns about weak economic growth, highlights the impact of energy prices and inflation on purchasing power, and acknowledges the EU’s role in stabilizing the economy during crises. The rapporteur emphasizes the need for coordinated fiscal, structural, and regulatory policies, as well as public and private investments. The employment and social aspects in the 2024 Annual Sustainable Growth Survey are especially important given the context of uncertainty marked by rising inflation and cost of living due to the ongoing Russian invasion of Ukraine, as well as the ongoing social and economic consequences caused by the Covid-19 pandemic and the situation in the Middle East.

In the report, concerns about weak growth rates in the EU due to the continuous impact of energy prices and inflation on household purchasing power and the performance of EU companies are expressed. The ECB’s efforts to address inflation is acknowledged but suggests that rising interest rates alone are insufficient; coordinated fiscal, structural, and regulatory policies are needed to be able to counteract the crisis-ridden environment. The text underscores that insufficient public and private investments in certain Member States impede sustainable growth, emphasizing the critical role of these investments in enhancing EU resilience, robustness, and competitiveness amid challenges.

Furthermore, the rapporteur discusses issues related to the European Semester, Recovery and Resilience Facility (RRF), and proposes reforms to the EU economic governance framework, including the need for simplification, enforceability, and support for green and digital transitions. While acknowledging lessons from the Recovery and Resilience Facility (RRF), the rapporteur regrets the lack of similar incentive mechanisms in the proposed economic governance framework reform. Concerns are raised about the financial capacity of some Member States to fund necessary green and digital transitions independently. Further concerns arise concerning the social dimension’s decline due to self-limitation of Country-Specific Recommendations (CSRs) and, resulting from this, a diminishing number of recommendations based on the Social Scoreboard. The rapporteur advocates focused 2024 CSRs, emphasizing their role in enhancing competitiveness, green and digital transitions, and social fairness, considering social vulnerabilities. Concerns about the RRF’s performance-based system inefficiency and bureaucracy are noted. This year’s annual Semester Report supports aligning EU cohesion policies with RRF and CSRs, urging stakeholder participation in National Recovery and Resilience Plans (NRRPs) akin to cohesion policy programs.

The rapporteur deplores the insufficient attention given to the interplay between macroeconomic imbalances and fiscal rules, emphasizing the importance of addressing this for the EU’s financial stability, potentially requiring public spending. It recognizes the need to restrain public spending to avoid excessive deficits, suggesting limitations based on objective criteria, with certain expenditures earmarked for necessary investments to be exempted.

Additionally, the strict performance-based financing and the verification system of the RRF are seen with concern, as more flexibility with a view to achieving the agreed investment objectives is needed. This is even more necessary if cohesion policy programmes should be streamlined with RRF investment needs. The reform of EU fiscal rules plays a crucial role in future developments of the economic and budgetary policies of Member States as does the need for more accountability, involvement of national parliaments, and proper instruments for the European Parliament to hold the European Commission to account for the performance of the European semester.

ANNEX: ENTITIES OR PERSONS FROM WHOM THE RAPPORTEUR HAS RECEIVED INPUT

Pursuant to Article 8 of Annex I to the Rules of Procedure, the rapporteur declares that he has received input from the following entities or persons in the preparation of the report, until the adoption thereof in committee:

Entity and/or person

European Consortium for Political Research (ECPR)

European Trade Union Confederation (ETUC)

The list above is drawn up under the exclusive responsibility of the rapporteur.

15.2.2024

OPINION OF THE COMMITTEE ON BUDGETS

for the Committee on Economic and Monetary Affairs

on the European Semester for economic policy coordination 2024

(2023/2063(INI))

Rapporteur for opinion (*): Margarida Marques

(*) Associated committee – Rule 57 of the Rules of Procedure

SUGGESTIONS

The Committee on Budgets calls on the Committee on Economic and Monetary Affairs, as the committee responsible, to incorporate the following suggestions into its motion for a resolution:

1. Underlines the uncertain economic and social outlook for the EU resulting from the lasting impact of the COVID-19 pandemic, the consequences of Russia’s war of aggression against Ukraine, inflation and the energy and cost-of-living crises; notes that the Union economy is expected to gradually recover in 2024, with a forecast growth of 1.3 % of GDP and a generally robust labour market; points, however, to the various challenges and uncertainties which put a strain on European businesses, public finance, public social and welfare policies and people, and affect some Member States more than others; is concerned that the level of inflation is expected to remain substantially above 2 % in 2024, at 3.5 %; is particularly concerned about the continuous impact of energy prices and inflation on the purchasing power of households, resulting in an increased risk of poverty for many Europeans, and on EU companies’ ability to perform;

2. Stresses that the current EU economic governance framework has proved inadequate to address past and current challenges and that a revision is urgently needed; takes note of the proposed reform of the economic governance framework of the Union; believes that the new framework should ensure clear, flexible and transparent implementation, and provide the adequate fiscal space for Member States to implement growth-enhancing and socially just reforms and investments, to make their economies and societies more resilient, safe, secure, sustainable, fair and inclusive and to invest in the EU’s strategic priorities, in particular in the twin transitions, social policies, defence and food security; recalls its position that an EU-level permanent crisis instrument, over and above the multiannual financial framework (MFF) ceilings, will contribute to ensuring a sufficiently high level of strategic investment and an appropriate fiscal stance at the aggregate level and to increasing the readiness of the Union to quickly react to ongoing and upcoming crises and their social and economic effects;

3 Recalls that respect for the rule of law guarantees greater justice, equality and economic stability; underlines the importance of compliance with the rule of law and the general regime of conditionality; recalls that protecting the Union budget against potential breaches of the rule of law is a fundamental prerequisite for accessing the fund, as is the application of effective monitoring, audit and enforcement mechanisms to Union funds, in particular in order to prevent misuse, fraud, corruption and conflicts of interest and to ensure transparency; calls on the Commission to ensure that there is no backsliding on achievements in the rule of law;

