What is included in this year's European Semester Autumn Package?
Today, the Commission is presenting:
-The Annual Sustainable Growth Survey;
-A Communication on the 2023 Draft Budgetary Plans of euro area Member States;
-Commission's opinions on the Draft Budgetary Plans of euro area Member States and of Croatia; and
-A Commission proposal for the euro area recommendation for 2023;
-The 2023 Alert Mechanism Report;
-A proposal for a Joint Employment Report for 2023;
-Post-programme surveillance reports for Cyprus, Greece, Ireland, Spain and Portugal.
What is the Annual Sustainable Growth Survey?
The Annual Sustainable Growth Survey (ASGS) outlines the economic and employment policy priorities for the EU for the coming 12 to 18 months.
Since the 2020 Semester cycle, the compass for our coordinated social and economic policy action, i.e. competitive sustainability, has been anchored in four dimensions: environmental sustainability, productivity, fairness and macroeconomic stability.
What are the main priorities in the Annual Sustainable Growth Survey?
This year's Annual Sustainable Growth Survey puts forward an ambitious agenda to further strengthen coordinated EU policy responses to mitigate the negative impacts of energy shocks in the short-term.
At the same time, it is crucial to continue increasing social and economic resilience and fostering sustainable and inclusive growth in the medium term, while maintaining flexibility to tackle new challenges.
What does this mean in practice?
-Key policy priorities in the short term include:
-Balancing energy supply and demand and tackling rising energy costs, while preserving incentives for the green transition;
-Ensuring that energy support measures are targeted to the most affected viable firms, and preserve the EU level playing field and the integrity of the single market;
-Ensuring that energy support measures are targeted to vulnerable households and retain incentives to reduce energy consumption and promote energy efficiency;
-Promoting the sustainable use of resources in the EU, while maximising the potential of the circular economy;
-Ensuring macro-financial stability and maintaining credit channels to the economy;
-Safeguard closely coordinated policy responses, ensuring coherence between fiscal and monetary policy.
-Key medium-term policy priorities include:
-Making rapid progress on the green transition, such as scaling up and speeding up of the rollout of renewables;
-Rolling out investments and reforms in support of the digital transition, also to enable the green transition;
-Designing fiscal policies ensuring fiscal sustainability and prioritising investment in support of the green and digital transitions, including the upskilling and reskilling of the workforce,and social and economic resilience;
-Engaging in concrete efforts to deepen the single market, in particular for services;
-Making sure that support measures focus on vulnerable households and exposed businesses and are temporary, as the negative effect of a prolonged increase in energy prices on economies cannot be addressed durably through broad compensatory fiscal measures;
-Putting in place effective labour market policies to support workers, enable access to the labour market, promote job transitions and tackle mismatches; and
-Adapting education and training systems to develop the skills needed in our economies, and tackling the digital skills gap and enabling fair transitions.
How does the European Semester Autumn Package take account of the exceptional circumstances brought about by Russia's invasion of Ukraine?
With the fallout of Russia's invasion of Ukraine on global energy and food markets, the EU's economy now faces significantly challenging economic and geopolitical conditions, following the recovery from the COVID pandemic.
The ongoing war in Ukraine has created a new environment, triggering severe knock-on effects with an unprecedented energy price crisis. Further hikes in commodity prices, renewed supply disruptions and heightening uncertainty are denting growth and imply significant downside risks. It also poses additional challenges to the EU economies related to security of energy supply and fossil fuel dependency on Russia.
This requires substantial efforts in economic policy coordination to protect our productive capacity in the face of unexpected events and to avoid a long-term loss of economic activity that could undermine the energy-related and cost-of-living conditions of Europeans, particularly the most vulnerable ones.
The Commission assessed the consistency of the 2023 draft budgetary plans with the Council Recommendations of 12 July 2022. The Council recommended that Member States' fiscal policy should take into account continued temporary and targeted support to households most vulnerable to energy price hikes and the cost of assisting people fleeing Ukraine.
