The start of the 2016 European Semester: The November European Semester package explained - Hoofdinhoud

Met dank overgenomen van Europese Commissie (EC) i, gepubliceerd op donderdag 26 november 2015.

Today, the Commission presents:

THE ANNUAL GROWTH SURVEY (AGS) 2016

What is the Annual Growth Survey?

The AGS sets out the Commission's views on the EU's economic and social priorities for the coming year. In it, the Commission gives Member States focused policy guidance to strengthen the recovery and foster convergence in line with the EU's long-term growth strategy Europe 2020. The AGS marks the start of the European Semester, the annual cycle of economic policy coordination, where national policies are reviewed collectively at EU level. It applies to the EU as a whole and to Member States individually. Its main messages will form the basis for the Country-Specific Recommendations next spring.

What are the main priorities in the 2016 AGS?

The priorities of the 2015 Annual Growth Survey remain valid, but policy efforts need to be strengthened to set the recovery on a sustainable path, unlock investment, strengthen the adjustment capacity of EU Member States, foster productivity and accelerate the process of convergence. In this light, the Commission proposes to focus efforts on the three following priorities for 2016:

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Re-launching investment

(i) the progress made on mobilising private and public investments and the selection of the strategic projects under the Investment Plan for Europe need to be accompanied by an improved investment and regulatory environment at the national as well as the European level;

(ii) the Banking Union needs to be completed to reinforce financial stability in the euro area and beyond; work on the Capital Markets Union needs to be accelerated, so that companies have access to increased and more diversified sources of funding and the financial sector can fully support the real economy; stocks of debt holding back financing and investment decisions also need to be addressed;

(iii) Smart investments in Europe's human capital and performance-oriented reforms of education and training systems are part of the necessary efforts to restore jobs and sustainable growth.

To accelerate change in these areas and to boost the attractiveness of Member States for investment, this Annual Growth Survey is accompanied by country-specific information about key challenges to investment at national level.

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Pursuing structural reforms to modernise our economies

(i) reforms must be based on effective coordination between the Member Statesand aim at higher productivity and convergence towards best policies and outcomes;

(ii) labour market policies need to balance flexibility and security considerations; a particular focus should be on tackling youth and long term unemployment;

(iii) more integrated and competitive product and services markets should stimulate innovation and job creation.

The AGS is accompanied by a proposal for the funding for technical assistance offered by the Commission's Structural Reform Support Service, which, upon request from Member States, provides technical assistance to help them implement appropriate reforms.

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Responsible fiscal policies

(i) there is a need to continue to support growth- and equity-friendly fiscal consolidation in many countries;

(ii) tax systems need to address disincentives to employment creation and be made fairer and still more effective;

(iii) social protection systems should be modernised to efficiently respond to risks throughout the lifecycle while remaining fiscally sustainable in view of the upcoming demographic challenges.

What economic progress has been made since last year?

The European Union’s economy is experiencing a moderate recovery. The pace of activity is expected to accelerate gradually.Unemployment has been falling but remains at a historically high level. The recovery benefits from temporary positive factors including low oil prices, a relatively weak euro and accommodative monetary policies. It also reflects the first effects of reforms implemented in the last few years. At the same time, security concerns and related geopolitical tensions have intensified and the global economic outlook is becoming more challenging, in particular in emerging economies.

Economic performance and social conditions, as well as reform implementation, remain uneven across the EU. Many economies still face the far-reaching challenges of high long-term and youth unemployment. Productivity growth remains slow, affecting competitiveness and living standards. High private and public debt levels contribute to holding back investment. Growth and employment are also constrained by the persistence of a number of macroeconomic imbalances. These are highlighted in the Alert Mechanism Report 2016 adopted alongside this Annual Growth Survey.

The unprecedented inflow of refugees and asylum seekers over the last year has represented a significant new development in some Member States. This development has an immediate impact in terms of additional public expenditure in the short run. In the medium and longer term, it may also have a positive impact on labour supply and growth, provided the right policies are in place to access to the labour market and to the integration process.

In this context, policies should be directed at consolidating the recovery and fostering convergence towards the best performers.Member States should take advantage of the current "tailwinds" to effectively implement ambitious reforms and pursue responsible fiscal policies. A renewed process of upward economic and social convergence is needed in order to tackle the economic and social disparities between Member States and within societies.

