EU economic reforms must continue as growth returns, says Barroso

3 Jun 14
Structural reforms must be maintained as the European Union returns to growth following the financial crisis, the European Commission has said.

Issuing a series of economic policy recommendations for individual member states yesterday, the commission said its emphasis had shifted from addressing the urgent problems caused by the crisis to strengthening the conditions for sustainable growth in a post-crisis economy.

While reforms had paid off and put the EU economy on a much firmer footing, growth in 2014/15 would remain ‘uneven and fragile’, the commission said.  ‘The momentum for reform must be maintained,’ it added, with actions introduced to tackle high unemployment levels, social inequality and the large investment gap.

Commission president José Manuel Barroso said: ‘The efforts and sacrifices made across Europe have started to pay off. Growth is picking up and – while still too modest – we will see a rise in employment from this year onwards.

‘The fundamental challenge for the EU now is political: how do we keep up support for reform as the pressure of the crisis recedes? If politicians show leadership and summon the political will to see reform through – even if it is unpopular – we can deliver a stronger recovery and a better standard of living for everyone.’

Among the structural reforms the commission says are needed to boost growth are shift in taxation from labour to property, consumption and environmental taxes, a boost in private investment, particularly bank lending to small- and medium-sized enterprises and measures to bring down public sector debt. This is particularly necessary in Belgium, Ireland, Greece, Spain, Italy, Cyprus and Portugal, where debt remains above 100% of gross domestic product.

‘The challenge for public finances is to manage the costs of ageing – particularly pensions and healthcare – and to preserve growth-enhancing expenditure in education, research and innovation,’ the commission said.

Country-specific recommendations will be considered by EU leaders and ministers later this month and will be formally adopted by the EU’s Council of Finance Ministers on July 8. It will then be up to individual member states to implement them when drafting their national budgets.

Meanwhile, the commission recommended the Council of Ministers close the Excessive Deficit Procedure for six countries: Austria, Belgium, the Czech Republic, Denmark, the Netherlands and Slovakia.

The EDP is intended to put limits on the budget deficits and levels of public debt for European nations – set at a 3% deficit-to-GDP ratio, and 60% of debt-to-GDP – and ensure national plans to reach these levels are implemented at a ‘satisfactory pace’.

Following today’s decision, the countries with ongoing excessive deficit procedures are: Malta, Ireland, France, Poland, Portugal, Slovenia, the UK, Cyprus, Greece, Spain and Croatia.

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