Building on the REPowerEU Plan, Europe should continue to work on securing adequate energy supply at affordable prices while reducing energy demand, setting up an integrated security of supply strategy, safeguarding economic and financial stability, and protecting the vulnerable households and companies from the fallout of high energy prices.
Today's package therefore includes a strong focus on mitigating the negative impacts of the energy and economic shocks in the short-term and on keeping up efforts to foster sustainable growth and the twin transition as well as increase resilience over the medium run.
How has the European Semester evolved since last year and why?
For the 2023 cycle, the European Semester preserves its main purpose of broad economic and employment policy coordination.
The continued implementation of the Recovery and Resilience Facility and the adoption of the REPowerEU Plan, as well as new challenges, resulting from Russia's aggression against Ukraine, make it necessary to further adapt the European Semester. The Semester now integrates new policy priorities and also ensures the efficient implementation of the recovery and resilience plans (RRPs).
As was the case this year, country reports next year will identify challenges that are only partially or not addressed by the RRPs, zooming in also on progress made in the implementation of the plans, and examining additional, newly emerging challenges.
Country-specific recommendations will again focus on a limited set of key challenges identified in the country reports, and where relevant the in-depth reviews, for which policy action over several years will be required. The recommendations will also take into account newly emerging needs.
What is the link between the European Semester Autumn Package, the Recovery and Resilience Facility and the REPowerEU proposal?
The Recovery and Resilience Facility (RRF), which will continue to provide a stream of investment in European businesses, infrastructure and skills until 2026, is integrated within the European Semester of economic and employment policy coordination. Together, the European Semester and the Recovery and Resilience Facility continue to provide a robust framework for effective policy coordination in view of the current challenges.
The RRF will continue to drive Member States' reform and investment agenda in the years ahead, accelerating the green and digital transition, including with measures accelerating the clean energy transition.
The RRF is at the heart of the REPowerEU Plan, the EU's plan to rapidly phase out the EU's dependence on Russian fossil fuels and accelerating the clean energy transition. It will support coordinated planning and financing of cross-border and national energy infrastructure, as well as energy-related projects and reforms. Once the REPowerEU Regulation amending the RRF enters into force, Member States should integrate dedicated REPowerEU chapters in their existing recovery and resilience plans addressing the 2022 energy-related country-specific recommendations, in addition to the large number of relevant reforms and investments which are already in the plans.
In this context, Member States would also see an increase of their financial allocation under the RRF through the additional funding foreseen by the REPowerEU plan.
How is the Commission addressing energy security challenges and tackling high energy prices?
The energy market situation has deteriorated since Russia's invasion of Ukraine and the weaponisation of its gas supplies in an attempt to fragment Europe politically. As a response to the energy crisis, the Commission has adopted several measures to tackle high energy prices and strengthen energy security, such as:
-The Energy Prices Toolbox, based on which Member States have deployed many measures to ease price pressure on citizens and businesses, especially vulnerable ones. The toolbox was expanded in March and May to extend short-term market interventions.
-The REPowerEU Plan, to end our dependence on Russian fossil fuels as fast as possible, by saving energy, diversifying our energy supply and enhancing renewable energy deployment.
-To ensure security of supply for the coming winters, new EU minimum gas storage obligations (of 80% for winter 2022 and 90% starting from the following winter) and a 15% gas demand reduction target to ease the balance between supply and demand in Europe.
-A set of emergency market intervention measures to address high electricity prices, adopted by the Council on 30 September, to reduce electricity demand and redistribute windfall profits in the energy sector to citizens and industry, while still allowing substantial benefits for such producers, keeping incentives for renewable energy sources investments.
-A proposal for a Council Regulation to address high gas prices through joint gas purchasing, principles for a market correction mechanism and new measures on transparent infrastructure use, solidarity between Member States, and demand management in case of supply crisis, with the aim to provide further stability to the market.
-A proposal for a Council Regulation establishing a market correction mechanism to protect EU citizens and the economy against ecessively high gas prices.
