Abstract
In the absence of a clearly defined industrial policy in the EU, the coordination of economic policies provided for in the TFEU can be treated as a substitute for a policy addressing industry. The close relationship between the coordination of economic policies and industrial growth has been confirmed by the Europe 2020 Strategy, which is the basis for EU development priorities in the period 2010–2020. In this paper we verify to what extent this assumed interrelationship is true. In particular, the objectives of the paper are as follows: (a) to identify the legal framework and instruments for the coordination of economic policies at the EU level; (b) to assess the effectiveness of this coordination.
The indicator adopted in this paper to assess the coordination record of economic policies is the European Commission’s assessment of each Member State’s implementation progress against the previous year’s Country Specific Recommendations. The assessment (with a one year lag) is worked out by the Commission and as a result Recommendations, prepared by the Commission and adopted by the Council, offer tailored advice to Member States on how to boost growth and jobs while maintaining sound public finances. They should be implemented by countries during the European Semester, which is the main vehicle for the coordination of national economic policies.
The paper argues that coordination of national economic policies, albeit containing a number of weak points, has been a useful instrument in strengthening the alignment of policies of EU members with the Europe 2020 strategy, and thus supporting economic growth and industrial development environment.
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Notes
- 1.
The Strategy includes the goal: “To establish an industrial policy creating the best environment to maintain and develop a strong, competitive and diversified industrial base in Europe as well as supporting the transition of manufacturing sectors to greater energy and resource efficiency“, Europe 2020, p. 15. At the same time “coordination at EU can help Member States to support the EU’s economic growth potential” (European Commission 2010, p. 24).
- 2.
Until 2015 the “country reports” were called: Commission Staff Working Document (SWD). Assessment of the …. (e.g. 2013) national reform programme and stability programme for X (e.g. France).
Each SWD assesses policy measures for a given country in light of the findings of the Commission’s Annual Growth Survey (AGS) for a given year and the annual Alert Mechanism Report (AMR), published in a previous year. The AGS sets out the Commission’s proposals for building the necessary common understanding about the priorities for action at the national and EU levels in an analysed year. The AMR serves as an initial screening device to determine whether macroeconomic imbalances exist and determine the risk emerging in Member States. Against the background of the previous year’s CSRs, the AGS, and the AMR, the national reform programmes and a stability programme are prepared by Member States. These programmes provide detailed information on the progress made since the previous year.
- 3.
These definitions of the assessment categories are published with the overview table of CSRs implementation in each Staff Working Document.
- 4.
In the rare instances where a Member State implements policies going in the opposite direction to what has been recommended in the European Semester, this would also be counted as “no progress” as there is no separate category for regressing.
- 5.
It should be noted that on the basis of this classification a synthetic indicator has been calculated in one of the studies which takes into account the various degrees of implementation of each CSR, which puts progress at a level of around 40 % (Deroose and Griesse 2014). We have not adopted this approach as—in order to ensure the comparability of assessment—one needs to take into account all CSRs for a concrete country and all information on the implementation of those CSRs, including issues going outside the scope of this study.
- 6.
All references to the Treaty refer to the TFEU unless otherwise mentioned.
- 7.
Coordination of policies also applies, under the TFEU, to other narrow areas, not necessarily linked to industry, such as market organizations for agricultural products, the establishment and protection of intellectual property rights, etc.
- 8.
Fiscal targets are central to the TFEU and the Stability and Growth Pact, which constrains Member States by restricting the permissible size of the budget deficit (short-term and medium-term targets) and debt. They‘ve become more restrictive under the Six-Pack. The surveillance of Member States entails the regular preparation and updating of Convergence Programmes for countries not yet participating fully in the third stage of EMU, and Stability Programmes for euro area countries. Sanctions can be imposed on Member States which breach the established rules, but only after a protracted process involving warnings and peer pressure (see also point 4).
- 9.
This took place for the first time in 2001, when the Council stressed the inconsistency of the fiscal policy of Ireland with BEPGs. Ireland planned to raise public expenditures and to cut taxes which, with a budget surplus projected to be well over 4 % of GDP, it could comfortably afford. In the BEPGs, however, Ireland had been advised to keep fiscal policy tight to avoid exacerbating an already overheating economy (Begg et al. 2003).
- 10.