What has been done at EU level to foster jobs and growth?

Throughout its first year, this Commission has delivered on its announcements and presented ambitious initiatives to support jobs and growth, reinforce economic convergence and strengthen social fairness. The Commission's EUR 315 billion Investment Plan for Europe to kick-start jobs and growth is up and running. The European Fund for Strategic Investment (EFSI) is already financing projects in the real economy as well as SMEs and start-ups. The Commission has also made a series of concrete proposals to put in place the building blocks of the Single Market Strategy, Capital Markets Union, Energy Union, and the Digital Single Market. Important steps were taken to ensure fair and efficient corporate taxation. The Commission ensured a swift follow-up to the roadmap for deepening of the Economic and Monetary Union (EMU) set out in the Five Presidents' Report.Finally, the Commission continues to work consistently and continuously on promoting a coordinated European response to the refugee and migration issues.

This Commission set out its jobs and growth strategy last year when presenting its 2015 Annual Growth Survey. Today it builds on this strategy with its 2016 Annual Growth Survey. Bringing recovery to a sustainable path and reviving the convergence process can only be achieved if all EU institutions and Member States act together. This requires close involvement of the European Parliament and national parliaments, social partners, national, regional and local authorities and the civil society at large. In line with its proposal set out in the Communication on completing the EMU, the Commission has engaged with the European Parliament prior to the presentation of this Annual Growth Survey. The European Parliament will continue to play its guiding role and provide political orientation on economic and social priorities. The role of national Parliaments is particularly valuable to strengthen democratic accountability, transparency and promote ownership of the reforms.

What are the next steps of the Annual Growth Survey?

In the coming weeks and months, the European Parliament and different Council formations will discuss the AGS and the European Council will adopt appropriate policy guidance for Member States. This guidance should be incorporated into Member States’ National Reform Programmes (on economic and social policies, in line with the Europe 2020 strategy) and Stability or Convergence Programmes (on budgetary policy, in line with the Stability and Growth Pact), which are sent to the Commission in April. The Commission will analyse these programmes and then issue Country-Specific Recommendations (CSRs) in May, in time for these to be endorsed by the June European Council. Member States should then incorporate this policy guidance into their annual budgets and other national legislation.

The Commission also looks forward to the views of the national parliaments as well as partners at all levels to enrich the discussion and focus priorities for action. Success requires strong commitment from the Member States and the EU institutions together. The Commission will continue to work with all actors to ensure that the recovery is set on a sustainable path, and that Europe can tap its full jobs and growth potential.

STRONGER FOCUS ON EURO AREA PRIORITIES -

PROPOSALS FOR EURO AREA RECOMMENDATION

For the first time, the Commission is publishing a recommendation for the euro area in November, together with the Annual Growth Survey, in order to integrate better the euro area and national dimensions of EU economic governance. This is one of the Commission's specific measures to follow up the Communication on Steps towards Completing Economic and Monetary Union.

The aim is for the European Semester to be structured so that discussions and recommendations about the euro area take place first, ahead of country-specific discussions, so that common challenges are fully reflected in country-specific actions. This is an important change from the previous semester cycles where the euro area recommendations came towards the end of the Semester, at the same time as the Country-Specific Recommendations.

The euro area recommendation provides tailored advice to euro area Member States on issues relevant for the functioning of the euro area as a whole. They reflect the general priorities identified in the Staff Working Document for the euro area and in the Commission's Annual Growth Survey for the EU as a whole.

The euro area recommendation covers issues concerning the whole currency union, such as policies related to correcting macro-economic imbalances, the euro area fiscal stance and the completion of the Economic and Monetary Union.

What is the 2016 euro area recommendation?