In addition, the Commission continues its work on a reform of the electricity market design, and additional measures to ensure energy security and tackle high energy prices. It has also kicked off work to identify new trans-European priority energy infrastructure projects under the revised Trans-European Networks for Energy (TEN-E) Regulation, which will help strengthen interconnections and diversify supply.
How will the 2023 European Semester cycle take account of the energy security challenges and help curb the high energy prices and their impacts on EU households and businesses?
This year's European Semester cycle of economic policy coordination identifies securing adequate and affordable energy supply and protecting the vulnerable households and companies as immediate policy priorities, requiring coordinated action at EU and national level. The European Semester supports the work on these priorities by ensuring coordination and providing clear policy guidance for the year to come.
The euro area recommendation states that euro area Member States should ensure that support provided to households and companies that come under financial stress is cost-effective, temporary, and targeted to vulnerable ones, in particular SMEs. In that respect, it suggests setting up a two-tier energy pricing system that ensures incentives for energy savings, replacing broad-based price measures. Under this system, vulnerable consumers could benefit from regulated prices. A cap would be introduced to drive down consumption, and normal prices would apply above that cap.
What is the current economic and employment outlook?
After a strong first half of 2022, the EU economy has now entered a much more challenging phase. Amid elevated uncertainty, high energy price pressures, erosion of households' purchasing power, a weaker external environment and tighter financing conditions are expected to tip the EU, the euro area and most Member States into recession in the last quarter of 2022. As inflation keeps cutting into households' disposable incomes, the contraction of economic activity is set to continue in the first quarter of 2023. Growth is expected to return to Europe in spring, as inflation gradually relaxes its grip on the economy. However, with powerful headwinds still holding back demand, economic activity is set to be subdued, with GDP growth reaching 0.3% in 2023 as a whole in both the EU and the euro area. By 2024, economic growth is forecast to progressively regain traction, averaging 1.6% in the EU and 1.5% in the euro area.
The labour market has continued to perform strongly, with employment and participation at their highest and unemployment at its lowest in decades. In light of the still high number of vacancies and large share of businesses recording shortages in labour supply, labour markets are set to remain resilient, although there is a risk of deterioration in view of steep rises in energy prices and inflation. Employment growth in the EU is forecast at 1.8% in 2022, before coming to a standstill in 2023 and moderately edging up to 0.4% in 2024. Unemployment rates in the EU are projected at 6.2% in 2022, 6.5% in 2023, and 6.4% in 2024.
What are the main risks to the economic outlook?
The economic outlook remains surrounded by an exceptional degree of uncertainty as Russia's war of aggression against Ukraine continues and the potential for further economic disruptions is far from exhausted.
The largest threat comes from adverse developments on the gas market and the risk of shortages, especially in the winter of 2023-24. Beyond gas supply, the EU remains directly and indirectly exposed to further shocks to other commodity markets reverberating from geopolitical tensions.
Longer-lasting inflation and potential disorderly adjustments on global financial markets to the new high interest rate environment also remain important risk factors. Both are amplified by the potential for inconsistency between fiscal and monetary policy objectives.
How has inflation affected the content of the Autumn Package?
The Communication on the 2023 draft budgetary plans notes that the projected euro area fiscal stance and its composition, appear to be consistent with the fiscal recommendation for 2023. Overall, planned fiscal policies for 2023 are currently not expected to contribute to inflationary pressures on the demand side and would enhance the supply side of the euro area economy, complementing the ongoing normalisation of monetary policy by the European Central Bank. In a context of high and persistent inflation, it is crucial that monetary and fiscal policies work hand in hand. The ongoing monetary policy normalisation is now reducing fiscal space in a context of high and persistent inflation that implies strong needs for targeted fiscal support to vulnerable households and companies.
How did the Commission assess the 2023 draft budgetary plans?
The Commission assessed the consistency of the 2023 draft budgetary plans with the Council Recommendations of 12 July 2022.
The Council recommended that Member States' fiscal policy should take into account continued temporary and targeted support to households most vulnerable to energy price hikes and the cost of assisting people fleeing Ukraine. All Member States were asked to stand ready to adjust current spending to the evolving situation. In addition, Member States should expand public investment for the green and digital transitions, and for energy security taking into account the REPowerEU initiative.
