1. Statistics for economic analysis and policy making in Europe Part 1
CONTRACTOR IS ACTING UNDER A FRAMEWORK CONTRACT CONCLUDED WITH THE EUROPEAN COMMISSION

2. Preliminary remarks
The aim of this course is to provide essential information about the main sources of empirical evidence available for economic analysis and policy making in Europe.
Emphasis will be laid on the European Statistical System and the specific role of statistics in the European Union.

3. Preliminary remarks
In addition to providing facts the course intends to offer participants insight into the relationship to economic theory and a critical understanding of the merits and limits of the available statistical data.
The course has to concentrate on selected sources of special relevance.
Not more than some spotlights are offered.
The selection of aspects covered is, necessarily, to some extent subjective.

4. Preliminary remarks Not all of the slides prepared will be presented.
A number of the slides are meant to play the role of “background material” only.
The material includes a quite a number of definitions. The definitions are primarily used to explain the underlying concepts.

5. Course overview – Day 1
Introduction - The function of statistical data for economic analysis and policy
Introduction - Economic theory and statistical data
Goal of the introduction: to outline a conceptual framework for the assessment of the main statistical sources
Business cycle analysis - Some selected indicators

6. Course overview – Day 2 Analysis of growth and structural change
The main sources of “structural” information in the EU
Macroeconomic policy and macro-accounting
National accounts as the language of macroeconomics
Theoretical background of national accounts
The main objectives of national accounts
The specific role of national accounts in the EU
National accounts – basic characteristics
National accounts – basic concepts and definitions

7. Course overview – Day 3 National accounts
Price and volume measurement
Measurement in PPS
National accounts: Quarterly and regional
Limits of national accounting
Selected sets of statistical data with high political relevance
Attempt of a summary

8. The function of statistical data for economic analysis and policy - Overview
The role of statistical data for economic analysis and policy
The role of statistical data in the EU
Implications for the statistical system
Some conclusions

9. The role of statistical data for economic analysis and policy
Economic reality is primarily perceived through the eyes of the statistical system.
“Our understanding of what is happening in our economy is constrained by the extent and quality of the available data“ (Griliches, 1994).

10. The role of statistical data for economic analysis and policy
Monitoring
Identification of problem areas.
Measuring the success of economic policy.
“There is a tendency of policy makers to formulate their political objectives in terms of precise target values for some statistical indicators” (Pesendorfer, 2014).

11. The role of statistical data for economic analysis and policy
Providing the empirical basis for simple and complex economic analyses.
Providing the optimal data for economic analyses and providing the optimal data for monitoring purposes often require different statistical concepts and call for different methods.
The different functions of statistical data for economic policy must be seen as ‘competing objectives’.

12. The role of statistical data in the EU – Evidence based policy making
At EU level, European statistics have become increasingly important for the development, implementation, monitoring and evaluation of EU policies.
European statistics thus constitute an essential contribution to building the information capacity required to sustain the EU's strategic objectives and the underlying policies and supporting instruments (Vision paper, 2009).

13. The role of statistical data in the EU – Evidence based policy making
Source: Regulation (EU) No 99/2013 on the European statistical programme

14. The role of statistical data in the EU – Evidence based policy making
Regulation (EU) No 99/2013 on the European statistical programme
Accounting systems: coherent and integrated accounts, balance sheets and tables based on a set of internationally agreed rules. An accounting framework ensures a high profile of consistency and comparability; statistical data can be compiled and presented in a format that is designed for the purposes of analysis and policy making.
Source: Regulation (EU) No 99/2013 on the European statistical programme

15. The role of statistical data in the EU – Evidence based policy making
Regulation (EU) No 99/2013 on the European statistical programme
Indicators: an indicator is a summary measure related to a key issue or phenomenon and derived from a series of observed facts. Indicators can be used to reveal relative positions or show positive or negative change. Indicators are usually a direct input into Union and global policies. In strategic policy fields they are important for setting targets and monitoring their achievement.
Source: Regulation (EU) No 99/2013 on the European statistical programme

16. The role of statistical data in the EU – Evidence based policy making
Only very few policy decisions can be taken on the basis of a single statistical indicator.
Coherence is a necessary condition to allow information from different statistical sources to be meaningfully combined in a single analysis.
Reduced coherence would lead to biased results in all kind of analyses and, as a consequence, to misinformed political decisions.

