News
BackOn Wednesday, 13 November, the European Commission published its Annual Growth Report, in which it lays down the economic priorities for the coming year. At the same time, it presented the so-called Alert Mechanism Report, which provides an overview of existing imbalances in the eurozone, enabling the Commission to initiate proceedings against individual countries. Together, these publications ring in the “European Semester”, the process of economic-political coordination for the whole of next year.
Annual Growth Report
The Annual Growth Report is designed to lay down the economic-political priorities of the Commission for the respective coming year. However, the national reform programmes of the Member States shall also take their cue from it. Finally, the Commission assesses the Member States in its so-called “country-specific recommendations” based on the Annual Growth Report. Even though the Report is non-binding, it seems strange that the Commission is able to set the economic strategy for the EU by itself and without the involvement of the European Parliament.
Anybody who believes that the Commission, after 5 years of crisis and three years of strangling the economy by imposed austerity measures, is now setting different economic-political priorities is bound to be disappointed. The Commission made it clear from the start that one wanted to retain the 5 priorities of the past year and would only make slight changes. The Commission interprets the minor signs of economic growth as vindication of their previous approach. However, it should be obvious that the modest growth, which so far has taken place without any noteworthy creation of decent employment opportunities, has taken place in spite of the austerity policy and not because of it.
The Commission’s five priorities are: “growth-friendly budget consolidation”, “restoring the normal lending to the economy”, “promoting growth and competitiveness”, “combating unemployment” and “modernising the administration”.
However, reading the smallprint, it becomes clear that even under the guise of combating unemployment, attacks on employees’ rights are recommended. The Commission sees the causes of unemployment not so much in the worst economic crisis since the 1930ies, but with employees themselves, who, furnished with too many rights and too generous salaries had made the labour market “rigid”. Hence, it consequently demands a softening of these rights and moderate pay settlements. Another recommendation is to shift the tax burden from income to consumption. Even if a tax relief on (in particular lower and medium) earned income would surely be positive, any higher taxation of consumption would hit the low-income population all the more. Finally, the Commission plans to use its “REFIT” initiative to also free businesses from so-called “administrative burdens”. That this poses a threat also for various labour and environmental standards goes without saying.
What becomes clear overall, is that the Commission does not explore new avenues when it comes to economic policy, but relies on the same failed concepts of neoliberalism.
Focus is on the Alert Mechanism Report and Germany
The Alert Mechanism Report was presented parallel to the Annual Growth Report. It forms part of the economic-political coordination, which has been intensified since 2011. Due to the fact that it has been recognised correctly that the crisis is also the result of strong economic imbalances between and in the Member States, a so-called Scoreboard consisting of 11 indicators has been introduced. Based on these indicators and its threshold values the Commission plans to identify the existence of imbalances. The indicators include, for example, current account surpluses and deficits, private and public debt and the development of unit labour costs. If one or more of these threshold values are exceeded, the Commission can, as a first step, commission an in-depth analysis of the respective country. If based on this analysis, it reaches the conclusion that an excessive imbalance exists, the Member State must correct this development. If the respective country takes no action, it may be fined. Austria, which last year had been subject to such an analysis, was able to leave the process because the Commission, based on the in-depth analysis, had reached the conclusion, that in spite of exceeding some threshold values, no excessive imbalance existed.
This time, the decision of the Commission in respect of Germany was eagerly anticipated. Since the outbreak of the crisis, Germany had been criticised that her massive current account surpluses, based on her export strength, would damage the eurozone as a whole. According to the critics, the imbalances were caused by years of low wage increases. Due to the fact, that Germany, with a current account surplus of over 6 % of GDP, again exceeded the already high threshold set by the Commission, the latter finally decided to undertake an in-depth analysis for Germany.
The German public greeted this decision with lots of hue and cry. According to German perception the EU is now intent on restraining Germany’s competitiveness. Commission President Barroso and Economic and Monetary Affairs Commissioner Rehn tried at the press conference of the Commission to eliminate this point of view; Barroso even commented that Europe needed more Germany. The latter demonstrates the Commission’s wrong economic-political understanding. A eurozone, which only consists of net exporters is not possible. Even if all states of the eurozone would only export to third countries, it would still have negative effects on the global economy. Only the Commissioner for Employment, Social Affairs and Inclusion, Andor, did not mince his words. From his point of view, German current account surpluses were not a sign of competitiveness, but of a lack of investments.
