What is included in this year's European Semester Spring Package?
The 2023 European Semester Spring Package includes:
-A Communication on the main elements of the European Semester Spring Package;
-Country reports for 27 Member States;
-Country-specific recommendations for 27 Member States;
-In-depth reviews for 17 Member States;
-Fiscal Statistical Tables accompanying the assessment of the 2023 Stability and Convergence Programmes;
-A report on compliance with the deficit and debt criteria of the Treaty;
-Post-programme surveillance reports for Ireland, Spain, Cyprus, Portugal, and Greece; and
-A proposal for a Council Decision on guidelines for the employment policies of the Member States.
What are the key priorities for the European Semester in 2023?
In the face of the current geopolitical reality and complex economic and social challenges, the EU seeks to build a robust and future-proof economy that secures competitiveness and long-term prosperity for all Europeans. This requires an integrated approach across all policy areas to increase productivity, resilience, fairness and sustainable growth throughout the whole economic base. The European Semester provides the right policy coordination framework for that purpose, also embedding the implementation of the Recovery and Resilience Facility (RRF) and of cohesion policy programmes.
While implementation of national recovery and resilience plans is well underway, any risk of delays with regard to the implementation calendars agreed in the Council Implementing Decisions needs to be addressed. To ensure lasting progress, Member States should continue to focus on the full and timely implementation of the national plans until 2026 and proceed swiftly to implement the recently agreed cohesion policy programmes. The envisaged revisions of the recovery plans, including REPowerEU chapters with additional funding, alongside cohesion policy programmes, are an opportunity to respond to structural challenges identified in the context of the European Semester, including in the area of climate and energy.
This year's European Semester pays particular attention to competitiveness and productivity, while also providing an updated, more detailed analysis of energy security and affordability.
The Commission calls for ambitious action by Member States to address the vulnerabilities exposed by recent crises and identified in the country reports at national and regional level. This includes strengthening resilience and productivity, facilitating access to financing, providing affordable energy, reducing strategic dependencies, ensuring the skills for the future, supporting the creation of quality jobs and support the needed skills to seize the opportunities of the green and digital transitions. The overall objective is to make sure the economic, scientific, industrial and technological base is in place for the green and digital transitions while leaving no one behind.
What is the link between the European Semester Spring Package, the implementation of the Recovery and Resilience Facility and REPowerEU?
Since its inception, the Recovery and Resilience Facility (RRF) - at the heart of NextGenerationEU - has become the central tool to deliver the EU policy priorities under the European Semester. The recovery and resilience plans under the RRF drive Member States' reform and investment agenda while the European Semester, with its broader scope and multilateral surveillance, guides and complements the implementation of the recovery and resilience plans. Together, the European Semester and the RRF continue to provide a robust framework for effective policy coordination in view of the current challenges.
In this context, the country-specific recommendations adopted in this European Semester Spring Package provide guidance to Member States to adequately respond to persisting and new challenges and deliver on key policy objectives.
The RRF is playing a visible role in supporting Member States' green and digital transitions and is also at the heart of the implementation of the REPowerEU Plan. Dedicated REPowerEU chapters are being integrated in Member States' existing recovery and resilience plans. Last year, an energy-related recommendation was added for each Member States, which addressed major challenges such as security of supply, the EU´s energy independence and clean energy transition, and offered targeted guidance on reducing the dependency on fossil fuels in line with the REPowerEU objectives. Measures included in the REPowerEU chapters are expected to address the country-specific recommendations related to energy challenges. This year, the energy-related recommendations were defined in a more granular way to feed into the finalisation of the REPowerEU chapters, and to guide Member States in the update of their national energy and climate plans.
Is the implementation of the national recovery and resilience plans on track?
The implementation of the national plans is running at full speed, with some variations across Member States. In parallel, the disbursements to Member States are picking up. The speed of these largely depends on the Member States achieving the milestones and targets included in their plans and submitting the relevant payment requests. The Commission has so far processed 24 payment requests under the RRF and has disbursed a total of over €152 billion to date for the successful implementation of reforms and investments.