The Council Recommendations assessed Member States on the basis of their fiscal space as illustrated by their debt levels. Low and medium debt Member States should ensure that in 2023 the growth of nationally financed primary current expenditure is in line with an overall neutral policy stance. High-debt Member States were recommended to ensure a prudent fiscal policy, in particular by limiting the growth of nationally financed primary current expenditure below medium-term potential output growth.
The draft budgetary plans of Italy and Latvia were submitted by the outgoing governments on a no-policy-change basis, in view of developments in their national political cycles. Italy and Latvia are therefore invited to present updated draft budgetary plans as soon as possible.
What are the main conclusions of the assessment of the 2023 draft budgetary plans?
Overall, the Commission's assessment finds that the draft budgetary plans generally include measures that go in the direction of strengthening the quality and composition of public finances and contributing to a sustainable and inclusive recovery. This includes growth-enhancing investment, in particular supporting the green and digital transition as well as energy security.
While Member States rapidly deployed energy measures as part of the emergency policy response to the exceptional energy price hikes, a prolongation of existing and/or an enactment of new support measures in response to high energy prices would contribute to higher growth in net nationally financed current expenditure and to an increase in the projected government deficit and debt in 2023. Therefore, it is important that Member States better focus such measures to the most vulnerable households and exposed firms, to preserve incentives to reduce energy demand, and to be withdrawn as energy price pressures diminish.
For the euro area as a whole, the projected 2023 broadly neutral fiscal stance and its composition are broadly in line with the Council Recommendations of 12 July 2022 and the Eurogroup statement on the fiscal policy response to high energy prices and inflationary pressures of 3 October 2022. However, given the uncertainty regarding the development of energy prices and the absence of information on the possible prolongation of energy measures into 2023 for most Member States, there is a risk that the fiscal stance may eventually turn out to be more expansionary than currently projected.
With regard to low/medium-debt Member States, the Commission is of the opinion that the draft budgetary plans of Croatia, Cyprus, Finland, Ireland, Latvia and Malta are in line with the fiscal guidance contained in the Council's Recommendations. Those of Austria, Lithuania, Germany, Estonia, Luxembourg, the Netherlands, Slovenia and Slovakia are partly in line with the Recommendation. For these Member States, the nationally financed primary current expenditure which provides an expansionary contribution to the fiscal stance is not the result of temporary and targeted support to households and firms most vulnerable to energy price hikes and to people fleeing Ukraine. Cyprus, Latvia and Malta are not planning to preserve nationally financed investment.
With regard to high-debt Member States, the Commission is of the opinion that the draft budgetary plans of France, Greece and Spain are in line with the fiscal guidance contained in the Council's Recommendations. Belgium's draft budgetary plan is partly in line with the recommendation. Portugal's draft budgetary plan is at risk of being only partly in line with the recommendation. The growth of Belgium's nationally financed primary current expenditure is not projected to be below the medium-term potential output growth. The growth of expenditure in excess of potential growth is also not the result of temporary and targeted support to households and firms most vulnerable to energy price hikes and to people fleeing Ukraine. For Portugal, the growth of nationally financed current expenditure is projected to be close to the medium-term potential output growth, assuming the planned reduction in measures in response to high energy prices, including in temporary and targeted support to vulnerable households and firms. Therefore, it risks not being in line with the Recommendation of the Council. Belgium, France, Greece, Portugal and Spain plan to preserve nationally financed investment.
How did the Commission consider the costs of providing assistance to those fleeing the war against Ukraine and measures to mitigate high energy costs when assessing the 2023 draft budgetary plans?
The Commission's assessment of compliance with the fiscal guidance takes into account continued temporary and targeted support to households and firms most vulnerable to energy price hikes and to people fleeing Ukraine.
