Visnja Samardzija and Ivana Skazlic The European Union and North America: An Inevitable Partnership? ECSA-C 11th Biennial Conference Comparing the Economic Governance in the New EU Member States - Is the European Semester a Success or Failure?   Visnja Samardzija and Ivana Skazlic Institute for Development and International Relations IRMO, Zagreb, Croatia

The paper is resulting from the project “Policy Observatory in Croatia (POLO-Cro28)”, IRMO, Zagreb Funded by the European Commission through the ERASMUS + programme, Jean Monnet Support to Institutions (2015-2018)

The reasons behind the European Semester the EU’s annual cycle of policy guidance, coordination and monitoring, as a response to the crisis created to support implementation of the Europe 2020 Strategy and to ensure compliance with economic and fiscal rules in the context of the Stability and Growth Pact (SGP) and the Macroeconomic Imbalance Procedure (MIP) in operation since 2011 – legal basis Art. 121 of the TFEU + specific provisions of the ‘Six pack’ legislation

The European Semester at a glance The European Semester introduces ex-ante coordination of national economic policies during a 6-month period every year The Commission conducts in-depth analysis of economic programs and structural reforms of every MS, issues CSRs and monitors their implementation on annual basis Participation in the European Semester is mandatory for all EU MS! During a remaining 6-month period of a ‘National Semester’ the MS implement the commonly agreed policies

Three components of the European Semester EUROPE 2020 STRATEGY (thematic surveillance) STABILITY AND GROWTH PACT (fiscal surveillance) MACROECONOMIC IMBALANCE PROCEDURE (macroeconomic surveillance) Education Employment Environmental and climate protection, energy efficiency R&D Fighting poverty and social exclusion Preventive arm Deficit <3% GDP Debt <60% Debt >60% which is decreasing Corrective arm   Excessive Deficit Procedure Preventive arm 1. Alert Mechanism Report 2. In-Depth Reviews Corrective arm Excessive Imbalance Procedure Source: European Commission, 'Six pack' and 'Two pack' Regulative

The European Semester for Economic Policy Coordination: Main steps and actors Sept Oct. Nov. Dec. Jan. Feb. Mar. Apr. May. Jun. Jul. Opinion on DBPs Presentation of AGS, AMR and EA recommendations In-depth review of imbalances Assessment of implementation of CSRs European Commission Assessment of NRPs and SCPs Draft CSRs Council Eurogroup Surveillance and implementation f CSRs Assessment of DBPs Conclusions on AGS and AMR and adoption of EA recommendations Adoption of CSRs European Council Policy guidance based on AGS and AMR Endorsement of CSRs Member States National Parliaments Implementation of CSRs Submission of DBPs by Oct Submission of NRPs and SCPs Article 13 conference EPW / Article 13 Conference European Parliament Debate /resolution on Semester and CSRs Debate /resolution(s) on the AGS Economic dialogues with other EU Institutions and member states Source: Hagelstam, K. (2015) At a glance The European Semester: Main steps at the EU level. Economic Governance Support Unit, European Parliament

Number of CSRs under the SGP, MIP and Europe 2020 processes, in 2015 Source: Bénassy-Quéré , A. (2015) Economic policy coordination in the euro area under the European Semester. Available at: http://www.europarl.europa.eu/committees/en/ECON/home.html

Implementation of country-specific recommendations (CSRs) by EU Member States, 2015 2015: Source: Hradiský, A. (2016) At a glance Implementation of the 2015 Country Specific Recommendations. Economic Governance Support Unit, European Parliament

Implementation of country-specific recommendations (CSRs) by EU Member States, 2012–2014 Source: Gern, K.-J., Jannsen N., Kooths, S. (2015) Economic policy coordination in the euro area under the European Semester. Kiel Institute for the World Economy. Available at: http://www.europarl.europa.eu/committees/en/ECON/home.html

Addressing the weaknesses of implementation: Streamlined European Semester (2015) Improving frameworks and mechanisms publishing CSRs for the euro area at the begining of the cycle; lowering the number and scope of CSRs; focus on priorities greater emphasis on employment and social performance; enhancing a democratic dialogue supporting reforms from ESI Funds and technical assistance

Examples of five new EU Member States Croatia, Czech Republic, Hungary – non Eurozone members Slovakia, Slovenia – Eurozone members New EU members, 5th and 6th enlargement Similar economic and social challenges, geographical proximity Covered by or passed through Excessive Deficit Procedure

The government deficit as proportion of GDP in selected EU Member States(in %) Source: Eurostat data

General government gross debt as proportion of GDP in selected EU Member States (%) Source: Eurostat data

Excessive Deficit Procedure (EDP) in selected EU Member States – an overview EU MS 2009 2010 2011 2012 2013 2014 2015 2016 Czech Republic EDP opened   EDP closed Hungary EDP opened in 2004 Slovakia Slovenia EDP still ongoing Croatia NOTE: In 2016 the EDP covers 9 countries. The EDP was closed for 17 countries in the past years, while 2 countries are not covered by EDP at all. Source: European Commission

Excessive imbalances procedure The status of selected new EU Member States under the Macroeconomic Imbalances Procedure of (MIP) 2012-2016 Year No imbalances Imbalances* Excessive imbalances* Excessive imbalances procedure 2012 Czech Republic Slovakia Hungary Slovenia   - 2013 2014 Croatia 2015 2016  - NOTE: In 2016, out of 18 countries identified for in-debt review, 12 countries experience imbalances. EIP has not been initiated yet Source: http://ec.europa.eu/economy_finance/economic_governance/macroeconomic_imbalance_procedure/index_en.htm

Comparative overview of CSRs under European Semester in five selected countries (2015) Country-specific recommendations 2015   EU Member State Public finances and welfare systems Financial sector Labor market Product and services market Education Social inclusion Administration Public finances Taxation Pension system Healthcare system Banking and access to finance Housing and private debt Labor taxation Wage-setting Services and network industries Innovation and business environment Education and skills Poverty and social inclusion Administrative modernization and rule of law Croatia Czech Republic Hungary Slovakia Slovenia Shaded cells in the table mark the field for which the selected Member State received recommendations. Source: European Commission, http://ec.europa.eu/europe2020/pdf/csr2015/csr2015-overview-table_en.pdf

Full/Substantial Progress Implementation of the 2015 CSRs under the European Semester in five selected Member States EU/Country level Full/Substantial Progress Some Progress No/Limited Progress Not yet Assessed Total Total CSR to EU-28 4 42 49 7 106  Czech Republic 3 1 - Croatia 5 6 Hungary Slovenia 2 Slovakia Source: Hradisky, Martin (2016). European Parliament. Economic Governance Unit. At a Glance. Implementation of the 2015 County Specific Recommendations. March 4, 2016

Conclusions Accomplishment of the European Semester: contribution to predictability and transparency of economic policies in the EU CSRs - the most important part for delivering reforms, but implementation is modest / low Eurozone members - stronger CSRs implementation Better implementation while under a financial assistance program; due to market pressure and/or due to high unemployment Normalisation of situation often „softens” reforms Political will of national authorities to implement reforms depends on eventual domestic consequences Implementation of CSRs varies with the electoral cycle

Conclusions Impact of recent modifications of the European Semester? Support for facilitating implementation of reforms through EU Funds and technical assistance Existing shortcomings are strong argument for further improvements of the European Semester in order to increase efficiency Need to identify more clearly articulated priorities at European level, raise awareness