Some Member States are facing challenges in administrating funds, for instance due to limited administrative capacity or investment bottlenecks. These challenges may, to some extent, affect the expected disbursement schedule foreseen in the relevant Council Implementing Decision. Member States are invited to proceed with the swift implementation of their RRPs. Where necessary, the revision of the recovery and resilience plans (RRP) is an opportunity to address emerging issues, increase the absorption capacity of RRF funds and include potential changes in the payment profile.
Detailed and up-to-date information on the state of play of the RRF in each Member State, as well as overall information on the Facility are available on the RRF website and on the Recovery and Resilience Scoreboard.
What has the Recovery and Resilience Facility (RRF) achieved in the two first years since its inception?
During the first year of the Facility, the Commission and the Member States focused their efforts on the preparation of the recovery and resilience plans. Following the approval of the plans, the implementation phase has started and is now in full swing.
Thanks to its unique design, the RRF swiftly provided significant financial support to Member States to address their economic and social challenges in the aftermath of the COVID-19 crisis, fast-forwarding the twin green and digital transitions, and strengthening their resilience for future challenges. Today, over €152 billion have already been disbursed, amounting to around 30% of the overall funding committed in Member States' recovery and resilience plans to date.
The RRF is already playing a visible role in supporting investment levels and the quality of investments and reforms. The public investment to GDP ratio is projected to increase from 3.0% in 2019 to 3.4% of GDP in 2023. Half of this increase between 2019 and 2023 is supported by EU financing and RRF funding. In parallel, Member States are seeing an unprecedented delivery of structural reforms in response to the European Semester country-specific recommendations.
How do the European Semester and the recovery and resilience plans help the EU in fast-forwarding the green and digital transition?
The RRF has brought the green transition and support for the competitiveness of the clean tech sector to the centre of the EU's post-pandemic recovery. The 27 national recovery and resilience plans have allocated €252 billion for green measures, including transformative measures to facilitate the EU industry's decarbonisation.
The REPowerEU Plan, introduced in May 2022 as the EU's response to the global energy crisis, will help achieve secure, affordable and green energy. Under this Plan, the RRF will support Member States in putting forward critical reforms and investments to rapidly phase-out the EU's dependence on Russian fossil fuels and foster zero-carbon sources and energy resilience. These new or scaled-up measures, to be included in dedicated REPowerEU chapters in Member States' recovery and resilience plans, will come on top of the already ambitious green agenda put forward by Member States in the existing plans. The country-specific recommendations in the context of the 2022 and 2023 European Semester cycles identify for each Member State specific energy challenges and measures to tackle them, and should guide Member States in the finalisation of their REPowerEU chapters.
The Commission's Green Deal Industrial Plan, presented on 1 February, puts the RRF and REPowerEU at the centre of the Union's response to the structural challenges affecting the competitiveness of the EU's clean-tech sector.
To support the digital transition, around €130 billion contribute to digitally transform Europe's economies and societies. These measures include reforms and investments aiming to promote the roll-out of very high-capacity networks, the digitalisation of public services and government processes, the digitalisation of businesses, in particular SMEs, the development of basic and advanced digital skills as well as measures supporting digital-related R&D and the deployment of advanced technologies.
How is the European Semester linked to the Green Deal Industrial Plan and the EU long-term Competitiveness Strategy?
The European Green Deal Industrial Plan seeks to enhance the competitiveness of Europe's net-zero industry and support the fast transition to climate neutrality. The Plan aims to provide a more supportive environment for the scaling up of the EU's manufacturing capacity for the net-zero technologies and products required to meet Europe's ambitious climate targets. It also seeks to develop the green skills of the EU workforce to help it make the most of this transformation.
The European Semester is playing a key role in contributing to this goal. For instance, the 2023 proposals for country-specific recommendations include recommendations on the provision and acquisition of skills needed for the green transition. Furthermore, the need to provide a more supportive environment for scaling up the EU's manufacturing capacity for net-zero technologies as well as ensuring access to relevant critical raw materials is indicated.
The EU's long-term Competitiveness Strategy sets out a forward-looking and coordinated EU framework to foster thriving businesses which are able to compete on the global market, with attractive jobs and setting global standards. It defines nine drivers of the long-term competitiveness: a functioning Single Market, access to private capital and investment, public investment infrastructure, research and innovation, energy, circularity, digitalisation, education and skills, and trade and an open strategic economy. This year's European Semester pays particular attention to the topic of long-term competitiveness and productivity. The drivers of the EU long-term competitiveness are largely reflected in the country specific recommendations. In addition, the EU's long-term competitiveness contains a set of selected 17 Key Performance Indicators aimed at monitoring progress in each of the competitiveness dimensions. These indicators are accompanied by respective targets in terms of values or trends, and together will allow us to measure improvements in each of the competitiveness dimensions.
How do the European Semester and the recovery and resilience plans support the implementation of the European Pillar of Social Rights and the achievement of the EU headline 2030 targets in terms of employment, skills and poverty reduction?
Through the European Semester, the Commission monitors progress on the implementation of the European Pillar of Social Rights and the 2030 EU headline targets on employment, skills, and poverty reduction, as well as on the contributing national targets. The state of play is presented notably in the Joint Employment Report (adopted in March 2023) as part of the Autumn European Semester package, as well as in the specific country reports. This is underpinned by the Social Scoreboard and its indicators across the areas of 1) equal opportunities and access to the labour market, 2) fair working conditions and 3) social protection and inclusion.
The Recovery and Resilience Facility represents a unique opportunity to support investments and reforms that contribute to the implementation of the European Pillar of Social Rights and the achievement of the EU headline targets. Of the plans' allocation, almost 30%, or around €141 billion, is dedicated to social expenditure; this comes on top of national and cohesion policy funding, notably the European Social Fund Plus, which provides for the period 2021-2027 almost €99.3 billion to invest in people. The implementation of the cohesion policy programmes and the RRPs until 2026 will contribute substantially to improving the EU's competitiveness and boosting EU cohesion.
What has the EU done to save energy, diversify sources of energy, and how are we prepared for next winter?
Last May, the Commission adopted the REPowerEU plan and continued its sustained efforts to ensure the diversification of energy supply, reduction of energy demand and acceleration of the clean energy transition.
The EU has adopted emergency measures at EU and national levels in record time strengthening our security of supply by setting targets for gas storage and demand reduction, and putting in place an inframarginal price cap, a solidarity contribution, and a market correction mechanism, while accelerating gas supply diversification and targeted infrastructure upgrades. The EU also made significant progress over the past year in accelerating permitting for renewable energy and significantly increasing installed capacities. In less than a year, Russian gas imports have fallen by 57% to 80 billion cubic meters in 2022. In January 2023, Russian gas imports by pipeline accounts less than 10% of total EU imports. The first gas supplier to Europe is no longer Russia. Overall, the EU phased out Russian gas by two-thirds.
This diversification effort was backed up with new tools. The Commission introduced a common storage policy. Following the adoption of the Gas Storage Regulation, on 1 November 2022 we reached a historic high of 95% of gas in storage at European level. This combined achievement has helped us save more than 52 billion cubic meters of gas between August 2022 and March 2023, and to leave the heating season this year with 56% of gas storage filled, compared to an average of 36% in previous years. Storage targets are set at 90% for next winter, and the EU should be able to meet this target even in the event of a complete absence of Russian gas volumes, provided EU Member States cooperated on supply.
The Commission has also introduced a framework for a coordinated gas demand reduction. All Member States committed on a voluntary basis to reduce their consumption by at least 15% between August 2022 and March 2023. It allowed them to save more than 18% of gas compared to the five previous years. For this reason, the Commission proposed an extension of the regulation, which was adopted in March, before the heating season had even ended.
The Commission also created an Energy Platform to support diversification and joint purchasing to contribute to better conditions for European consumers. As a result, more than 110 companies have now expressed interest in AggregateEU and have subscribed to the services. In the first tender launched at the beginning of the month, 63 European companies have submitted requests for a total volume of 11.625 billion cubic metres of gas demand. Following the completion of the demand aggregation, companies have expressed their interest to purchase the equivalent of 11.6 billion cubic meters in the form of LNG and pipeline gas. Out of this total offered quantity, 10.9 billion cubic meters has been matched. Finally, the Commission has introduced a mechanism to correct price peaks in the Title Transfer Facility gas market. And retail prices have gone down to pre-war levels, even if they remain high.
This wide-ranging change happened thanks to the joint efforts of the EU, of Member States, and of the European citizens and companies. Millions of solar PVs were installed on the roofs, the demand for heat pumps increased significantly. EU citizens adjusted their lifestyles and reduced energy consumption. Companies increased energy efficiency and shifted fuels. As a result, the EU is in a good position to start refilling for the next heating season with confidence. However, we need to keep a healthy and prudent supply and demand balance and continue voluntary measures to save energy.
The Commission will continue and extend its efforts to at diversification around the world and to ensure reliable supplies to Europe.
How do the country-specific recommendations provide guidance to Member States on reducing dependence on fossil fuels in line with REPowerEU objectives?
This year, the country-specific recommendations on energy are more detailed compared to last year and call on all Member States to reduce their dependency on fossil fuels by taking specific actions such as shortening and simplifying permitting procedures to accelerate the deployment of renewables, and pursuing efforts on energy efficiency including on manufacturing processes and decarbonisation of industry. Moreover, the recommendations call on Member States to upgrade their electricity transmission and distribution infrastructure to allow a higher roll out of renewables and to focus on energy storage facilities to ensure flexibility and security of supply.
The recommendations on energy will guide Member States in the finalisation of their REPowerEU chapters as well as the update of their national energy and climate plans.
What are the main themes in the country-specific recommendations addressed to Member States?
The 2023 country-specific recommendations focus on:
-Ensuring a prudent fiscal policy in 2023-2024: Member States should in particular phase out less targeted energy support measures currently in force and reduce debt in the medium term, while preserving public investment.
-The implementation of recovery and resilience plans: Depending on the level of progress made, the recommendations call on Member States to steadily continue, or in several cases, to accelerate implementation.
-Addressing energy-related reforms and investment challenges, including reskilling and upskilling the labour force: The updated recommendations on energy will help Member States finalise their REPowerEU chapters and will guide them in the update of their national energy and climate plans:
-All Member States are recommended to reduce their dependence on fossil fuels.
-Actions to shorten and simplify permitting procedures and to further invest in grids are critical for accelerating the deployment of renewable energy, alongside a strong and innovative home-grown capacity in clean-tech value chains.
-Member States should also continue to support the acquisition of the needed skills for the green economy.
-Boosting competitiveness and social resilience: Where relevant, the Commission proposes an additional recommendation on outstanding and/or newly emerging challenges, including on economic competitiveness and social resilience
How have the country-specific recommendations integrated the objectives of the 2023 European Year of Skills? Are the skills and labour shortages and mismatches addressed?
The country-specific recommendations, underpinned by the country reports, contribute to the objectives of the European Year of Skills by focusing on the need to support people to develop the skills needed to address labour and skills shortages, including in the context of the green and digital transitions, boost competitiveness and achieve inclusive and sustainable growth.
The country reports highlight significant and rising labour shortages and low provision of training in key sectors. This could create bottlenecks in the transition to a net-zero economy. Therefore, all Member States received a recommendation to accompany skills development through appropriate policy measures in the context of the green transition. In addition, several Member States are also invited to increase up- and reskilling more generally.
This is particularly important since demand for skills relevant for the green transition is likely to increase further. Furthermore, increased productivity requires a workforce with the relevant skills and the modernisation of education and training, offering equal opportunities for all. The European Year of Skills provides a new momentum to advance skills development and reach the EU 2030 headline targets of at least 60% of adults in training every year, as well as at least 78% in employment.
What fiscal guidance is the Commission providing to Member States for the period ahead?
The general escape clause of the Stability and Growth Pact, which provides for a temporary deviation from the budgetary requirements that normally apply in the event of a severe economic downturn, will be deactivated at the end of 2023. Moving out of the period during which the general escape clause was in force, the Commission provides quantified and differentiated country-specific recommendations on fiscal policy:
-Member States that have attained their medium-term budgetary objective (MTO) based on the 2023 Spring Forecast, are asked to maintain a sound fiscal position in 2024.
-All other Member States are asked to ensure prudent fiscal policy, in particular by limiting the nominal increase in nationally-financed net primary expenditure in 2024.
-All Member States should preserve nationally-financed public investment and ensure the effective absorption of RRF grants and other EU funds, in particular to foster the green and digital transitions.
-All Member States should wind down the energy support measures in force by the end of 2023. Should renewed energy price increases necessitate support measures, these should be targeted at protecting vulnerable households and firms, fiscally affordable, and preserve incentives for energy savings.
-For the period beyond 2024, Member States should continue to pursue a medium-term fiscal strategy of gradual and sustainable consolidation, combined with investments and reforms conducive to higher sustainable growth, to achieve a prudent medium-term fiscal position.
How has the Commission established the recommended growth in nationally financed net primary expenditure in 2024?
Pending an agreement on a reform of the economic governance framework, the current legal framework continues to apply. In particular, an annual fiscal adjustment of 0.5% of GDP, as a benchmark, continues to be applied to Member States that have not yet achieved their medium-term budgetary objectives. At the same time, some elements of the Commission's reform proposals have been incorporated into the 2023-24 fiscal surveillance cycle. The fiscal guidance in 2024 is expressed in terms of the recommended growth in nationally financed net primary expenditure. It is differentiated to take into account the fiscal sustainability challenges of each Member State.
Taking into account fiscal sustainability considerations, the required adjustment is calibrated around the 0.5% of GDP benchmark adjustment, with a minimum effort of 0.3% of GDP and a maximum of 0.7%. Member States with a forecast deficit above 3% of GDP in 2023, which is not close and temporary, are recommended to achieve an adjustment of at least 0.5% of GDP in their structural budget balance. The fiscal efforts required to achieve these adjustments are then translated in terms of limits to the annual increase in net primary expenditure.
Does the Commission have any concerns regarding Member States' fiscal sustainability?
The Commission published an update of its fiscal sustainability risk assessment in the annex of the Country Reports. It follows the same multi-dimensional approach as the European Commission's 2022 Debt Sustainability Monitor, updated based on the Commission's 2023 Spring Economic Forecast and including the most recent ageing costs from the Ageing Report 2021.
The main findings can be summarised as follows:
-Short-term risks are overall considered low in all 27 Member States.
-Medium-term risks: Debt is expected to decline in the EU on average until mid-2020s before increasing, in particular due to rising cost of ageing. Medium-term sustainability risks are assessed to be high in eight Member States.
-Long-term risks are still significant and widespread across countries, notably due to population ageing and an unfavourable initial fiscal position.
In terms of policy implications, the results call for pursuing fiscal policies aimed at ensuring that the public debt ratio was put on a downward path or stayed at a prudent level over the medium term, while enhancing investment. A credible implementation of planned reforms, notably under the Recovery and Resilience Facility, is also key to reduce fiscal sustainability risks.
How is the Commission's fiscal guidance linked to the Commission's proposed new economic governance framework?
On 26 April 2023, the Commission tabled legislative proposals to build an economic governance framework fit for the challenges ahead. The key objective of the reform is to strengthen public debt sustainability and promote sustainable and inclusive growth in all Member States through reforms and investment. To achieve this, the proposal will make the economic governance framework simpler and more transparent, improve national ownership and strengthen enforcement.
The Council has called for the legislative work to be concluded in 2023. The Commission invites the European Parliament and the Council to agree on the legislative proposals as quickly as possible to enable a swift and adequate response to the current challenges.
Pending an agreement on a reform of the economic governance framework, the current legal framework continues to apply. In particular, an annual fiscal adjustment of 0.5% of GDP, as a benchmark, continues to be applied to Member States that have not yet achieved their medium-term budgetary objectives. At the same time, some elements of the Commission's reform proposals have been incorporated into the 2023-24 fiscal surveillance cycle, such as the focus on a single operational indicator and a differentiation of the fiscal effort on the basis of fiscal sustainability challenges.
Why is the Commission not recommending opening new Excessive Deficit Procedures this Spring? When will the Commission open Excessive Deficit Procedures?
The Commission does not propose to open new excessive deficit procedures in Spring 2023. Russia's invasion of Ukraine, together with the remaining macroeconomic and fiscal impact of the COVID-19 pandemic, creates uncertainty, including for designing a detailed path for fiscal policy. As regards Member States with a debt ratio above the 60% of GDP reference value, the Commission considers that compliance with the debt reduction benchmark would imply a too demanding frontloaded fiscal effort. Therefore, in the view of the Commission, compliance with the debt reduction benchmark is not warranted under the current economic conditions.
Romania is the only Member State under an excessive deficit procedure, based on the pre-pandemic developments. On 3 April 2020 the Council decided that an excessive deficit existed in Romania based on planned excessive deficit in 2019. In its revised recommendation of 17 June 2022, the Council asked Romania to put an end to the excessive deficit situation by 2024 at the latest. Romania's general government deficit in 2022 is in line with the Council recommendation, while the adjustment in structural balance is below the one recommended by the Council. The procedure is kept in abeyance.
The Commission will continue monitoring Member States' economic and budgetary situation. In the autumn, the Commission will adopt opinions on euro area Member States' Draft Budgetary Plans, to ensure that the 2024 budgets are consistent with the country-specific recommendations that are also part of the spring 2023 European Semester package and will be adopted by the Council later in 2023.
In Spring 2024, the Commission will propose to the Council to open deficit-based Excessive Deficit Procedures on the basis of the outturn data for 2023, in line with existing legal provisions. Member States should take account of this in the execution of their 2023 budget and in preparing their Draft Budgetary Plan for 2024.
What are the main findings of the country reports?
The country reports identify policy action needed at Member State level to overcome immediate economic and social challenges, while also increasing long-term competitiveness and productivity.
They include an assessment of progress on the implementation of the European Pillar of Social Rights, via the Social Scoreboard, and on achieving the 2030 EU headline and national targets on employment, skills and poverty reduction, as well as the Sustainable Development Goals.
They pay particular attention to long-term competitiveness and productivity, while providing updated and more detailed analysis on energy security and affordability.
The country reports identify challenges that are not addressed, or only partially addressed, by each Member State's recovery and resilience plans, as well as any emerging challenges. They also closely examine progress on the implementation of recovery and resilience plans, providing examples of milestones and targets reached, while highlighting cases where implementation risks and delays should be addressed.
How does the Commission assess the recent evolution of macroeconomic imbalances?
The assessment of imbalances is marked by high, and sometimes divergent, inflation. A part of the divergence in inflation is related to the different impact of the higher energy and food prices on the various countries, but for several cases it is accompanied by other sources of inflationary pressures, including increases in unit labour costs and corporate mark ups and profits. If divergent inflationary dynamics were to continue, cost competitiveness could be harmed where inflation is highest, which could increase vulnerabilities. At the same time, high and persistent inflation may lead to tighter financing conditions and hamper debt servicing, possibly impacting the financial sector and slowing down economic growth through receding consumption and investment.
High private and government debt ratios continued declining, sometimes even at accelerated pace, but vulnerabilities remain. High private and government debt ratios have continued declining, sometimes even at accelerated pace thanks to the strong nominal economic growth, although debt ratios remain high in several cases. Going forward, the continued nominal GDP growth will support further deleveraging but in a context of less favourable financing conditions. External positions have typically been weakened by the much higher energy import prices, with domestic demand buoyancy contributing further in some cases; lower energy prices are expected to increase the current account deficits and surpluses of nearly all Member States in 2023.
House prices continued to grow strongly for most of 2022 but a cooling of housing markets was evident in the later months. Going forward, house prices are expected to moderate further amid tightening financial conditions and incomes that are under pressure, while housing supply will be affected by rising construction costs. The banking sector has shown increased strength but vulnerabilities may increase in the current macroeconomic context. Member States with high legacy non-performing loans continued to reduce them, sometimes substantially so. Yet, a worsening of the economic outlook, and potential heightened volatility in financial markets, can raise issues for banks' balance sheets.
The Commission took a number of decisions under the Macroeconomic Imbalance Procedure. Vulnerabilities are receding in Cyprus to lead to an improvement in its classification of imbalances. Conversely, in Hungary, vulnerabilities have increased to an extent that leads to a new finding of imbalances. Some Member States being subject for an in-depth review for the first time in recent years were not found experiencing imbalances at this juncture. Developments are generally favourable in the remaining Member States analysed but relevant challenges remain. Implementation of the country-specific recommendations under the European Semester and the policy agenda embedded in the RRPs should support a further reduction in macroeconomic vulnerabilities.
In which areas is the implementation of country-specific recommendations particularly lagging behind? What will the Commission do to improve this?
The 2023 European Semester takes stock of Member States' action to address structural challenges identified in the country-specific recommendations adopted since 2019.
Following the establishment of the RRF as a key tool to deliver EU and national policy priorities, the 2023 country-specific recommendation assessment takes into account the policy action taken by the Member States to date as well as the commitments undertaken in the RRPs, depending on their degree of implementation. The assessment therefore reflects the current stage of implementation of RRPs, rather than the level of progress that could be achieved assuming a full implementation of the plans until 2026.
From a multiannual perspective, progress has been achieved, with 68% of the 2019-2021 country-specific recommendations implemented. Compared to last year's assessment, substantial progress has been made on both 2019 country-specific recommendations of a structural nature and more crisis-oriented 2020 country-specific recommendations. However, reform implementation differs significantly across policy areas. In particular, Member States have made most progress in recent years on access to finance and financial services, followed by anti-money laundering and business environment. On the other hand, progress has been slower on pension systems, single market, competition and state aid, and housing.
Progress in the implementation of the recommendations adopted in 2022 has been substantial. Member States have made at least some progress in almost 52% of the recommendations addressed to them in July 2021.
What are the main findings of the post-programme surveillance reports for Greece, Cyprus, Ireland, Spain, and Portugal?
Post-programme surveillance assesses the economic, fiscal and financial situation of Member States that have benefited from financial assistance programmes with a view to their repayment capacity. 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.
Greece's economy grew at a solid pace in 2022, but economic growth is expected to moderate in 2023-2024. While the post-pandemic recovery has practically run its course, headwinds reflecting tighter monetary and fiscal policy conditions and the still challenging global economic environment will come more to the forefront. Despite the relatively large fiscal support provided to households and corporations in the context of the energy crisis, the primary balance reached a surplus of 0.1% of GDP. Primary surpluses are expected to increase further as pandemic-related support measures are phased out and the fiscal cost of energy measures is likely to be lower than expected. Banks continued to reduce the stock of non-performing loans and banks' return to profitability helps prepare the banking sector for future challenges amid a decelerating economy. Greece made also further progress to overcome remaining structural shortcomings, notably by advancing the codification of labour legislation and the cadastral mapping as well as public asset management and privatisations. However, tax debt settlement schemes and the clearance of government arrears will need to be further monitored.