In 2022 as a whole, the net cost of the measures adopted until the cut-off date of the autumn forecast is estimated at around 1.2% of GDP for the EU as a whole. This estimate is projected to decrease to 0.9% of GDP in 2023 against the assumptions that most ‘energy measures' expire early in 2023. As energy prices are set to remain high in 2023, the currently announced measures may underestimate the ultimate budgetary costs.
Most of the adopted measures are not sufficiently targeted to the most vulnerable households and firms. In 2022, more than 70% of measures is untargeted and this proportion increases even to around 90% in 2023. The vast majority of these measures are also price measures (roughly two thirds in both years). Therefore, they may distort the price signal and reduce incentives to contain energy consumption and increase energy efficiency.
The Commission's opinions underline the importance that Member States better focus such measures to the most vulnerable households and exposed firms, to preserve incentives to reduce energy demand, and to be withdrawn as energy price pressures diminish.
In 2023, the budgetary cost of sheltering and integrating people fleeing Ukraine, following Russia's war of aggression, is estimated to remain at 0.1% of GDP in the euro area.
How will the orientations for a reform of the EU's economic governance framework affect the European Semester?
The European Semester would remain the key channel for the Commission and the Council to monitor Member States' compliance with their reform and investment commitments.
All Member States would be required to address the priorities identified in country-specific recommendations issued in the context of the European Semester. The national medium-term fiscal-structural plans should also put forward initiatives that are in line with strategic EU priorities derived directly from agreed EU guidance and targets that require policy action by Member States.
Member States would report on progress in the implementation of these commitments in their annual progress reports together with a report on the policy action taken to address country-specific recommendations. The Commission would monitor the delivery of those national commitments closely.
As part of the European Semester, monitoring would become more targeted for Member States that request a more gradual fiscal adjustment path to implement priority reforms and investment. A new tool is also proposed to enforce these additional commitments, with stronger enforcement in case of non-compliance.
What is the euro area recommendation?
The euro area recommendation presents tailored advice to euro area Member States on those topics that affect the functioning of the euro area as a whole. The recommendation reviews fiscal, financial and structural issues, as well as institutional aspects of Europe's Economic and Monetary Union.
What is contained in the euro area recommendation?
The euro area recommendation calls on euro area Member States to take action, individually, including through the implementation of their Recovery and Resilience Plans, and collectively within the Eurogroup, in the period 2023-2024 to:
-Continue to coordinate fiscal policies across Member States to support the timely return of inflation to the European Central Bank's 2% medium-term target;
-Sustain a high level of public investment needed to foster social and economic resilience and support the green and digital transitions, including for greater energy efficiency and for the transition to sustainable sources of energy;
-In accordance with national practices and respecting the role of social partners, foster wage developments that mitigate the loss in spending power of wage-earners, in particular for low-income workers, while reflecting medium-term productivity developments and limiting second-round effects on inflation;
-Develop and adapt, where needed, social support systems to help vulnerable households deal with the energy shock and the green and digital transition, addressing the increased risk of poverty;
-Further improve active labour market policies and address skills shortages;
-Ensure the effective involvement of social partners in policy-making and strengthen social dialogue;
-Ensure that the support to companies that come under financial stress because of the energy crisis is cost-effective, temporary, and targeted to viable firms, in particular SMEs; and
-Preserve macro-financial stability and continue supporting financial integration.
It adds that further steps in deepening the Economic and Monetary Union should take into account the lessons learnt from the design and implementation of the Union's comprehensive economic policy response to the COVID-19 crisis, including the Recovery and Resilience Facility and the economic governance review.
What are the next steps following the presentation of the euro area recommendation?
The Council will have to formally adopt the recommendation, based on today's Commission's proposal. The Commission will present its proposal for the euro area recommendation at the Economic and Financial Affairs Council in December. The proposal is expected to be discussed by the Eurogroup next January. Endorsement by the European Council is expected in March 2023 with formal adoption by the Economic and Financial Affairs Council later in 2023.
Member States should take action based on the Recommendation both individually and collectively within the Eurogroup to implement the euro area recommendation in the period 2023 - 2024.
What is the Alert Mechanism Report?