The Commission is proposing a total of four recommendations for the euro area:

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Pursue policies that support the recovery, foster convergence, facilitate the correction of macroeconomic imbalances and improve adjustment capacity. To this end, Member States, particularly those with large stocks of private and foreign debt, should implement reforms that enhance productivity, foster job creation, raise competitiveness and improve the business environment. Member States with large current account surpluses should implement as a priority measures that help to channel excess savings toward the domestic economy and thereby boost domestic investment.
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Implement reforms that combine (i) flexible and reliable labour contracts that promote labour market transitions and avoid a two-tier labour market; (ii) comprehensive lifelong learning strategies; (iii) effective policies to help the unemployed re-enter the labour market, (iv) modern social protection systems that support those in need and provide incentives for labour market integration and, (v) open and competitive product and services markets. Reduce the tax wedge on labour, particularly on low-earners, in a budgetary-neutral way to foster job creation.
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Maintain the planned broadly neutral fiscal stance in 2016. With a view to 2017, reduce public debt to restore fiscal buffers while avoiding pro-cyclicality, in full respect of the Stability and Growth Pact. Differentiate the fiscal effort by individual Member States taking into account their respective position vis-à-vis the requirements under the SGP and their stabilisation needs, as well as spillovers across euro area countries. To this end, discuss the euro area fiscal stance in time for the preparation and presentation of the Stability Programmes and the Draft Budgetary Plans.
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Facilitate the gradual reduction of banks' non-performing loans and improve insolvency proceedings for businesses and households. In Member States with large stocks of private debt, promote an orderly deleveraging, including by facilitating the resolution of unviable private debt.

What is the analytical basis for the euro area recommendation?

The euro area recommendation is supported by solid economic analysis by the Commission services on key issues for the functioning of the euro area. This is reflected in the Commission Staff Working Document "Report on the Euro Area" as well as in other documents that are published today.

What is the legal basis for the euro area recommendation?

The euro area recommendation related to economic policy is adopted on the basis of Articles 136 and 121 of the Treaty on the Functioning of the European Union. It is a recommendation for a Council recommendation.

How do the euro area recommendations relate to the Country-Specific Recommendations?

Country-Specific Recommendations (CSRs) provide tailored advice to individual Member States on how to boost jobs and growth, while maintaining sound public finances. The Commission publishes them every spring, as part of the European Semester. They focus on what can realistically be achieved in each EU Member State over the next 12-18 months to make growth stronger, more sustainable and more inclusive. The CSRs reflect on a national level the general priorities identified at EU level in the Commission's Annual Growth Survey.

The earlier adoption of the euro area recommendation and the strengthened focus on euro area issues allows for discussions and recommendations on the euro area to take place first, ahead of country-specific discussions. This should make it possible that common euro area challenges are fully reflected in country-specific actions for the individual euro area Member States. Overall, the interaction between the euro area recommendation and the CSRs allows a better integration of the euro area and national dimensions of EU economic governance.

What are the next steps in the adoption and implementation of the euro area recommendation?

The Eurogroup and the ECOFIN Council will discuss the euro area recommendation before EU Heads of State and Government endorse it. The Council will formally adopt it later on.

Together with discussions on euro area priorities outlined in the euro area recommendation, the EU institutions will provide orientation for the content of the National Reform and Stability/Convergence Programmes of Member States in April, as well as the respective Country-Specific Recommendations in May.

In line with the new cycle of the European Semester, the Commission intends to publish its assessment of the progress made by Member States in implementing the Country-Specific Recommendations as well as of their economic challenges in February, and to adopt the CSRs in May. This will leave ample time for dialogue with the Member States.

MONITORING OF MACROECONOMIC IMBALANCES - THE 2016 ALERT MECHANISM REPORT

The "Six Pack" introduced a system to monitor broader economic developments, to detect early on problems such as credit and real estate bubbles, issues in external sustainability or falling competitiveness. This is called the Macroeconomic Imbalance Procedure (MIP).

What is the Alert Mechanism Report?

The Alert Mechanism Report (AMR) initiates the fifth annual round of the MIP. The procedure aims to prevent or address imbalances that hinder the smooth functioning of the Member States' economies, of the euro area, or of the EU as a whole - and to spur the right policy responses. The AMR identifies Member States that may possibly be affected by imbalances in need of policy action and for which the Commission should undertake further in-depth reviews. The AMR is thus a screening device for economic imbalances, published at the start of each annual cycle of economic policy coordination. It is based on the economic reading of a scoreboard of indicators with indicative thresholds, plus a set of auxiliary indicators.

The AMR is not a mechanical exercise. The Commission does not launch an in-depth review because a Member State reports an indicator beyond the indicative thresholds. Instead, the Commission takes the complete economic picture into account. It is only on the basis of the in-depth reviews that the Commission will conclude whether imbalances, and potentially excessive imbalances, exist as part of the annual Country Reports. The in-depth reviews are expected to be published in February 2016 and will feed into the analysis underpinning the Country-Specific Recommendations under the European Semester of economic policy coordination.

