It was as a reaction to the economic and financial crisis that the EU introduced the European Semester in 2011; its aim was to coordinate the economic and social policy of the European Member States. Based on a fixed cycle, the Commission prepares analyses and reports and makes recommendations at European and national level. One of the key papers is the Annual Growth Report 2019, which was published by the Commission on 21 November 2018 within the scope of the Autumn Package.

The Commission describes the current economic growth as sustainable but little dynamic; it is, however, characterised by a high degree of uncertainty. In order to ensure permanent stability in the countries, the current dynamics shall be used to create “budget buffers” and to reduce debt. This shall also form the basis to create better jobs and to ensure more social justice. However, the EU Commissioner for Employment, Marianne Thyssen, commented that the conditions now exist “for being able to invest more in people” so that this boom will benefit all permanently.

It has to be regarded as positive that the Annual Growth Report also refers to the European Pillar of Social Rights. In doing so, the Commission states that it is of vital importance to improve the alignment of working and living conditions of people within the EU. However, the use of the term “growth-friendly” social protection systems in this context seems to be rather odd. The report also clarifies that in view of a digital single market a fair tax system is required to achieve growth, which does not only benefit a few.

Apart from the Annual Growth Report, the Commission also published the so-called Alert Mechanism Report to be able to identify macroeconomic imbalances at an early stage. The Commission identified such imbalances in case of 13 countries, which will be closer examined in a next step. Austria is not one of these countries; however, for example Germany, France and Italy are.

The Commission also published its new assessment in respect of adhering to the Stability and Growth Pact. The situation in Italy is critical: the Commission accuses the country of a particularly serious breach of the applicable rules. Based on the current Italian budget for 2019, it does not only criticise the planned level of new borrowing, but also the fact that allegedly growth stimulating structural reforms have been cancelled. Therefore, deficit procedures shall be initiated against Italy.

However, it is less positive that the Annual Growth Report once again refers to the aging population and the alleged challenges for the pension and health system. However, at the beginning of the year, the country-specific recommendations, which followed three months after the publication of the Annual Growth Report, recommended that Austria would increase the pensionable age. However, from the point of view of the Chamber of Labour, introducing a pension automatism is neither wise nor necessary and would also result in an increase in old age poverty in Austria.

Further information:

European Commission: European Semester Autumn Package: Bolstering inclusive and sustainable growth

AK Position Paper: Country Report Austria 2018

AK EUROPA: Criticism of the Country-Specific Recommendations

AK EUROPA: Winter Package 2018: European Commission presents Country Reports within the European Semester

AK EUROPA: Year after Year – the European Semester