4. Recognises that NextGenerationEU (NGEU), in particular the Recovery and Resilience Facility (RRF), and the Support to mitigate Unemployment Risks in an Emergency (SURE) have demonstrated their successes and effectiveness in supporting the recovery of EU economies and in contributing to macroeconomic stabilisation and resilience across the EU; notes, further, their positive impact on the implementation of the country-specific recommendations and on investments in EU priorities; welcomes the fact that most Member States have submitted revised national plans, including REPowerEU chapters; welcomes the Commission’s estimate that the full implementation of quantifiable milestones and targets funded by NGEU Green Bonds until the end of 2026 has the potential to reduce greenhouse gas emissions by 44 million tonnes per year; stresses that the milestones and targets must be fulfilled for national plans to be successfully and effectively implemented; stresses that investments in line with European objectives, notably those of the RRF and REPowerEU, should be taken favourably into account when deciding on extensions for Member States’ to submit their fiscal plans;

5. Recalls the need to take into consideration the particular financial and economic effects of the war in Ukraine, especially on the frontline countries and calls on the Commission to take the necessary measures;

6. Underlines the need for better policy coordination and for increased social and educational dimensions within the framework of the European Semester; underscores, further, that significant public investments will be needed to support a sustainable, fair and inclusive recovery in the EU, to address the energy crisis and to enable upward social and economic convergence in order to ensure the EU’s strategic autonomy; stresses, further, the considerable needs for public and private investment to tackle climate change, estimated by the Commission at more than EUR 450 billion in investments annually, and to promote the digitisation of the economies; underlines that the European Semester process should contribute to the full implementation of the UN Sustainable Development Goals, the European Pillar of Social Rights, the EU’s climate and biodiversity objectives and the EU Gender Equality Strategy;

7. Recalls that the substantial increase in interest rates has driven up the borrowing costs for the European Recovery Instrument (EURI); calls, therefore, for a stable and predictable solution for the repayment of the EURI borrowing costs, over and above the MFF ceilings, in order to protect EU programmes from cuts; strongly insists on the rapid introduction of genuine, adequate and effective new own resources, in particular those agreed on in the legally binding roadmap established under the Interinstitutional Agreement on budgetary disciple, on cooperation in budgetary matters and on sound financial management, as well as on new own resources, including a roadmap towards the introduction of new own resources, such as a financial transaction tax and a financial contribution linked to the corporate sector or a new common corporate tax base; calls on the Commission to present additional proposals for genuine own resources;

8. Calls for Parliament to be fully involved in reforming the economic governance framework and the future conduct of economic governance in the EU, including in the establishment and management of fiscal instruments; recalls that its role in the European Semester should be significantly strengthened.

ANNEX: ENTITIES OR PERSONS FROM WHOM THE RAPPORTEUR HAS RECEIVED INPUT

The rapporteur declares under her exclusive responsibility that she did not receive input from any entity or person to be mentioned in this Annex pursuant to Article 8 of Annex I to the Rules of Procedure.

INFORMATION ON ADOPTION IN COMMITTEE ASKED FOR OPINION

Date adopted

14.2.2024

Result of final vote

+:

–:

0:

24

4

5

Members present for the final vote

Rasmus Andresen, Olivier Chastel, Katalin Cseh, Andor Deli, José Manuel Fernandes, Jonás Fernández, Eider Gardiazabal Rubial, Alexandra Geese, Vlad Gheorghe, Eero Heinäluoma, Niclas Herbst, Monika Hohlmeier, Hervé Juvin, Moritz Körner, Joachim Kuhs, Camilla Laureti, Janusz Lewandowski, Siegfried Mureşan, Eva Maria Poptcheva, Bogdan Rzońca, Eleni Stavrou, Nils Torvalds, Nils Ušakovs, Angelika Winzig

Substitutes present for the final vote

Anna-Michelle Asimakopoulou, Lefteris Nikolaou-Alavanos, Jan Olbrycht, Grzegorz Tobiszowski, Roberts Zīle

Substitutes under Rule 209(7) present for the final vote

Michael Gahler, Thijs Reuten, Maria Veronica Rossi, Pedro Silva Pereira

FINAL VOTE BY ROLL CALL IN COMMITTEE ASKED FOR OPINION

Key to symbols:

INFORMATION ON ADOPTION IN COMMITTEE RESPONSIBLE

Date adopted

22.2.2024

Result of final vote

+:

–:

0:

28

3

2

Members present for the final vote

Anna-Michelle Asimakopoulou, Gilles Boyer, Valentino Grant, Claude Gruffat, Eero Heinäluoma, Michiel Hoogeveen, Danuta Maria Hübner, Stasys Jakeliūnas, Othmar Karas, Georgios Kyrtsos, Aurore Lalucq, Philippe Lamberts, Pedro Marques, Caroline Nagtegaal, Luděk Niedermayer, Lefteris Nikolaou-Alavanos, Piernicola Pedicini, Lídia Pereira, Sirpa Pietikäinen, Antonio Maria Rinaldi, Alfred Sant, Aušra Seibutytė, Paul Tang, Irene Tinagli

Substitutes present for the final vote

Andżelika Anna Możdżanowska, René Repasi, Eleni Stavrou

Substitutes under Rule 209(7) present for the final vote

João Albuquerque, Jordi Cañas, Deirdre Clune, Bernard Guetta, Nacho Sánchez Amor, Michal Wiezik

FINAL VOTE BY ROLL CALL IN COMMITTEE RESPONSIBLE

Key to symbols: