Country reports put sustainability at heart of EU economic policy

Nicolas Schmit – Photo EC

(BRUSSELS) – Environmental sustainability is at the heart of the ‘winter package’ of EU country reports analysing Member States’ key socio-economic challenges, published on Wednesday by the European Commission.

The analysis in the country reports focuses on competitive sustainability with the aim of building ‘an economy that works for people and the planet’. Implementation of the European Pillar of Social Rights and performance on its accompanying social scoreboard is also assessed for each Member State. The country reports focus on four dimensions: environmental sustainability, productivity gains, fairness and macroeconomic stability.

For the first time, the reports assess Member States’ progress towards the United Nations Sustainable Development Goals (SDGs), highlighting the macro-economic and employment policies that can help to achieve them. They also analyse the challenges and opportunities for each country arising from the climate and energy transition. In the same vein, they identify priorities for support by the Just Transition Fund.

“The good news is that imbalances in the EU are receding,” said EC vice-president Valdis Dombrovskis: “Member States should build on this positive trend. They must continue reforms to make our economy future-proof. They need to bring down debt, boost productivity and make the right investments to achieve a fair transition to a sustainable and inclusive economy.”

Nicolas Schmit, Commissioner for Jobs and Social Rights, added that employment was at a record high in Europe, but inequalities persist: “We need to step up our fight for more equality by strengthening the social dimension of the European Semester and fully implementing the European Pillar of Social Rights, by, among others, proposing a framework for fair minimum wages, reinforcing the skills agenda and revamping the youth guarantee.”

Country reports’ key findings

The European Green Deal aims to make Europe the first continent to achieve climate- neutrality by 2050. The reports contain a dedicated analysis of environmental sustainability issues. The analysis in the country reports on reforms and the most significant investment needs, in areas such as energy, transport and buildings, can guide Member States’ policy actions in line with this priority.

The country reports highlight that unemployment levels continue to differ considerably across Member States while poverty and social exclusion keep declining on the back of good labour market conditions. That said, it will be crucial to deliver on the implementation of the European Pillar of Social Rights to ensure the climate and digital transitions are just and socially fair.

Productivity growth remains a challenge, even more so in the light of demographic change. Insufficient investment, the ageing of the labour force and skills shortages or mismatches are holding back potential growth.

Member States continue to have very different positions in terms of debt and sustainability challenges. Government deficits in the EU have, on average, started rising again, reversing the declining trend of recent years. Current high levels of public debt represent a source of vulnerability in some Member States.

Addressing macroeconomic imbalances

The macroeconomic imbalances procedure aims to identify, prevent and address the emergence of potentially harmful macroeconomic imbalances that could adversely affect economic stability in a particular Member State, the euro area, or the EU as a whole.

The 2020 Alert Mechanism Report published last December identified 13 Member States for an in-depth review to assess whether they are, or may be at risk of being affected by imbalances. The analysis looks at the gravity of the imbalances, their evolution and the policy responses.

The results of these in-depth reviews, contained in the country reports for the Member States concerned, have found that:

Greece, Italy and Cyprus are still experiencing excessive imbalances;
Germany, Ireland, Spain, Netherlands, France, Croatia, Portugal, Romania and Sweden are still experiencing imbalances;
Bulgaria is no longer experiencing imbalances.