What is new in this Alert Mechanism Report?

In line with the 21 October Commission Communication on completing the EMU, in this year's AMR a greater emphasis is put on euro area considerations.The aim is to conduct a more systematic analysis of euro area-wide implications of countries' imbalances and how such implications require a coordinated approach to policy responses.

Moreover, this year three employment indicators - namely the activity rate, long-term and youth unemployment - have been added to the main scoreboard. The inclusion of new employment variables in the scoreboard is a concrete deliverable on the Commission’s commitment to strengthen its analysis of macroeconomic imbalances. This is particularly relevant for the social consequences of the crisis and because long, drawn-out negative employment and social developments can have a negative impact on potential GDP growth in a variety of ways and risk compounding macroeconomic imbalances. This inclusion does not change the focus of the MIP, which remains aimed at preventing the emergence of harmful macroeconomic imbalances and ensuring their correction. Flashes of the added employment indicators do not trigger by themselves steps under the MIP.

What are the main findings of this Alert Mechanism Report?

This AMR shows that Member States continue to progress in correcting their imbalances. Incountries with high external liabilities, the large and unsustainable current account deficits of the pre-crisis period have been considerably attenuated and external positions balanced or in surplus would need to be sustained in order to significantly reduce the vulnerabilities. Furthermore, cost competitiveness developments have been broadly consistent with external adjustment needs, and in most countries, the process of balance-sheet repair is progressing in the different sectors of the economy.

However, vulnerabilities associated with elevated levels of indebtedness remain a source of concern. In several Member States, the stock of liabilities, private and public, external and internal, remain at historically high levels. They not only represent vulnerabilities for growth, jobs and financial stability in the EU, but the associated deleveraging pressures related to their necessary unwinding also weigh on the recovery.

Surpluses in some Member States remain large over the forecast horizon (2015-2017). At the aggregate level, the euro area is posting a current account surplus which is one of the world's largest and is expected to rise again this year. While weaker commodity prices and the depreciation of the euro exchange rate have contributed to boosting the trade balance, the surplus largely reflects an excess of domestic savings over investment at the area level.

After years of markedly divergent patterns, labour market conditions are converging but social distress remains at unacceptable levels in a number of countries, notably those concerned by the unwinding of macroeconomic imbalances and debt crises.

As identified in the AGS, a coordinated approach to macroeconomic policies is warranted to tackle imbalances while supporting the recovery. Policy action and effective reform implementation, in particular in the field of competitiveness but also insolvency, must especially be stepped up in countries whose capacity to grow is constrained by elevated deleveraging pressures or structural growth bottlenecks. In parallel, domestic demand and investment needs to be boosted particularly in countries with fiscal space, a large current account surplus or low deleveraging pressures. In light of the interconnection between Member States, this combination of policies would contribute to put the rebalancing process on a more stable footing by making it more symmetric, while making the recovery more self-sustainable.

How is the adjustment of current accounts progressing?

Large current account deficits recorded before the onset of the crisis have adjusted to balanced positions or even surpluses in most Member States. While the initial adjustment was mainly the result of reduced private domestic demand, more recent surpluses have also been achieved through export growth. Cyclically-adjusted figures are in general lower than the headline balances, suggesting that further increases in current accounts are not to be expected as the recovery brings back output close to potential. At the same time, risks of going back to pre-crisis deficits seem limited.

In general, creditor countries continue to post very high surpluses. These large and persistent surpluses show no tendency to correct. The current account surpluses in countries where domestic demand is affected by the ageing profile of their populations are expected to remain high. The impact of recent oil price and exchange rate developments on the trade balance only explains in part the current level of the surplus, which is well above what economic fundamentals would imply.

The euro area as a whole is expected to maintain a large current account surplus. It is now one of the world's largest and is expected to rise again this year. According to the Commission Autumn Forecast, the euro area current account surplus will reach 3.7% of GDP in 2015 (from 3.0% in 2014). The current account surplus of the EU as a whole is expected to reach 2.2% in 2015 (1.6% in 2014). The surplus is largely due to an excess of domestic savings over investment at euro area level.

Which EU Member States will be subject to an in-depth review (IDR) under the current AMR?

