This guidance aims to help Member States strengthen their economic recoveries, making the best possible use of the Recovery and Resilience Facility (RRF), the key instrument at the heart of NextGenerationEU. The European Semester has been adapted this year, given the links to Member States' recovery and resilience plans, laying out the investments and reforms that the RRF will finance.
Fiscal policy guidance and the continued application of the general escape clause
The activation of the general escape clause of the Stability and Growth Pact in March 2020 allowed Member States to react swiftly and adopt emergency measures to mitigate the economic and social impact of the pandemic.
On March 3 2021, the Commission's Communication on fiscal policy clarified that the decision todeactivate the general escape clause should be taken based on an overall assessment of the state of the economy based on quantitative criteria, with the level of economic activity in the EU compared to pre-crisis levels as the key quantitative criterion. On the basis of the Commission's Spring 2021 Economic Forecast, the general escape clause will continue to be applied in 2022 and is expected to be deactivated as of 2023.
Fiscal policy needs to remain supportive in 2021 and 2022. Member States should avoid a premature withdrawal of support and make full use of the RRF funding. The implementation of investments and reforms within the RRF will help to support the economic recovery, foster higher potential growth and employment, reduce imbalances and improve public finances. In 2022, national fiscal policies should become increasingly differentiated, while all Member States should preserve investments to support the recovery. Once conditions allow, Member States should pursue policies to ensure fiscal sustainability in the medium term.
Article 126(3) report on compliance with the deficit and debt criteria of the Treaty
The Commission has adopted a report under Article 126(3) of the Treaty on the Functioning of the EU (TFEU) for all EU Member States except Romania, which is already in the corrective arm of the Pact. The purpose of this report is to assess Member States' compliance with the deficit and debt criteria of the Treaty. The analysis suggests that the deficit criterion is fulfilled by Bulgaria, Denmark, and Sweden and not fulfilled by all other Member States. The debt criterion is not fulfilled by 13 Member States (Belgium, Germany, Greece, Spain, France, Croatia, Italy, Cyprus, Hungary, Austria, Portugal, Slovenia and Finland).
The Commission considers that, at this stage, a decision on whether to place Member States under the Excessive Deficit Procedure should not be taken. In the case of Romania, the Commission recommends updating its fiscal adjustment path, targeting a correction of its excessive deficit in 2024.
Addressing macroeconomic imbalances
The Commission has identified macroeconomic vulnerabilities related to imbalances and excessive imbalances for the 12 Member States selected for in-depth reviews in the 2021 Alert Mechanism Report. Three Member States continue to experience excessive imbalances (Cyprus, Greece, and Italy) and nine others are experiencing imbalances (Croatia, France, Germany, Ireland, the Netherlands, Portugal, Romania, Spain, and Sweden).
The implementation of reforms and investments under the RRF is expected to help address the challenges identified over previous Semester cycles and play an important role in addressing existing macroeconomic imbalances.
Regarding the imbalances experience by Ireland the report finds that:
Ireland is experiencing imbalances. Vulnerabilities relate to large private and government debts and net external liabilities remain. Government debt remains high according to various metrics, with downside risks relating to possible changes in corporate taxation rules and reforms in international taxation. Private debt remains high. Corporate debt is inflated by the presence of multinational companies, most of which have very few linkages to the domestic economy. Household debt as a share of household gross disposable income remains amongst the highest in the EU. The net international investment position is still highly negative but improving and mostly reflects the activities of multinational firms and mutual funds with little connection to the domestic economy.
Enhanced surveillance report and post-programme surveillance reports
The Commission has adopted the tenth enhanced surveillance report for Greece. The report concludes that, despite the challenging circumstances caused by the COVID-19 pandemic, Greece has taken the necessary actions to achieve its specific commitments.
The Commission has also adopted the post-programme surveillance reports for Ireland, Spain, Cyprus, and Portugal. The reports conclude that the repayment capacities of each of the Member States concerned remain sound.
Employment Guidelines set common priorities for national employment policies with a view to making them more inclusive and fair. The Guidelines, adopted in October 2020, were updated to integrate the environmental sustainability and digital dimensions, reflecting the Stronger Social Europe for Just Transitions Communication and integrating the UN Sustainable Development Goals (SDGs). They also addressed the consequences of the COVID-19 crisis, providing specific guidance aimed at mitigating the employment and social impact of the crisis.
Given their continued relevance, the Commission proposes to carry over the current Employment Guidelines to 2021, underlining the role of the new EU headline targets set with the European Pillar of Social Rights Action Plan and the policy guidance emerging from the Porto Social Summit.
The European Semester 2021 Spring Package: Questions and answers
The European Semester 2021 Spring Package - Documents
Communication on the Commission's recommendations
Employment guidelines for 2021
Tenth enhanced surveillance report for Greece
Post-programme surveillance report for Cyprus
Post-programme surveillance report for Ireland
Post-programme surveillance report for Spain
Post-programme surveillance report for Portugal
European Semester 2021 – an exceptional cycle
Communication on fiscal policy response
- Publication date
- 2 June 2021
- Representation in Ireland