Cyprus's economy continued to be robust in 2022 and growth is expected to be driven by domestic demand and exports in services, both through a further rebound in tourism and an influx of ICT companies. Economic activity is expected to slow down over the coming years as the global economy loses momentum, continued elevated inflation reduces households' disposable income and rising interest rates adversely affect investments. The country's fiscal position improved significantly in 2022 and the general government balance is expected to remain in surplus in 2023 and 2024. The banking sector is adequately capitalised, has ample liquidity and became profitable, while non -performing loans continue to decline. Cyprus has a very large cash buffer and continues to enjoy favourable financing conditions and market perceptions, as reflected in the continuous upgrading and favourable outlook of credit rating agencies.
Ireland's economy grew by 12% in 2022 — another year of historically high GDP growth — but began slowing towards the end of the year. Nevertheless, economic activity is set to continue growing strongly as headwinds from inflation begin to ease and real disposable income growth buttresses household spending. Public finances are solid and fiscal risks are balanced overall, though tilted to the downside in the long term. The financial sector remained resilient to the challenging economic environment and has so far withstood the recent flare-up in market volatility.
Spain's economy weathered the disruptions prompted by Russia's war of aggression against Ukraine well and posted strong growth in 2022. Economic activity is expected to continue expanding in 2023, although at a more moderate pace than last year. The general government balance in 2022 has improved, helped by a strong revenues performance, but the underlying deficit and the public debt remain high. The banking sector has remained resilient, as asset quality has continued to improve and profitability increased markedly in 2021 and 2022, but is facing new challenges stemming from high inflation and tighter financing conditions.
Portugal's economic growth picked up from 5.5% in 2021 to 6.7% in 2022, reflecting a very strong recovery in foreign tourism, which outweighed adverse shocks related to high energy prices and disruptions in global supply chains. Growth is projected to moderate in annual terms but to remain above the euro area average in 2023 and 2024. After narrowing to 0.4% of GDP in 2022, Portugal's general government deficit is expected to improve further in 2023 and 2024. Portugal's financial sector remained resilient to recent external shocks as banks continued to improve their performance.
What is included in the proposal on guidelines for employment policies?
The proposed Employment Guidelines present common priorities for national employment policies and provide the legal basis for Country-Specific Recommendations in the employment and social areas.
The Commission proposes to carry over the current Employment Guidelines adopted in November 2022, since they were already updated to reflect the post-COVID environment, for instance in relation to short-time work schemes and telework. They also reflect the context of Russia's war of aggression against Ukraine, for instance as regards support to the labour market and social integration of refugees, and measures supporting vulnerable households in the energy crisis. Elements were introduced related to the fairness dimension of the green transition, in line with the Council Recommendation on ensuring a fair transition towards climate neutrality.
The recitals of the Guidelines were updated to reflect the EU headline and national targets on jobs, skills and poverty reduction that Member States have presented for 2030, and the monitoring of these targets. The updated recitals also refer to recent initiatives related to the energy crisis and high energy prices. Furthermore, the Guidelines now refer to recent policy initiatives such as the European Year of Skills, the Social Economy Action Plan, the Council Recommendation on micro-credentials for lifelong learning and employability, the Green Deal Industrial Plan, the Council Recommendation on adequate minimum income ensuring active inclusion, and the European Care Strategy.
What are the next steps in the European Semester process?
The Commission invites the Eurogroup and Council to discuss the package and endorse the guidance offered today. It looks forward to engaging in a constructive dialogue with the European Parliament on the contents of this package and each subsequent step in the European Semester cycle.
The Commission also calls on all EU Member States to implement the recommendations fully and in a timely manner, in close dialogue with their social partners, civil society organisations and other stakeholders.
For More Information
European Semester Spring package - Documents