17. The role of statistical data in the EU - Targets and thresholds
Convergence criteria (Maastricht criteria):
Price stability: Member States should have a price performance that is sustainable and an average rate of inflation that does not exceed by more than 1.5 percentage points that of the three best-performing Member States in terms of price stability for a period of one year before the examination.
Price stability is assessed on the basis of HICP results.

18. The role of statistical data in the EU - Targets and thresholds
Convergence criteria (Maastricht criteria):
Government budgetary deficit: Member States are to avoid situations of excessive government deficits, that is their ratio of planned or actual government deficit to gross domestic product should be no more than 3 %.
If a state is found by the Commission to have breached the deficit criteria, they will recommend the Council of the European Union to open up a deficit-breached EDP against the state in accordance with Article 126(6), which only will be abrogated again when the state simultaneously comply with both the deficit and debt criteria.

19. The role of statistical data in the EU - Targets and thresholds
Convergence criteria (Maastricht criteria):
Government debt-to-GDP ratio: The ratio of (general) government debt to GDP should be no more than 60 %, unless the excess over the reference value is only exceptional or temporary or the ratios have declined substantially and continuously.
If a state is found by the Commission to have breached the debt criteria (without this breach solely being due to "exempted causes"), they will recommend the Council of the European Union to open up a debt-reached EDP against the state in accordance with Article 126(6), which only will be abrogated again when the state simultaneously comply with both the deficit and debt criteria.

20. The role of statistical data in the EU - Targets and thresholds
Convergence criteria (Maastricht criteria):
The criteria of convergence for the economic and monetary union (EMU) are defined in terms of national accounts figures (e.g. GDP growth rates).
The measures of government deficit and debt are defined within the ESA framework.
The criteria for the excessive deficit procedure are also defined in terms of national accounts.

21. The role of statistical data in the EU - Targets and thresholds
Exchange rate stability: Applicant countries should not have devalued the central rate of their euro pegged currency during the previous two years, and for the same period the currency stability shall be deemed to have been stable without "severe tensions". Long-term interest rates (average yields for 10yr government bonds in the past year): Shall be no more than 2.0% higher, than the unweighted arithmetic average of the similar 10-year government bond yields in the 3 EU Member States with the lowest HICP inflation (having qualified as benchmark countries for the calculation of the HICP reference value).

22. The role of statistical data in the EU - Targets and thresholds
Europe 2020: a strategy for jobs and smart, sustainable and inclusive growth, based on five EU headline targets which are currently measured by ten headline indicators. 
Objectives at European level inter alia:
• Raising the employment rate from the current 69% to 75%;
• Boosting the expenditure on R&D to 3% of the GDP from the current 2%;
• Reducing the school drop-out to less than 10% from the current 15% and increase the share of citizens in their early 30s holding a university degree or equivalent title from 31% to at least 40%;

23. The role of statistical data in the EU – Other operational roles
Use of results from national accounts for operational purposes:
Granting financial support to regions in the EU: the allocation of expenditure funds to regions uses regional accounts statistics;
Determining the own resources of the EU budget.
The results of a very complex piece of “tertiary” statistics, such as national accounts, turned into the tax base of Member States.

24. The role of statistical data in the EU – Other operational roles
The own resources of the EU budget depend on national accounts figures in three ways (ESA ):
(1) the total resources for the EU are determined as a percentage of the sum of Member States' gross national incomes (GNI);
(2) the third own resource of the EU is the VAT own resource. The contributions by the Member States for this resource are largely determined by national accounts figures, because these figures are used to calculate the average VAT rate;
(3) the relative sizes of the contributions by the Member States for the fourth own resource of the EU are based on their gross national income estimates. These estimates are the basis for the majority of Member States' payments.

