The European Commission announced today its 2018 country-specific recommendations (CSRs), setting out its economic policy guidance for Member States for the next 12 -18 months. The recommendations were jointly presented by the Vice President Dombrovskis and Commissioners Moscovici and Thyssen.
Today`s communication to the Council (that will discuss the whole set when it convenes in Ecofin format) is a follow up to March 2018, EC opinion that eight Member States were experiencing imbalances (Bulgaria, France, Germany, Ireland, Spain, Netherlands, Portugal and Sweden) and that three countries were experiencing excessive imbalances (Croatia, Italy and Cyprus). Cyprus answered to the EC opinion through the national reform and stability program, the EC has reviewed it and therefore issues five specific recommendations to be adopted by the Council.
More specifically the European Commission issued a “recommendation for a Council Recommendation on the 2018 National Reform Programme of Cyprus and delivering a Council opinion on the 2018 Stability Programme of Cyprus” and hereby recommends that Cyprus take action in 2018 and 2019 to:
– Adopt key legislative reforms to improve efficiency in the public sector, in particular as regards the functioning of the public administration and the governance of state- owned entities and local governments.
– Step up efforts to improve the efficiency of the judicial system by revising civil procedures, increasing the specialisation of courts and setting up a fully operational e-justice system. Take measures to fully operationalise the insolvency and foreclosure frameworks and ensure reliable and swift systems for the issuance of title deeds and the transfer of immovable property rights.
– Accelerate the reduction of non-performing loans by implementing a comprehensive strategy, including legislative amendments allowing for the effective enforcement of claims and facilitating the sale of loans. Integrate and strengthen the supervision of insurance companies and pension funds.
– Prioritise the implementation of key elements of the action plan for growth, in particular fast-tracking strategic investments, and take additional measures to improve access to finance for small and medium-sized enterprises. Improve the performance of state-owned enterprises including by resuming the implementation of privatisation projects.
– Complete reforms aimed at increasing the capacity and effectiveness of the public employment services and reinforce outreach and activation support for young people who are not in employment education or training.
– Complete the reform of the education and training system, including teacher evaluation and actions to increase the capacity of vocational education and training. Take measures to ensure that the National Health System becomes fully functional in 2020, as planned.
The Commission clarifies that as in previous years, specific monitoring will take place for all of these Member States. This will enable the Commission to follow policy action closely in the context of the Macroeconomic Imbalances Procedure, with the depth of this monitoring process reflecting the scope of the challenges and the severity of the imbalances.
According to the overall assessment for the EU, the correction of macroeconomic imbalances continues, but some sources of imbalances remain unaddressed and new risks have emerged. While current account deficits have been corrected in several countries, persistent surpluses in other Member States remain broadly unchanged. Deleveraging is taking place at an uneven pace, with private, public and external debt levels remaining high in some Member States. Keeping debt on a solid declining path is crucial to reduce vulnerabilities in these countries. In a growing number of Member States, challenges linked to strong house price increases require close monitoring.
In General the all the recommendations to M-S focus on strengthening the foundations for sustainable and inclusive growth in the long term. They build on the comprehensive analysis carried out by the Commission in the latest Country Reports, which highlighted legacy issues in certain Member States arising from the financial crisis and challenges for the future.
The Commission stressed that improved economic context allows to focus on a renewed set of priorities, and this window of opportunity should be used to do what is necessary in a domestic context, bearing in mind the close interdependence of the EU economies, notably those of the Euro area.
In particular, the Commission calls on Member States to pursue structural reforms that improve the business environment and conditions for investment, especially through product and service market reforms, supporting innovation, improving small- and medium-sized enterprises` access to finance and fighting corruption.
Member States should also strengthen economic resilience in the context of long-term challenges, such as demographic trends, migration and climate change. Only resilient economies can ensure long-term economic convergence and the reduction of disparities.
This year, the recommendations dedicate special attention to social challenges, guided by the European Pillar of Social Rights proclaimed in November 2017. There is a particular focus on ensuring the provision of adequate skills, the effectiveness and adequacy of social safety nets and improving social dialogue.
Countries are also recommended to carry out reforms that prepare their workforces for the future, including future forms of work and increasing digitalisation; reduce income inequalities; and create employment opportunities, for young people in particular.
It should be noted that the country-specific recommendations to the Member States are adjusted every year, to reflect the progress made and the changing environment. Their content reflects the wider priorities outlined in the President`s State of the Union Address and the Annual Growth Survey. For euro area Member States, they also reflect the recommendation for the economic policy of the euro area. The analysis and guidance under the European Semester are coherent with the longer-term vision of the Europe 2020 strategy.