The Macroeconomic Imbalances Procedure - brief overview ESTP Course Luxembourg 9-11 December 2014 Kirsten Wentzel & Dario Buono, MIP TF

Outline Policy context Scoreboard: Application and Indicators Data sources and role of Eurostat Dissemination issues and statistical challenges 2014 Statistical Annex to the Alert Mechanism Report (AMR) – flashing indicators 2014 In-Depth Reviews (IDR)

Policy context: The economic, financial and sovereign debt crisis EU policy initiatives: Six-Pack Regulation: enhanced economic policy coordination and surveillance, including MIP MIP: surveillance mechanism - part of European Semester - preventive and corrective arm

print hand-out of this slide

Macroeconomic Imbalances Procedure (MIP) Scoreboard of relevant macro-economic and macro-financial indicators currently 11 headline indicators neither policy targets nor policy instruments supplemented by economic judgment and country specific expertise thresholds defined by the Commission may evolve over time annual exercise - results published in the Alert Mechanism Report (AMR)

Macroeconomic Imbalances Procedure Alert Mechanism Report (AMR) starting point of MIP Initial screening device identifies countries for in-depth reviews MIP scoreboard + economic reading

Macroeconomic Imbalances Procedure In-depth reviews (IDRS) the Commission determines if imbalances exist Not excessive: country-specific recommendations (preventive arm) Excessive: Member State prepares a 'corrective action' roadmap If failure to comply: sanctions Programme countries not covered but under tight surveillance

MIP Headline Indicators Scoreboard Internal Imbalances House price developments Private sector credit flow Private sector debt General government debt Unemployment rate + Total financial sector liabilities (since second exercise) External Imbalances Balance of Payments Current account Net international investment Competitiveness Real effective exchange rate (REER) Share of world exports Nominal unit labour cost

Print handout of this slide

Data sources Main providers: National Statistical Institutes and Eurostat some BoP indicators co-produced by National Central Banks and the European Central Bank REER indicators compiled by DG ECFIN figure for global exports provided by the International Monetary Fund

The role of Eurostat Ensure statistical support for the MIP Produce and supply the relevant statistical data Ensure high quality of data Set up and implement a quality and monitoring framework for MIP relevant statistics Provide methodological support in the process of choice and definition of indicators Foster harmonisation and documentation of production processes

Print handout of this slide

Statistical challenges Comparability, Reliability, Consistency Inventories and quality reports Data for the last 10 years Backward data calculation Estimates (current year) In 2014 - ESA 2010 - BPM6

The Statistical Annex 2014 11 headline indicators + 28 auxiliary indicators (8 social indicators) - Activity rate - Long-term unemployment rate - Youth unemployment rate - % of young people not in employment, education or training - people at risk of poverty or social exclusion - At risk of poverty rate - Severely materially deprived people - People living in households with very low work intensity

2013 scoreboard– flashing indicators IE 6 IDR - imbalances (just out of programme) IT 3 IDR - Excessive Imbalances ES IDR -imbalances UK CY programme HR PT SE EL 5 EE 2   NL SI DE 4 SK FR BG LU IDR -No imbalances DK HU LV BE LT MT PL AT RO FI CZ 1

Number of flashing Indicators All Member States: Min. one indicator beyond the thresholds maximum number of flashing indicators: 6 out of 11 For RO, under financial assistance programme, only 2 indicators are flashing: CA and NIIP Some indicators not flashing: HPI yoy, private sector credit flow, total financial sector liabilities yoy

IDRs 2014 – countries overview Covering 17 countries Excessive Imbalances: HR, IT, Sl Imbalances for 11 out of 17 No imbalances : DK, MT, LU Specific monitoring of policy implementation for: HR, IT, Sl and IE, ES and FR SGP: for FR and SI risk of non-compliance with 2014 budgetary target

IDRs 2015 – countries overview AMR 2015: 16 countries will be subject to IDRs Follow-up on excessive imbalances: HR, IT and SI Imbalances in need of policy action: IE, ES, FR, HU Imbalances: BE, BG, DE, NL, FI, SE and UK After completion of adjustment programme: PT, RO No IDR at this stage: CZ, DK, EE, LV, LT, LU, MT, AT, PL and SK Surveillance in context of adjustment programme: GR, CY

Reading of the MIP scoreboard No single indicator can capture all potential risks: - Analysis in connection with other scoreboard indicators The number of flashes is not the key criteria The scoreboard should be read also over time The severity of a breach of a threshold can be considered The auxiliary indicators play an important role 24 24

Conclusions - overview MIP: surveillance mechanism integrated part of the European Semester prevention and correction of macroeconomic imbalances early warning system based on scoreboard of indicators + economic reading AMR starting point of MIP  In-Depth Reviews preventive and corrective arm

Any questions? ESTAT-MIP@ec.europa.eu

Useful links MIP website http://epp.eurostat.ec.europa.eu/portal/page/portal/macroeconomic_imbalance_procedure/indicators AMR http://ec.europa.eu/europe2020/pdf/2014/amr2014_en.pdf IDR for Germany http://ec.europa.eu/economy_finance/publications/occasion al_paper/2014/pdf/ocp174_en.pdf IDR for Malta http://ec.europa.eu/economy_finance/publications/occasion al_paper/2014/pdf/ocp184_en.pdf