25. Implications for the statistical system
Need for a strong legal basis
European statistics are based on numerous legal acts and compulsory methodologies laid down in manuals.
In the field of business statistics, many domains are characterised by a certain ‘stove-pipe principle’ which does not pay much attention to the requirements, concepts and definitions in the related statistical areas.
Consistency and coherence is not always guaranteed.

26. Implications for the statistical system
Need for a strong legal basis
The basic concepts of European statistics are usually laid down in regulations. Such concepts are:
Statistical unit;
Target population – scope;
Classifications and their application (breakdowns, special aggregates).

27. Implications for the statistical system
Need for a strong legal basis
The regulations also include very specific and detailed provisions regarding the information which has to be transmitted:
Variables and their definitions;
Reference periods, periodicity;
Availability of data, form of transmission;
Quality requirements.

28. Implications for the statistical system
Strong legal basis - Characteristics
The regulations usually define minimum requirements.
A number of methodological manuals recommend ‘best practices’ and aim at a certain standardisation of processes.
In most cases Member States are free to collect additional data, offer more detailed results, etc.
The regulations are very ‘output oriented’; Member States are usually free to decide which sources are to be used, which processes are to be applied.

29. Implications for the statistical system
Legal basis - A typical formulation (abridged):
Member States may acquire the necessary data using a combination of the different sources specified below, applying the principle of administrative simplification:
(a) Compulsory surveys;
(b) Other sources which are at least equivalent as regards
accuracy and quality;
(c) Statistical estimation procedures, where some of the
characteristics have not been observed for all of the units.

30. Implications for the statistical system
Legal basis - Three groups of legal provisions may be distinguished:
Legal acts providing a methodological/ conceptual basis for surveys and data compilation;
Legal acts governing surveys, data collection and statistical indicators;
Legal acts referring to statistical projects which might be characterized as ‘Tertiary Statistics’.

31. Implications for the statistical system
Governance
The governance of the statistical system has become a critical issue.
The existence of detailed legal provisions and principles is seen as a necessary but not sufficient criterion.

32. Implications for the statistical system
Governance – Key principles of European statistics
European statistics are determined in the European statistical programme.
They shall be developed, produced and disseminated in conformity with the statistical principles as set out in Article 285(2) of the Treaty and further elaborated in the European statistics Code of Practice.

33. Implications for the statistical system
Governance – Key principles of European statistics
The development, production and dissemination of European statistics shall be governed by the following statistical principles as defined in Article 2 of Regulation (EC) No 223/2009 on European statistics:
Professional independence
Impartiality
Objectivity
Reliability
Statistical confidentiality
Cost effectiveness

34. Implications for the statistical system
Governance – Key principles of European statistics
The statistical principles set out in Article 2 are further elaborated in the Code of Practice.
The Code of Practice is consistent with the Fundamental Principles of Official Statistics adopted by the United Nations ECE on 15 April 1992 and by the United Nations Statistical Commission on 14 April 1994.
The revised Code of Practice was approved in 2011.

35. Implications for the statistical system
Governance – Key principles of European statistics
Six principles of the Code of Practice deal with the institutional environment, four principles with statistical processes, five with statistical output.
The Quality Assurance Framework of the European Statistical System (ESS QAF) identifies possible activities, methods and tools that can provide guidance and evidence for the implementation of the Code of Practice when developing, producing and disseminating European statistics.

36. Implications for the statistical system
Governance
The European Statistical System needs a specific form of governance: “Principles are not enough; compliance with them also has to be monitored” (Radermacher, 2011).
For this purpose Peer Reviews have been carried out and an European Statistical Governance Advisory Board (ESGAB) has been established.
The purpose of the ESGAB is to provide an independent overview of the ESS as regards the implementation of the European Statistics Code of Practice.