For the 2016 Semester cycle, 18 countries will be covered in an in-depth review in the framework of the MIP.

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For most countries, IDRs are needed because imbalances were identified in the previous round of IDRs. Following established practice and in line with the MIP legislation, a new IDR is needed to assess whether existing excessive imbalances or imbalances are unwinding, persisting or aggravating, while paying due attention to the contribution of the policies implemented by these Member States to overcome imbalances. The Member States concerned are Belgium, Bulgaria, Germany, France, Croatia, Italy, Hungary, Ireland, the Netherlands, Portugal, Romania, Spain, Slovenia, Finland, Sweden and the United Kingdom.
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IDRs will be prepared for the first time also for Estonia and Austria. In the case of Estonia, the IDR will assess the risks and vulnerabilities linked to a renewed build-up of demand pressures. In the case of Austria, issues related to the financial sector, notably its high exposure to developments abroad and the impact on credit provided to the private sector will be analysed.

For the Member States that benefit from financial assistance, the surveillance of their imbalances and monitoring of corrective measures take place in the context of their assistance programmes. This concerns Greece and Cyprus. As was the case in the previous cycles for Member States expected to exit their financial assistance programmes, the situation of Cyprus will be assessed in the context of the MIP only after the conclusion of the on-going financial assistance programme, which is expected by March 2016.

For the other Member States, the Commission will not at this stage carry out further analyses in the context of the MIP. On the basis of the economic reading of the scoreboard, the Commission is of the view that for the Czech Republic, Denmark, Latvia, Lithuania, Luxembourg, Malta, Poland and Slovakia, an In-Depth Review is not needed at this stage and that further MIP surveillance is not warranted. However, careful surveillance and policy coordination are necessary on a continuous basis for all Member States to identify emerging risks and put forward the policies that contribute to growth and jobs.

On which economic indicators is the AMR scoreboard based?

The scoreboard used in the Alert Mechanism Report is now made up of 14 indicators to monitor external imbalances and competitiveness as well as internal imbalances. The indicators in the scoreboard allow for an early identification of imbalances that emerge over the short term as well as of imbalances that arise due to structural and long-term trends. Indicative thresholds have been set for each indicator.

This year, three employment indicators have been added to the main scoreboard in order to strengthen the Commission's analysis of macroeconomic imbalances particularly in view of the social consequences of the crisis. These indicators are the change in the activity rate, long-term unemployment and youth unemployment. Their inclusion does not change the focus of the MIP. The added employment indicators alone are not used to trigger steps under the MIP.

The AMR also includes a set of auxiliary indicators useful for the interpretation of the scoreboard of indicators. Since 2013, the auxiliary indicators have covered a number of relevant social indicators; their analysis should help to understand better the social costs of imbalances in their different guises and of the required adjustment. These social indicators refer for example to the rate of people at risk of poverty, social exclusion or the share of persons (as percentage of the total population) living in households with very low work intensity. However, unlike for the main indicators, there are no thresholds for these auxiliary indicators.

What is an imbalance?

Regulation No 1176/2011 on the prevention and correction of macroeconomic imbalances defines a macroeconomic imbalance as "any trend giving rise to macroeconomic developments which are adversely affecting, or have the potential to adversely affect, the proper functioning of the economy of a Member State or of the Economic and Monetary Union, or of the Union as a whole". It defines excessive imbalances as "severe imbalances that jeopardise or risk jeopardising the proper functioning of the Economic and Monetary Union".

In general, any deviation from a desirable level can be considered as an imbalance. However, not all imbalances are detrimental or require policy interventions as they may be part of dynamic economic adjustment. Imbalances that require close monitoring and possibly policy interventions relate to developments that could significantly impede the proper functioning of the economy of a Member State, the euro area or the EU as a whole. In practice, these are imbalances that are either at dangerous levels (e.g. high debt levels) or reflect unsustainable dynamics (e.g. excessive increases in house prices or credit) that could result in abrupt and large, and hence damaging, adjustment. For example, having a large and persistent current account deficit is considered an imbalance if it runs the risk of leading to a 'sudden stop' and ensuing large welfare costs. By the same token, a large and persistent current account surplus may be an indicator that excess savings are not being used efficiently to sustain investment in the domestic economy.

What are the next steps following the adoption of the AMR?