This Alert Mechanism Report initiates the next annual round of the Macroeconomic Imbalance Procedure to detect, prevent and correct imbalances that hinder the proper functioning of Member States' economies, the Economic and Monetary Union or the Union as a whole, and at eliciting appropriate policy responses.
The Alert Mechanism Report identifies Member States for which in-depth reviews should be undertaken to assess whether they are experiencing macroeconomic imbalances. The Alert Mechanism Report analysis is based on the economic reading of a scoreboard of agreed indicators.
What are the main findings of the Alert Mechanism Report?
This Alert Mechanism Report considers that economic challenges are present in a number of Member States.
The Alert Mechanism Report concludes that in-depth reviews are warranted for those Member States that were subject to an in-depth review in the previous annual cycle of Macroeconomic Imbalance Procedure surveillance and were considered to be experiencing excessive imbalances, or imbalances (Cyprus, France, Germany, Greece, Italy, the Netherlands, Portugal, Romania, Spain and Sweden). The in-depth reviews will assess whether those imbalances are aggravating, under correction, or corrected, with the view to updating existing assessments and assessing possible remaining policy needs.
In addition, the Alert Mechanism Report points to the need to closely monitor potentially risky trends rooted in differential cost and price pressures, and related competitiveness dynamics, or in housing market developments, or in both issues, which affect a number of Member States which were not subject to an in-depth review in 2021/2022 (Czechia, Estonia, Hungary, Latvia, Lithuania, Luxembourg, and Slovakia).
What are the next steps following the presentation of the Alert Mechanism Report?
Discussions on the Alert Mechanism Report with the European Parliament and within the Council and the Eurogroup will focus on the findings of the report. The Commission will in the coming months prepare in-depth reviews for the Member States concerned.
Before that, as part of the analytical underpinning of the in-depth reviews, the Commission services will carry out three separate in-depth thematic assessments dealing with the issues most relevant at the current juncture. These assessments will cover issues that are common to a number of Member States. The assessments will also be presented to the Economic Policy Committee in early 2023, and the relevant Member States will be invited to provide input to inform a discussion. Those assessments will focus on housing market developments, competitiveness dynamics, and external sustainability and balances.
The in-depth reviews will be published in spring 2023, and will provide the basis for the Commission's assessment regarding the existence or unwinding of macroeconomic imbalances, and the extent to which policies are addressing these challenges.
What is the Proposal for a Joint Employment Report?
The Joint Employment Report provides an annual overview of the main employment and social developments in the EU, as well as of Member States' actions in line with their Guidelines for the Employment Policies. In addition, the Joint Employment Report 2023 monitors Member States' performance in relation to the Social Scoreboard accompanying the European Pillar of Social Rights. The report fully integrates the three EU headline targets on employment, skills and poverty reduction by 2030 and covers for the first time the national targets put forward by the Member States, as presented to the June 2022 EPSCO Council.
The Report shows the main employment and social challenges in Europe as well as policy measures taken by Member States to address them. Member States can therefore compare their own performance to that of others and take steps to align policy measures more closely.
What are the main findings of the proposal for a Joint Employment Report?
The proposal for the Joint Employment Report confirms that overall, the EU labour market has fully recovered from COVID-19, surpassing pre-pandemic employment levels since the third quarter of 2021 and showing a strong performance. Some sectors - manufacturing, accommodation and food services, and administrative support activities - however, have not returned to their pre-pandemic employment levels. This could be partly due to changed market conditions, increased energy prices and supply chain disruptions, as well as increased uncertainty heightened by Russia's war of aggression on Ukraine.
Policies helping workers get new skills, in line with the European Skills Agenda and the upcoming European Year of Skills, need to be strengthened to mitigate the risks of high labour and skills shortages and to support job-to-job transitions in changing labour markets, especially against the background of the green and digital transitions. Young people, women, people with disabilities, and those with a migrant background are in particular in need of support, as the socio-economic background continues to have a strong impact on learning and labour market outcomes. Labour market outcomes of young people have been improving recently but overall, some 9.3 million of the 15-29 year olds were neither in employment, nor in education or training in 2021 (13.1%); some 8.3 million in Q2-2022 (11.7%). Unpaid work, including care obligations, prevented eight times more women than men from seeking paid employment and made five times more women take up part-time employment involuntarily.