According to the Council Regulation (EC) No. 1466/97, as amended in December 2011, the Council is, as a rule, expected to follow the Commission’s text of the CSRs. In cases where it amends the text without the Commission’s consent, it has to explain its position publicly. This “comply or explain” rule may contribute to the relatively low number of amendments in the adoption process (Deroose and Griesse 2014).
- 11.
Begg has noted that the EU coordination “does not cover the core of the traditional notion of policy mix, namely how fiscal and monetary policy are combined. Instead, the emphasis is on what might be called horizontal coordination across individual policy areas. …. the only real links between monetary policy and other economic policies are consultative. That monetary policy is not part of the equation is simply explained; an independent central bank with the primary responsibility to assure price stability cannot plausibly engage in the sort of bargaining with other policy actors that would be implicit in coordination. If it did, it would open itself to the possibility that the ensuing bargain might mean trading-off higher inflation for other goals, such as faster growth or lower unemployment.” (Begg et al. 2003).
- 12.
To be precise, coordination of economic policy was provided for in the original Treaty of Rome (Art. 6 of the Treaty establishing the European Economic Community): “Member States shall, in close cooperation with the institutions of the Community, coordinate their respective economic policies to the extent necessary to attain the objectives of the Treaty”. Concrete provisions applied, however, only to the monetary field (Art. 70 and 105). The Single European Act added Art. 102a providing for “convergence of economic and monetary policies“. To this end each Member State should cooperate “to ensure the equilibrium of its overall balance of payments and to maintain confidence in its currency, while taking care to ensure a high level of employment and a stable level of prices” (Art. 104).
- 13.
The guidelines for employment and economic policies are presented as two distinct—but intrinsically interconnected—legal instruments. Together they form the Integrated Guidelines. The Broad Economic Policy Guidelines and Employment Guidelines were first adopted together in 2010, underpinning the Europe 2020 strategy. They were contained in two documents:
-
(a)
A Council Recommendation on broad guidelines for the economic policies of the Member States and of the Union—Part I of the integrated guidelines;
-
(b)
A Council Decision on guidelines for the employment policies of the Member States—Part II of the integrated guidelines; see: (http://europa.eu/rapid/press-release_MEMO-15-4526_en.htm).
-
(a)
- 14.
Open Method of Coordination (OMC) to EU policy-making. This new mode of governance has been developed over the last decade and has received considerable attention in the literature.
- 15.
On 13 July 2010, the Council of the EU adopted Recommendation (No. 2010/410/EU) on broad guidelines for the economic policies of the Member States and of the Union (Official Journal L 191 of 23.7.2010), which was the basis for the Europe 2020 Strategy till 2014. Since 2015 the new document, the EU2020 Integrated Guidelines, for 2015-2018, has been in force.
- 16.
The same classification has been proposed in: Heinen (2012).
- 17.
Pillar II is supplemented via the Fiscal Compact, which is an intergovernmental agreement (see: Heinen 2012).
- 18.
As already noted, some of the recommendations are also included in pillar III coordination (The Macroeconomic Imbalance Procedure). In this case, concrete indicators are monitored (within the framework of a whole scoreboard of more than 10 indicators). The result of the assessment of changes in the level of these indicators can be—as mentioned above—concrete sanctions. See, for example: Implementation of the Macroeconomic Imbalance Procedure State-of-play (May 2015), Briefing, European Parliament.
- 19.
- 20.
As already mentioned, budgetary surveillance, which is a part of the European Semester and is reflected in the CSRs, is excluded from this analysis.
- 21.
In the past, most of the Commission's recommendations have been adopted as they were drafted. Member States are free to suggest amendments, which then have to be adopted by a qualified majority of Member States. According to the new rules introduced by the Six-Pack reforms in 2011, the Council is expected to follow the recommendations and proposals of the Commission or else explain its position publicly http://europa.eu/rapid/press-release_MEMO-14-388_en.htm)
- 22.
- 23.
Some countries get more detailed recommendations, as countries with excessive imbalances have a pressing need to pursue reforms. Countries which are subject to more regular and separate monitoring under the EU-IMF financial assistance programmes aimed at restoring financial stability and boosting competitiveness do not receive recommendations (e.g. Greece and Cyprus in the last several years).
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Kawecka-Wyrzykowska, E. (2017). Coordination of EU Member States’ Economic Policies and the Industrial Development Environment. In: Ambroziak, A. (eds) The New Industrial Policy of the European Union. Contributions to Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-39070-3_11
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