On the European Semester for economic policy coordination 2024

MOTION FOR A EUROPEAN PARLIAMENT RESOLUTION

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 Protocol No 1 to the Treaty on European Union (TEU) and the TFEU on the role of national parliaments in the European Union,

– having regard to Protocol No 2 to the TEU and TFEU on the application of the principles of subsidiarity and proportionality,

– having regard to the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union,

– having regard to the Paris Agreement of the United Nations Framework Convention on Climate Change and the Sustainable Development Goals,

– having regard to Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States,

– having regard to Council Regulation (EU) No 1177/2011 of 8 November 2011 amending Regulation (EC) No 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure,

– having regard to Regulation (EU) No 1173/2011 of the European Parliament and of the Council of 16 November 2011 on the effective enforcement of budgetary surveillance in the euro area,

– having regard to Regulation (EU) No 1174/2011 of the European Parliament and of the Council of 16 November 2011 on enforcement measures to correct excessive macroeconomic imbalances in the euro area,

– having regard to Regulation (EU) No 1175/2011 of the European Parliament and of the Council of 16 November 2011 amending Council Regulation (EC) No 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies,

– having regard to Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances,

– having regard to Regulation (EU) No 472/2013 of the European Parliament and of the Council of 21 May 2013 on the strengthening of economic and budgetary surveillance of Member States in the euro area experiencing or threatened with serious difficulties with respect to their financial stability,

– having regard to Regulation (EU) No 473/2013 of the European Parliament and of the Council of 21 May 2013 on common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of the Member States in the euro area,

– having regard to Regulation (EU) 2021/241 of the European Parliament and of the Council of 12 February 2021 establishing the Recovery and Resilience Facility (RRF Regulation),

– having regard to the Commission communication of 4 March 2021 entitled ‘The European Pillar of Social Rights Action Plan’ (COM(2021)0102),

– having regard to the Porto Social Commitment of 7 May 2021 of the Council, the Commission, Parliament and social partners,

– having regard to the European Fiscal Board assessment of 28 June 2023 on the fiscal stance appropriate for the euro area in 2024,

– having regard to the European Fiscal Board annual report of 4 October 2023,

– having regard to the Commission communication of 9 November 2022 on orientations for a reform of the EU economic governance framework (COM(2022)0583),

– having regard to the Commission proposal for a regulation of the European Parliament and the Council on the effective coordination of economic policies and multilateral budgetary surveillance and repealing Council Regulation (EC) No 1466/97 (COM(2023)0240),

– having regard to the Commission proposal for a Council regulation amending Regulation (EC) No 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure (COM(2023)0241),

– having regard to the Commission proposal for a Council directive amending Directive 2011/85/EU on requirements for budgetary frameworks of the Member States (COM(2023)0242),

– having regard to the Granada Declaration adopted on 6 October 2023,

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

– having regard to the Commission report of 21 November 2022 entitled ‘Alert Mechanism Report 2024’ (COM(2023)0902) and to the Commission recommendation of 21 November 2022 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 2022 (COM(2023)0904),

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

– having regard to Rule 54 of its Rules of Procedure,

– having regard to the opinion of the Committee on Budgets,

– having regard to the report of the Committee on Economic and Monetary Affairs (A90000/2022),

A. whereas according to the Commission’s autumn 2023 forecast, GDP growth in 2023 is expected to be 0.6 % in both the EU and the euro area and expected to increase to 1.3 % and 1.2 % in 2024 respectively;

B. whereas the EU labour market continued to perform strongly in the first half of 2023 despite the slowdown in economic growth, yet labour shortages continue to be acute in some sectors and occupations, according to the Commission’s autumn 2023 forecast; whereas unemployment hit a historic low in the EU as a whole with variation across Member States;

C. whereas inflation will amount to 6.5 % in the EU and 5.6 % in the euro area in 2023 and is expected to fall to 3.5 % and 3.2 % in 2024 respectively, according to the Commission’s autumn 2023 forecast;

D. whereas the debt-to-GDP ratio is expected to decrease to 83.1 % in the EU (90.4 % in the euro area); whereas the debt-to-GDP ratio is expected to marginally decline in the EU to around 82.7 % in 2024 and 82.5 % in 2025;

E. whereas a swift, decisive and coordinated policy response allowed the EU economy to rebound and address the socioeconomic consequences of the COVID-19 pandemic and Russia’s war of aggression against Ukraine, and has allowed it to navigate through the resulting energy crisis, the economic slowdown in 2023 and a period of high risk and uncertainty, including as a result of the situation in the Middle East;

