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Among several means to guide and coordinate the EU-wide socio-economic domain, the European Semester is probably the most vital one: it assists the member states in achieving the EU-wide objectives both by setting priorities and providing clear and well-coordinated policy guidance. The 2024 annual sustainable growth survey puts forward an ambitious agenda to further strengthen a coordinated policy response to enhance the EU’s competitiveness through a green and digital transition, while ensuring social fairness and territorial cohesion.
At the end of each year the Commission issues economic policy coordination guidelines for a year ahead; thus, the 2024 European Semester cycle of economic policy coordination was revealed in November 2023. Therefore, the Autumn-23 package included economic forecast which showed the EU-27 member states measures towards resilient economies facing multiple shocks and providing for growth in the context of high inflation and tighter financing conditions, as only moderate uptick in growth was expected in 2024.
The EU is evidently facing a number of important structural challenges, including low productivity growth, the green and digital transitions, population’s ageing and drives to social inclusion, etc. all of which needs urgent governing measures in order for the member states to stay on the path of sustainable competitiveness. Disruptive geopolitical events have also demonstrated the need for the EU to remain competitive in a global market, while ensuring the survival of the EU-wide social market economy’s concept.
European Semester
The European Semester provides a framework for coordinating economic and employment policies of the member states, since its introduction in 2011; it has become a well-established “executive instrument” in providing a feasible guidance to the member states in fiscal, economic and employment policy directions under a common EU-wide annual timeline.
The Recovery and Resilience Facility, RRF is both the centerpiece of NextGenerationEU, with €723.8 billion in loans and grants to support EU-wide reforms and investments and a “governance facility” in the European Semester. The RRF aims is to mitigate the economic and social impact of the post-pandemic period and make European economies and societies more sustainable, resilient and better prepared for the challenges and opportunities of the green and digital transitions.
By the end of 2023, annual payments disbursed under the RRF amount to €175 billion; about €150 billion in additional resources (i.e. about €127 billion in loans) are expected to be committed following REPowerEU-related revisions of the plans.
Under the cohesion policy funds, over €210 billion has been disbursed since the start of the 2020 pandemic; presently, the Commission has endorsed revised national recovery and resilience plans for almost all member states, which contain REPowerEU chapters to reduce external energy dependence and accelerate the green transition. The Council has already approved 13 of these revised plans and is expected to decide on the remaining ones by the end of the year.
Note: Launched in May 2022, REPowerEU is helping the EU states in three main energy policy’s directions: a) saving energy, b) producing clean energy, and c) diversifying national energy supplies. More in: https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/repowereu-affordable-secure-and-sustainable-energy-europe_en
The 2024-growth package was discussed by the Commission with the Eurogroup and the Council in order to endorse offered guidelines; the Commission is also engaged in a constructive dialogue with the European Parliament on the contents of this package with the subsequent steps in the European Semester cycle, and further engagement with social partners and the member states’ stakeholders.
Annual Sustainable Growth Survey
Four priorities remain for 2024, which were adopted under the European Semester: a) promoting environmental sustainability, b) increasing productivity, c) sustaining fairness, and d) ensuring macroeconomic stability (with a view to fostering competitive sustainability). These priorities are in line with the UN Sustainable Development Goals, which are an integral part of both the European Semester and the 2024-annual development guidelines.
Thus, addressing structural and emerging challenges to fully realize each EU state’s competitiveness potential will be one of the focal points of the 2024 growth cycle. This includes removing bottlenecks to private and public investment, supporting a perspective business environment, and ensuring the development of the skills required for the green and digital transitions.
In this respect, the 2024 cycle will specifically focus on synergies and complementarities between the implementation of the recovery and resilience plans and the Cohesion Policy programs, and on identifying areas with further investment and reform needs at national and regional level.
Reference to Commission’s key priorities for 2024 in: https://ec.europa.eu/commission/presscorner/detail/en/ip_23_5871
The Commission has already accepted draft 2024 budgetary plans of Cyprus, Estonia, Greece, Spain, Ireland, Slovenia and Lithuania are being in line with the Council Recommendations. The draft budgetary plans of Austria, Germany, Italy, Luxembourg, Latvia, Malta, Netherlands, Portugal and Slovakia were not fully in line with the EU recommendations by the end of November; draft budgetary plans of Belgium, Finland, France and Croatia “risk not being in line” with the Council Recommendations.
Employment issues
Important part of the 2024 planning process is the Joint Employment Report, JER which, generally confirms that the EU labour market is resilient: e.g. the EU-wide employment rate reached about 75.4% at the end of 2023, well surpassing the pre-pandemic levels. At the same time, EU unemployment decreased to a historic low at 6.2%; and the trend continues. However, the report acknowledges, disparities do exist among the states, regions, and sectors.
Despite nominal wage increases, real wages have fallen in various degrees in almost all EU states, the process which highlights the importance of well-balanced wage setting mechanisms, including strong social dialogue and effective collective bargaining, in line with national practices. Adequate minimum wages can help protect the purchasing power of low-wage earners and decrease in-work poverty, while sustaining demand and strengthening incentives to work. Sizeable labour and skills shortages are posing bottlenecks to economic growth. If not adequately addressed, they risk hampering the green and digital transitions.
The new JER’s report is the first one directed towards progressive moves along the 2030 EU-wide employment, skills and social targets. While the EU is well on track towards its headline employment target of 78% by 2030, significant progress is still needed to reach the other two headline targets on adult learning and poverty reduction. This report also has a stronger country-specific focus on the member states’ labour market, skills and social challenges to identify potential risks to upward social convergence that require deeper analysis.
Euro area economic policy: recommendations for 2024
All EU states are part of Economic and Monetary Union, EMU and coordinate their economic policy-making in line with the EU-wide political-economy’s guidelines. However, presently twenty EU member states have taken vigorous steps further by replacing their national currencies with the single currency, the euro; these states form the EU euro area.
When the euro was first introduced in 1999, the euro area was made up of 11 of the then 15 EU states: the area’s growth proceeded with Greece joined in 2001 followed by Slovenia in 2007, Cyprus and Malta in 2008, Slovakia in 2009, Estonia in 2011, Latvia in 2014, Lithuania in 2015 and Croatia in 2023.
The euro area recommendation presents tailored policy advice to euro area member states on topics that affect the functioning of the euro area: in 2024 the focus lies on policy responses to the challenges of high inflation and competitiveness. The recommendations for the euro area states include the following directions:
= adopting coordinated prudent fiscal policies and winding down energy support measures, with a view to enhancing public finances’ sustainability and avoiding fuelling inflationary pressures.
= ensuring high and sustained levels of public investment and promote private investment through the acceleration of the implementation of the Recovery and Resilience Facility, RRF and Cohesion Policy programs.
= supporting wage developments that mitigate the loss in workers’ purchasing power, taking into account competitiveness dynamics.
= monitoring risks related to tightening financial conditions, while completing the Banking Union; and
= enhancing competitiveness by improving access to finance, progressing in the Capital Markets Union and ensuring that public support to strategic sectors remains targeted and does not create distortions in the level playing field of the EU-wide Single Market.
Additionally on RRF in: https://commission.europa.eu/business-economy-euro/economic-recovery/recovery-and-resilience-facility_en. On new EU cohesion policy in: https://ec.europa.eu/regional_policy/2021-2027_en
More in the following Commission’s websites: = Autumn 2023 Economic Forecast; = The European Semester; = The Recovery and Resilience Facility; = NextGenerationEU; = Cohesion Policy; and = The REPowerEU Plan.