37. Implications for the statistical system
Governance - ESGAB Opinion 2014
The use of statistical indicators as thresholds in EU policy making has significantly and irreversibly increased in recent years.
This leads to some indicators being used as control figures, subjecting the statistics in object to significant political visibility, as well as at potential pressure.
The above brings the risk of undermining the trust in official statistics, and perhaps even the trust in the institutions that produce such data.

38. Implications for the statistical system
Governance - ESGAB Opinion 2014
The responsibility of statisticians to independently decide on methods, standards and procedures needs to be recognised, and the independence of statistical institutions protected, in order to preserve the credibility and trustworthiness of the European Statistical System (ESS).

39. Implications for the statistical system
Need for additional legal provisions and control
First crisis of trust 2004/2005
First regulation on EDP
Code of Practice
First round of Peer Reviews

40. Implications for the statistical system
Need for additional legal provisions and control
Second crisis of trust 2009/2010
Second regulation on EDP
Revision of the Code of Practice and ESS QAF
Amendment of Regulation 223/2009 (Statistical law)
Reinforcement of the Macroeconomic Imbalance Procedure (MIP). The Scoreboard is used to identify emerging or persistent macroeconomic imbalances in a country and is part of an annual exercise. 

41. Implications for the statistical system
Need for additional legal provisions and control
Second crisis of trust 2009/2010
Following the weaknesses identified, extended audit-like powers were also granted in the field of EDP
Second round of Peer Reviews

42. Implications for the statistical system
“Economic and fiscal policy in the EU has been put pretty much on auto-pilot and heavily relies on statistical indicators, fixed thresholds of tolerance and automatic procedures, once those thresholds are crossed by a Member State”.
“We need to recognize that the environment for producing indicators on government finance and internal and external balances has changed drastically”.
“Statistics has shifted very much to the centre stage of political interest in the EU” (Pesendorfer, 2014).

43. Implications for the statistical system
The European Union has already been a rule-based system before the crisis in 2008/09.
The new economic governance set up as a consequence of the crisis, however, tightened the existing rules.
“Rather than just provide information for policy makers, statistics have become an arbiter in all manner of social and political debate” (Outrata, 1999).
Goodheart’s law:"When a measure becomes a target, it ceases to be a good measure“.

44. Implications for the statistical system
“In fact, detailed political decision making is to some extent delegated to statistics, allowing the process of developing statistical values to enter an awesome world of political pressures”.
“Operating thus more or less directly on the welfare of groups and nations, statistics require a much more wholesome arsenal of guidance and protection than was available in the days when politicians alone took responsibility for social policies and their impacts” (Outrata, 1999).

45. Some conclusions The specific role of statistical data in the EU has a
number of consequences for the statistical system:
Improved status and reputation of statisticians, but at the same time not necessarily more resources for NSIs.
Change in the paradigms governing the statistical work: fulfilling legal provisions as a main concern.
Change in the hierarchy of quality criteria: international comparability as a top priority.

46. Some conclusions The specific role of statistical data in the EU has a
number of consequences for the statistical system:
Lack of comparability in the published data between Member States can hardly be directly detected by the user.
Data are often seemingly comparable only.
The best “European” solution is not necessarily the best “national” solution. Users should be aware of this trade-off.
Main focus on the role of statistics for monitoring purposes, not on its role as the basis of empirical research.

47. Some conclusions The specific role of statistical data in the EU has a
number of consequences for the statistical system:
The discussion on concepts and methodological questions in areas such as national accounts in too many cases focuses only on three aspects:
What are the implications on GDP?
What are the implications for the Government budgetary deficit?
What are the implications for the Government debt-to-GDP ratio?

48. Thank you for your attention
CONTRACTOR IS ACTING UNDER A FRAMEWORK CONTRACT CONCLUDED WITH THE EUROPEAN COMMISSION