Overall, the proposed report shows that policy measures implemented by Member States complemented by EU initiatives were instrumental in preventing a dramatic fall of households' income. Collective bargaining and setting fair minimum wages are powerful tools to preserve the purchasing power of wages, in particular for low wages, while promoting employment. In Q2-2022 real wages fell by 3.3% in the EU on average compared to the same quarter of 2021, amidst growing concerns about the adverse social consequences of the loss in purchasing power, especially for low-wage earners. To ensure that work pays, the Commission has presented a Directive on adequate minimum wages in the EU, which has been adopted and entered into force.
Further work to increase both the adequacy and coverage of minimum income schemes and effectiveness of social protection play an important stabilising role and can alleviate the impact of the ongoing energy crisis. To help Member States modernise their minimum income schemes, the Commission has presented a proposal for a Council Recommendation on minimum income.
In the medium term, the challenge of adapting to the changing macroeconomic conditions can be an opportunity to accelerate the fair green and digital transitions and help Member States progress towards their national commitments to contribute to the 2030 EU social targets on employment, skills, and poverty reduction.
What does the proposal for a Joint Employment Report say with regard to the social scoreboard and upward social convergence in the EU?
The Social Scoreboard supports the monitoring of the implementation of the European Pillar of Social Rights in the Member States. The analysis in the 2023 Joint Employment Report relies on the Social Scoreboard headline indicators endorsed by the Council across the three areas of 1) equal opportunities and access to the labour market, 2) fair working conditions and 3) social protection and inclusion.
The proposal for a Joint Employment Report shows that there are areas where upward convergence needs a particular boost because some Member States either lag behind their peers or experience a substantial deterioration compared to them. These areas include: early leaving from education and training, the growth of gross domestic household income per capita, the at-risk-of-poverty and social exclusion rate for children, the rate of young people neither in employment nor in education and training, the gender employment gap or income inequalities. On the other hand, convergence could nonetheless be observed for rising employment and falling unemployment rates.
What is the state of play of the Pillar of Social Rights being implemented in the Member States?
At the EU-level, the Social Scoreboard indicates good progress in implementing the Pillar and its Action Plan with an improvement for 9 out of 16 headline indicators, including the employment rate, the unemployment rate, participation in early childhood education and care and the impact of social transfers (excluding pensions) on poverty reduction. Significant differences across Member States remain. Indicators that deteriorated related to income inequality, the long-term unemployment rate and the housing cost overburden rate. The at-risk-of-poverty rate indicators remained stable.
How will the Commission monitor the work towards reaching the 2030 social targets?
The Commission monitors progress on the 2030 EU headline targets on employment, skills, and poverty reduction, as well as on the contributing national targets, through the Social Scoreboard and country-specific analysis underpinning specific country-specific recommendations where relevant. The state of play will be presented at different points in time, notably in the Joint Employment Report and the country reports that provide the basis for the country-specific recommendations. The Employment Performance Monitor (EPM) and the Social Protection Performance Monitor (SPPM), which are prepared yearly respectively by the Council's advisory Employment Committee and the Social Protection Committee, contribute further to the monitoring of the targets.
What are the next steps following the presentation of a Joint Employment Report?
The proposal for a Joint Employment Report will now be discussed in two advisory bodies of the Council, the Employment Committee and the Social Protection Committee, with a view to final adoption by the Employment, Social Policy, Health and Consumer Affairs Council (EPSCO) in March 2023.
What are the main findings of the post-programme surveillance reports for Ireland, Greece, Spain, Cyprus and Portugal?
The post-programme surveillance reports for Ireland, Greece, Spain, Cyprus and Portugal conclude that all five Member States retain the capacity to repay their debt.
