The Commission is today providing policy guidance to Member States under the 2024 European Semester Spring Package to build a robust and future-proof economy that secures competitiveness, resilience and long-term prosperity for all, while maintaining sound public finances, in the face of a challenging geopolitical environment.
The EU is determined to take further steps to enhance its long-term competitiveness, prosperity and leadership on the global stage and to strengthen its open strategic autonomy. While the EU and its Member States have strong assets to build on, the EU will continue to address structural challenges that hamper its competitiveness, ensuring higher productivity growth and stronger investment and addressing labour and skills shortages.
This requires an integrated approach across all policy areas: macroeconomic stability, promoting environmental sustainability, productivity and fairness. The European Semester provides this policy coordination, including the implementation of NextGenerationEU, with the Recovery and Resilience Facility (RRF) at its core, and Cohesion Policy programmes. The European Semester cycle also provides updated reporting on progress towards the delivery of the Sustainable Development Goals and identifies investment priorities for the upcoming mid-term review of Cohesion Policy.
Resilience in the face of challenges
The European Semester has played a crucial role in supporting strong and coordinated economic policy responses over the past five years, as the EU was confronted by a series of extraordinary challenges. The EU has demonstrated a high degree of economic and social resilience in the face of major shocks, including the COVID-19 pandemic, Russia's war of aggression against Ukraine and the related energy price surges and inflation hikes. Looking ahead, the Spring 2024 Economic Forecast projects GDP growth in 2024 at 1.0% in the EU and 0.8% in the euro area, on the back of a strong labour market and dynamic private consumption. In 2025, growth is forecast to accelerate further to 1.6% in the EU and to 1.4% in the euro area. Meanwhile, inflation is expected to fall from 6.4% in 2023 to 2.2% in 2025.
Targeted recommendations to Member States
The 2024 country reports analyse economic, employment and social developments in each Member State and take stock of the implementation of recovery and resilience plans (RRPs) and Cohesion Policy programmes. The reports also identify key challenges, with a particular focus on competitiveness, and priority reforms and investments. Based on this analysis, the Commission proposes country-specific recommendations (CSRs) to provide guidance to Member States on how to tackle those key challenges that are only partially or not addressed in Member States' RRPs.
The country-specific recommendations are divided into:
- A recommendation on fiscal policy, including fiscal-structural reforms, where relevant;
- A recommendation to continue or accelerate implementation of the national recovery and resilience plans and Cohesion Policy programmes; and
- Where relevant, further recommendations on outstanding and/or newly emerging structural challenges, with a focus on improving competitiveness.
Effective delivery of NextGenerationEU and Cohesion Policy: crucial drivers of a competitive EU economy
As illustrated in this year's country reports, NextGenerationEU and other EU funding programmes have supported the EU's recovery towards a greener, more digital, fairer and more resilient future through job creation, improved competitiveness, macroeconomic stability and territorial and social cohesion.
To date, the Commission has disbursed over €240 billion to Member States in RRF grants and loans for the successful implementation of key reforms and investments. Also, over €252 billion has been disbursed under the Cohesion Policy funds since the beginning of the COVID-19 pandemic.
Most Member States continue to make good progress in the delivery of their RRPs and Cohesion Policy programmes. However, some Member States need to urgently address emerging delays and structural challenges, to ensure the timely implementation of investments and reforms included in their RRP. This Semester cycle also provides guidance to Member States in view of the forthcoming mid-term review of Cohesion Policy programmes.
Policy guidance to enhance competitiveness
The Spring Package calls on Member States to take policy action to promote competitiveness and increase productivity. To this end, Member States are invited in the CSRs to:
- Ensure a business environment supportive to competitiveness, taking full advantage of the opportunities generated by the single market, especially for SMEs;
- Improve educational outcomes and support skills development, with high-quality education and training based on modernised curricula, since addressing labour and skills shortages is essential to ensure the EU's prosperity;
- Facilitate access to finance by improving savings allocation and capital financing and facilitating capital market and alternative forms of financing, especially for SMEs. Implement ambitious reforms to build integrated research and innovation ecosystems, focusing on science-business collaboration and knowledge transfers for example; and
- Accelerate the green and digital transition, increasing the autonomy, resilience and competitiveness of the EU's net-zero industry, addressing labour and skills shortages, boosting public investment in digital infrastructure and skills, and tackling regulatory barriers to digitalisation.
Strengthening fiscal sustainability
The COVID-19 pandemic, the surge in energy prices, and the required policy response have contributed to a substantial increase in public debt in several Member States in recent years. Fiscal policies should put debt on a downward path or to keep it at prudent levels, while preserving investment.
The new economic governance framework makes 2024 a year of transition for fiscal policy coordination in the EU. The fiscal policy guidance and decisions under the new framework contained in the Spring Package aim to strengthen Member States' debt sustainability and promote sustainable and inclusive growth in all Member States.
