The Trade-Off between Fiscal and Competitiveness Adjustments

Abstract

A centrepiece of the new economic governance structure for the euro area is the so-called European Semester, whose first cycle closes each year in early July with the endorsement of the country-specific recommendations (CSRs) by the European Council. Member state governments are then expected to implement such recommendations into budgetary decisions, structural reforms and employment policies. The recommendations are formulated on the basis of specific challenges previously identified by the Commission in the framework of the annual growth survey (budget and structural challenges) as well as within the macroeconomic imbalances procedure and after hearings of the European Parliament opinion.

A previous version of this paper was prepared for the Directorate General for Internal Policies — Economic Governance Support Unit — of the European Parliament in advance of the Economic Dialogue with the President of the Eurogroup in the Economic and Monetary Affairs Committee of the European Parliament on 5 September 2013.