The Irish economy is strong, driven by both the domestic economy and multinational corporations. However, growth started to decelerate in the summer of 2022. The energy crisis, persisting supply bottlenecks, tighter financial conditions and a deteriorating global economy weigh on the outlook, although multinational corporations, particularly in the fields of pharmaceuticals and medical devices, are expected to remain resilient. The outlook for public finances is favourable, in spite of risks on the downside. The Irish financial sector remained resilient, with domestic banks withstanding well the impact of the most acute phase of the pandemic.
The Greek economy continued to recover at a solid pace in the first half of 2022, but the economy is expected to slow down in the coming quarters as a consequence of the energy crisis and the ensuing inflationary shock. Fiscal policy remains supportive in 2022, but expected to turn contractionary as pandemic-related support measures are phased out, and the fiscal cost of the energy measures is reduced. The reduction in the banks' non-performing loans continued. Despite improving fundamentals, banks face challenges in the future, as the economy decelerates. Related to Greece's policy commitments, the report finds that the authorities delivered on their commitments across various areas, notably fiscal policy, tax administration, justice, financial sector reforms, cadastre and privatisation. In certain areas, progress has been made, but further steps are needed to fully achieve the objectives; this is notably the case for the implementation of the primary health care reform, the labour law codification, as well as the clearance of arrears and backlogs related to the functioning of the financial sector. The report could serve as a basis for the Eurogroup to take a decision on the release of a final tranche of policy-contingent debt measures.
The Spanish economy continued to expand in 2022 despite the growing disruptions prompted by the war of aggression of Russia against Ukraine, but a rapid slowdown is expected into 2023 amid high uncertainties with risks tilted to the downside. The general government balance in 2022 has improved, helped by a strong revenues performance, but the high underlying deficit and elevated level of debt remain a source of vulnerability. The banking sector has remained resilient, as potential cliff-edge effects after the expiry of public support measures deployed during the pandemic period have not materialised, but the second-round effects stemming from higher energy prices and interest rates warrant close oversight.
The Cypriot economy grew strongly in 2022, mainly driven by domestic demand and supported by a rebound in tourism. However, economic activity is expected to slow down considerably towards the end of the year due to the weakening of growth in the EU and the trading partners of Cyprus, rising interest rates and upward price pressures. The country's fiscal performance continued to improve markedly in 2022, supported by the robust economic growth. The general government balance is expected to remain in surplus over the forecast horizon. In the banking sector, the stock of non-performing loans remained stable, following a sizeable reduction in 2021. The impact of the Russian invasion of Ukraine on the Cypriot financial sector remained contained. Cyprus' sizeable cash buffer and ‘investment grade' ranking by three major rating agencies reduces refinancing risks.
The Portuguese economy continued to grow in 2022 as the strong rebound in tourism outweighed adverse external shocks related to global supply chains disruptions and high energy prices. In line with developments of main trading partners, economic growth is expected to weaken in late 2022 and early 2023 and to gradually improve afterwards. Portugal adopted fiscal policy measures in response to the exceptional increases in energy prices. Nevertheless, public finances are projected to continue improving over the period 2022-2024. The banking sector remains resilient, as banks have improved their profitability and the share of non-performing loans has continued to decline.
How does the European Semester contribute to implementing the Sustainable Development Goals?
Sustainable Development Goals (SDGs) have been integrated into the European Semester since 2020, as called for by President von der Leyen in her 2019 Political Guidelines.
The European Semester now includes a yearly SDG monitoring report, which covers implementation of SDGs across Member States. This is published in the European Semester Spring package.
Each European Semester country report also includes a dedicated section discussing the country's SDG implementation status, compared to the EU average, as well as progress made in each Sustainable Development Goals area.
These reports, as well as additional indicators monitoring Member States' performance in view of key EU policy targets (e.g. European Green Deal, Digital Decade), inform the European Semester's country reports and underpin country-specific recommendations.
For more information
Press release - Economic policy coordination: Commission sets out guidance to help tackle the energy crisis and make Europe greener and more digital
European Semester Autumn package - Documents