Only the coming report of the Commission will show whether the imbalances in the eurozone will at last be approached in a differentiated manner or whether the deficit countries will still be forced to adopt a fatal and one-sided adjustment course.
Further information:
Annual Growth Report
Alert Mechanism Report
The Annual Growth Report is designed to lay down the economic-political priorities of the Commission for the respective coming year. However, the national reform programmes of the Member States shall also take their cue from it. Finally, the Commission assesses the Member States in its so-called “country-specific recommendations” based on the Annual Growth Report. Even though the Report is non-binding, it seems strange that the Commission is able to set the economic strategy for the EU by itself and without the involvement of the European Parliament.
Anybody who believes that the Commission, after 5 years of crisis and three years of strangling the economy by imposed austerity measures, is now setting different economic-political priorities is bound to be disappointed. The Commission made it clear from the start that one wanted to retain the 5 priorities of the past year and would only make slight changes. The Commission interprets the minor signs of economic growth as vindication of their previous approach. However, it should be obvious that the modest growth, which so far has taken place without any noteworthy creation of decent employment opportunities, has taken place in spite of the austerity policy and not because of it.
The Commission’s five priorities are: “growth-friendly budget consolidation”, “restoring the normal lending to the economy”, “promoting growth and competitiveness”, “combating unemployment” and “modernising the administration”.
However, reading the smallprint, it becomes clear that even under the guise of combating unemployment, attacks on employees’ rights are recommended. The Commission sees the causes of unemployment not so much in the worst economic crisis since the 1930ies, but with employees themselves, who, furnished with too many rights and too generous salaries had made the labour market “rigid”. Hence, it consequently demands a softening of these rights and moderate pay settlements. Another recommendation is to shift the tax burden from income to consumption. Even if a tax relief on (in particular lower and medium) earned income would surely be positive, any higher taxation of consumption would hit the low-income population all the more. Finally, the Commission plans to use its “REFIT” initiative to also free businesses from so-called “administrative burdens”. That this poses a threat also for various labour and environmental standards goes without saying.
What becomes clear overall, is that the Commission does not explore new avenues when it comes to economic policy, but relies on the same failed concepts of neoliberalism.
Focus is on the Alert Mechanism Report and Germany
The Alert Mechanism Report was presented parallel to the Annual Growth Report. It forms part of the economic-political coordination, which has been intensified since 2011. Due to the fact that it has been recognised correctly that the crisis is also the result of strong economic imbalances between and in the Member States, a so-called Scoreboard consisting of 11 indicators has been introduced. Based on these indicators and its threshold values the Commission plans to identify the existence of imbalances. The indicators include, for example, current account surpluses and deficits, private and public debt and the development of unit labour costs. If one or more of these threshold values are exceeded, the Commission can, as a first step, commission an in-depth analysis of the respective country. If based on this analysis, it reaches the conclusion that an excessive imbalance exists, the Member State must correct this development. If the respective country takes no action, it may be fined. Austria, which last year had been subject to such an analysis, was able to leave the process because the Commission, based on the in-depth analysis, had reached the conclusion, that in spite of exceeding some threshold values, no excessive imbalance existed.
This time, the decision of the Commission in respect of Germany was eagerly anticipated. Since the outbreak of the crisis, Germany had been criticised that her massive current account surpluses, based on her export strength, would damage the eurozone as a whole. According to the critics, the imbalances were caused by years of low wage increases. Due to the fact, that Germany, with a current account surplus of over 6 % of GDP, again exceeded the already high threshold set by the Commission, the latter finally decided to undertake an in-depth analysis for Germany.
The German public greeted this decision with lots of hue and cry. According to German perception the EU is now intent on restraining Germany’s competitiveness. Commission President Barroso and Economic and Monetary Affairs Commissioner Rehn tried at the press conference of the Commission to eliminate this point of view; Barroso even commented that Europe needed more Germany. The latter demonstrates the Commission’s wrong economic-political understanding. A eurozone, which only consists of net exporters is not possible. Even if all states of the eurozone would only export to third countries, it would still have negative effects on the global economy. Only the Commissioner for Employment, Social Affairs and Inclusion, Andor, did not mince his words. From his point of view, German current account surpluses were not a sign of competitiveness, but of a lack of investments.
Only the coming report of the Commission will show whether the imbalances in the eurozone will at last be approached in a differentiated manner or whether the deficit countries will still be forced to adopt a fatal and one-sided adjustment course.
Further information:
Annual Growth Report
Alert Mechanism Report