Under the new rules, Member States will prepare medium-term plans setting out their expenditure paths and their priority reforms and investments. The recommendations included in the Spring Package provide a strong underpinning for the reform and investment commitments Member States must set out in these plans.
The CSRs provide that Member States should pursue prudent fiscal policies by ensuring that the growth in net expenditure in 2025 and beyond is consistent with the fiscal adjustment requirements under the new governance framework.
Concretely, this means that Member States with public debt above 60% of GDP or a deficit above 3% of GDP should ensure that the growth in net expenditure is limited to a rate that puts the government debt-to-GDP ratio on a plausible downward path over the medium term, while bringing the general government deficit to below 3% of GDP and maintaining it below this reference value over the medium term.
Fiscal surveillance
The Commission prepared a Report under Article 126(3) of the Treaty on the Functioning of the EU (TFEU) for 12 Member States to assess their compliance with the deficit criterion of the Treaty: Belgium, Czechia, Estonia, Spain, France, Italy, Hungary, Malta, Poland, Slovenia, Slovakia and Finland. In this assessment, the Commission takes into account relevant factors brought forward by Member States in case their public debt-to-GDP ratio is below 60% of GDP or their deficit is assessed as being 'close' to the 3% reference value and 'temporary'.
In light of the assessment contained in the report, the opening of a deficit-based excessive deficit procedure is warranted for seven Member States: Belgium, France, Italy, Hungary, Malta, Poland and Slovakia.
The Report under Article 126(3) is only the first step into opening the excessive deficit procedures. In light of this assessment, and after considering the opinion of the Economic and Financial Committee, the Commission intends to propose to the Council to open deficit-based excessive deficit procedures for these Member States in July 2024. As part of the Autumn European Semester Package, to ensure consistency with the adjustment path set out in the medium-term plans, the Commission will propose to the Council recommendations to put an end to the excessive deficit situation.
In 2020, the Council decided that an excessive deficit existed in Romania, based on 2019 data. According to the Commission's assessment, Romania has not taken effective action to correct this and put an end to its excessive deficit situation.
Assessing macroeconomic imbalances
The Commission has assessed the existence of macroeconomic imbalances for the 12 Member States selected for in-depth reviews in the 2024 Alert Mechanism Report. Overall, after the big terms-of-trade shock of 2022, macroeconomic imbalances tended to ease in most Member States.
- France, Spain, and Portugal are no longer experiencing imbalances as vulnerabilities have overall declined. Fiscal sustainability risks will be surveyed under the reformed fiscal rules.
- Greece and Italy are now found to be experiencing imbalances after experiencing excessive imbalances until last year as vulnerabilities have declined but remain a concern. Fiscal sustainability risks will be surveyed under the reformed fiscal rules.
- Slovakia is now found to be experiencing imbalances. The vulnerabilities related to cost competitiveness, external balance, housing market and household debt have lingered, and policy action has not been forthcoming.
- Romania is now found to be experiencing excessive imbalances after experiencing imbalances until last year as vulnerabilities related to external accounts, mainly linked to large and increasing government deficits, remain, while significant price and cost pressures have increased and policy action has been weak.
- Germany, Cyprus, Hungary, the Netherlands, and Sweden continue to experience imbalances.
Post-programme surveillance reports
Post-programme surveillance assesses the economic, fiscal and financial situation of Member States that have benefited from financial assistance programmes, focusing on their repayment capacity. The post-programme surveillance reports for Ireland, Greece, Spain, Cyprus and Portugal conclude that all five Member States retain the capacity to repay their debt.
Assessing social convergence challenges
In this Semester cycle, the Commission has carried out for the first time a two-stage analysis of employment, skills and social challenges in each Member State, based on the revised Social Scoreboard and the principles of a Social Convergence Framework. The first-stage analysis is included in the Joint Employment Report (JER) 2024, while a more detailed second-stage analysis was published by the Commission services in May 2024 for seven Member States (Bulgaria, Estonia, Spain, Italy, Lithuania, Hungary and Romania).
Employment guidelines
The Commission is proposing guidelines for Member States' employment policies in 2024. These guidelines set common priorities for national employment and social policies to make them fairer and more inclusive.
The 2023 guidelines are updated to cover actions to tackle skills and labour shortages and improve basic and digital skills. New technologies, artificial intelligence and algorithmic management and their impact on the world of work are also included. In addition, the guidelines refer to recent policy initiatives, in areas of particular relevance such as platform work, the social economy, and affordable housing.
Finally, the Commission underlines the importance of monitoring progress towards the EU-wide 2030 headline targets, and the contributing national targets, in the areas of jobs, skills and poverty reduction.
Next steps
The Commission invites the Eurogroup and the Council to discuss the package and to endorse the guidance offered today. It looks forward to engaging in a constructive dialogue with the European Parliament on the contents of this package and each subsequent step in the European Semester cycle.