F. whereas EU funding has proven to be an essential tool to provide macroeconomic stabilisation at EU level and increase its internal and external resilience in times of crisis while supporting Member States in financing necessary investments in EU priorities to tackle current and future challenges;

Economic prospects for the EU

1. Expresses concern about the weak growth in the EU; notes the continuous impact of energy prices and inflation on the purchasing power of households and on the ability to perform of EU companies;

2. Recognises the efforts of the European Central Bank (ECB) to bring the inflation rate down in the euro area; considers rises in interest rates to only partially address the reasons for the hikes in inflation and that adequate and coordinated fiscal, structural and regulatory policies and reforms complementing the ECB’s monetary policy actions are needed;

3. Stresses that a lack of public and private investments in certain Member States is hindering the potential of sustainable growth; highlights that these investments are crucial for the EU’s ability to cope with existing challenges and increase the EU’s resilience and competitiveness during upcoming challenges;

European Semester and Recovery and Resilience Facility (RRF)

4. Recalls that the European Semester is the established framework for coordinating the budgetary, economic, social and employment policies across the Union in accordance with the Treaties, including the European Pillar of Social Rights, thereby safeguarding its macroeconomic stability and its social cohesion;

5. Is concerned about the deterioration of the social dimension of the European Semester resulting from the self-limitation of country-specific recommendations (CSRs) to the implementation of national recovery and resilience plans (RRPs) and about the declining number of social CSRs based on the Social Scoreboard; calls on the Commission to link the CSRs more closely to the respective country reports;

6. Shares the view that the 2024 CSRs need to be focused on a limited set of challenges; underlines that CSRs must equally serve to enhance competitiveness, promote the green and digital transitions and ensure social fairness; stresses that CSRs need to take account of social vulnerabilities;

7. Is concerned that the performance-based financing and verification system of the RRF delivers in practice too little in terms of results and creates too much bureaucracy; calls for more flexibility to adjust milestones and targets to take account of lessons learned during the implementation process;

8. Supports streamlining EU cohesion policy programmes with investment needs identified under the RRF and in CSRs; recalls that cohesion policy serves a broader set of objectives than the RRF; calls for a comparable incorporation of stakeholder participation in the drafting and implementation of national RRPs as it is for cohesion policy programmes;

Reform of the EU economic governance framework

9. Considers it necessary to reform the EU fiscal rules and welcomes the proposals put forward by the Commission;

10. Underlines that the reform must lead to a simplification of the framework, be more country-specific and strengthen its enforceability, and enable Member States to meet the public investment needs for the green and digital transitions of their economies without undermining the sustainability of government debt;

11. Welcomes that lessons have been learned from the design choices of the RRF in linking national fiscal, reform and investment commitments with EU financial incentives such as grants and loans; greatly regrets that, unlike the RRF, the reform of the economic governance framework lacks the incentive mechanisms to support and promote necessary national policy reforms and investments; is concerned that some Member States will not have the financial capacity to finance the just green and digital transition on their own;

12. Deplores that the interplay between macroeconomic imbalances and fiscal rules is not sufficiently addressed by the reform proposals; underlines that the financial stability of the EU depends on the macroeconomic balance between Member States’ economies and that restoring such a balance may require public spending;

13. Acknowledges the need to avoid enduring excessive deficits and calls for common rules based on objective criteria as a way to achieve this goal; stresses that, in return, those rules should not preclude temporary deviations from the net expenditure path due to dedicated, justifiable and strategically significant investments realising EU objectives;

14. Acknowledges the differences between individual Member States regarding the sustainability of their debt and their capacity to reduce debt while still being able to invest; emphasises therefore the need to allow Member States to have different debt reduction paths;

15. Welcomes the fact that the Commission negotiates with the Member States individual fiscal-structural plans; underlines that such an increase in discretionary power for the Commission must be accompanied by increased accountability towards the European Parliament;

16. Considers the stronger involvement of national parliaments in determining the content and voting on fiscal structural plans to be a meaningful way to increase national ownership of fiscal structural plans;

17. Recognises that the Economic Dialogue as part of the European Semester lays a useful foundation of accountability, but considers that proper accountability can only be achieved if the European Parliament has accountability instruments that allow it to apply consequences based on its assessment of the performance of the European Semester such as veto rights or holding Commissioners personally responsible;

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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 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 Strategy 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.