14 Dec 2017

How to strengthen the European Semester?

Cinzia Alcidi / Daniel Gros

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The emphasis of the European Semester should shift from economic policy coordination – intended as the process through which member states commit to common rules and recommendations adopted by the Council of the European Union under the surveillance of the European Commission – to a stronger national ownership. Coordination of national policies may be essential at times of crisis, when cross-country spillover effects tend to be large, but it may not be very effective when economic conditions return to normal, as spillovers tend to be small and the incentives for governments to coordinate are diminished. Stronger national ownership should lead to better enforcement of commonly agreed rules, regardless of economic conditions and remove the perception that rules are hierarchically imposed. National ownership could be improved by involving the national fiscal councils and the national productivity boards explicitly in the elaboration of EU recommendations for national governments. This should be done without increasing the complexity of an already complicated EU governance system of governance or damaging their reputation as independent bodies.

Reforms aimed at improving the structural functioning of EU’s economies are of critical importance for member states, yet the reasons why specific reforms should be embedded in the Semester are not always clear. Moreover, strengthening the Semester by further linking the EU budget to reforms undertaken in the member states is fine in theory but very difficult to implement in practice. Reforms cannot be ‘bought’ as such and it would be extremely difficult to measure the implementation of so-called country-specific recommendations (CSRs) with sufficient precision to make implementation a condition for funds.

The primary role of the Commission should remain to foster coordination in case of economic crisis and to provide technical support for reforms when needed.

Keywords: European semester, Policy coordination, Reforms

Cinzia Alcidi is Senior Research Fellow and Head of the Economic Policy Unit at CEPS. Daniel Gros is the Director of CEPS. This paper was originally commissioned by the Economic and Monetary Affairs Committee of the European Parliament and is republished here with its kind permission.