Having published the Country Reports in February 2020, on 20 May 2020, the Commission presented the country-specific recommendations within the scope of the European Semester. The social and economic consequences of the Coronavirus crisis have set a completely different course.
In response to the Coronavirus crisis, the Commission significantly readjusted this year’s country-specific recommendations. The respective recommendations shall support Member States in dealing with the most urgent challenges of the current crisis and pave the way to recovery in terms of sustainable growth. One message applies to all Member States: in order to absorb the economic shock of the Coronavirus pandemic, countries should take all necessary steps to contain the social and economic consequences of the pandemic. According to Commissioner Nicolas Schmit, preserving jobs, fighting inequalities and the social protection of citizens should be awarded the highest priority. At the same time, the recommendations emphasise the necessity of future investments as part of the economic recovery, which shall enable the implementation of both Green Deal and digital agenda. The Commission is laying an additional focus on securing an efficient and resilient healthcare system, which is addressed in various recommendations to the Member States.
Country-Specific Recommendations for Austria
The Commission defines four recommendations for Austria. Even if the Commission endorses the Austrian healthcare system for successfully coping with the Coronavirus pandemic, Austria has nevertheless been asked to make her healthcare system more resilient and to improve in particular public basic and preventive healthcare services. Secondly, the Commission once again returns to the issue of equal opportunities: Austria is advised to improve equal access to high-quality education. This recommendation has to be seen in context with the Coronavirus crisis, as distance learning has made previously existing unequal educational opportunities even graver. After all, not all pupils have access to laptops or PCs, which are essential for digital education. Thirdly, the Commission identifies a need for action regarding support and liquidity assistance for SMEs, which should be provided with less bureaucratic effort. In order to achieve the great political ambitions such as the Green Deal and the digital transformation, Austria should promote private investments and make public investments relevant and implementable. Investments should above all be made in the areas of innovation, sustainable transport as well as clean and efficient energy generation and consumption, which the AK too demands in view of the climate protection investment package. As it has done in previous years, the Commission also refers to adjusting the tax mix, which, in accordance with the target to achieve sustainable and inclusive growth, has to be adjusted. The factor ‘labour’ was still taxed to high, while other sources of income, such as environmental tax and wealth taxes were not used enough. In this context, consumption taxes should also be adjusted.
Recommendations strike the right chord
In accordance with the suspended fiscal rules, the ad-hoc response to the crisis refrains from recommending a policy of savings for welfare state institution. What is pleasing, is that for the first time Austria has not been criticised regarding the sustainability of long-term care as well as the healthcare and pension system. Also positive is the expressive recommendation to implement a wealth tax. By recommending to expand care facilities and early childhood education as part of the economic recovery, Commission also integrates a long-term demand of the AK, which would also contribute to reducing the gender-specific pay gap. It should also be mentioned that the Commission recommends the revaluation of care jobs, including “adequate remuneration”.
Paradigm change or boomerang effect?
What is not yet clear is whether this year’s progressive country specific recommendations will become a lasting trend in the European Semester process. After all, the fiscal rules were only suspended for so long as expanded fiscal policy scope of action to urgently tackle the crisis and to cushion the social and economic consequences are necessary. According to the Commission, once the crisis is over, the budgetary balance should be speedily restored and the debt sustainability guaranteed. Thus, returning to austerity for the purpose of competitiveness after the pandemic cannot be excluded. Executive Vice President Valdis Dombrovskis did not specify a concrete time when the escape clause would end, and everybody would return to a “new normality”. Apart from that, one can already see that the European Semester will assume an important role in respect of monitoring and evaluating the reconstruction fund, which will be presented next week. This would be yet another reason to get the reforms of the European Semester off the ground at last.