The conclusions of the AMR will be discussed in the Eurogroup - if they concern euro area Member States - and in the Economic and Financial Affairs Council (ECOFIN) for all EU Member States. The Commission is also looking forward discussing them with the European Parliament and other partners. Moreover, the European Council will hold a discussion following the publication of the Annual Growth Survey and the AMR in order to agree on the main areas for coordination of economic policies and reforms.

Taking all feedback into account, the Commission will prepare country-specific in-depth reviews in the coming months and present them in February 2016. This will involve a dialogue with the Member States concerned. To prepare the IDRs, the Commission will base its analysis on a much richer set of data then the one used in the AMR: all pertinent statistics, all relevant data, all material facts will be taken into account.

It will be on the basis of the IDRs that the Commission will conclude whether imbalances or excessive imbalances exist, and subsequently prepare the appropriate policy recommendations for each Member State.

THE DRAFT JOINT EMPLOYMENT REPORT 2016

The draft Joint Employment Report (JER) is mandated by Article 148 TFEU and is a key element in EU economic governance. The JER provides an annual overview of the main employment and social developments in the EU as a whole, as well as Member States' reform actions in line with the Guidelines for the Employment Policies of the Member States and AGS priorities.

What are the main findings of the JER?

The employment and social situation is slowly improving but signs of divergence among and within Member States persist. In line with the gradual economic recovery, employment rates are increasing, and unemployment rates are falling in almost all Member States. But social developments still point to further divergence across the EU.

Reforms supporting well-functioning, dynamic and inclusive labour markets must continue. Several Member States have pursued reforms and positive effects are visible for instance in increasing employment rates. However, more effort is needed to stimulate growth and create a positive environment for the creation of quality jobs. Considering that recent employment growth is largely accounted for by an increase in fixed-term contracts, Member States should also continue, and in some cases step up, measures addressing the challenge of segmented labour markets, ensuring a desirable balance between flexibility and security.

Tax systems must support job creation more effectively. Reforms of tax systems have been initiated to reduce disincentives to accepting jobs and to decrease labour taxation. This is intended to support companies (re)hire, often targeted at groups such as the young unemployed and long-term unemployed. Even so, in recent years the overall tax wedge on labour has increased in a considerable number of Member States, notably for low-wage and average wage earners. This trend is worrying given still high unemployment rates in many Member States and considering that high tax wedge levels can constrain both labour demand and labour supply.

Wage-setting has overall continued to show wage moderation. Reforms have strengthened wage-setting mechanisms that promote the alignment of wage developments to productivity and to support households' disposable income, with a particular focus on minimum wages. Overall, recent wage developments appear to be balanced in most Member States and have contributed to rebalancing within the euro area. Real wages move broadly in line with productivity in most Member States, with a few exceptions. This is a positive development for the countries' internal and external equilibria even if some further adjustments are needed.

Investment in human capital through education and training has been predominantly focused on the young but some Member States have also engaged in broad efforts to reform their education systems or extend adult education and vocational training opportunities. However, public expenditure on education decreased by almost half of Member States and fell by 3.2% for the EU as a whole compared to 2010. Modernisation, better alignment of skills and labour market needs and sustained investment in education and training, including digital skills, are essential for future employment, economic growth and competitiveness in the EU.

Member States sustained their efforts to support youth employment and address high levels of NEETs (those not in employment, education or training). The Youth Guarantee has become a driver for improving school-to-work transitions and reducing youth unemployment. First results have now become visible with the share of young people not in employment, education or training decreasing. However, continued implementation, also supported through national funding sources and a focus on structural reform, will be essential for sustainable achievements.

Labour market reintegration of long-term unemployed must remain a priority. Long-term unemployment now accounts for 50% of unemployment. The probability to transit from unemployment to inactivity increases with the time spent in unemployment. This can have important negative consequences for economic growth, in view of required productivity increases and demographic change. Action must be taken both on the demand and the supply side before the long-term unemployed become discouraged and move into inactivity.

Ongoing social dialogue reform is mostly linked to collective bargaining reform and to workers' representation. In contexts of decentralised collective bargaining, structures for workers' representation and the coordination of bargaining with higher levels and horizontally are crucial to secure increased productivity and employment as well as a fair share of wages for workers. Involvement of social partners in policy design and implementation needs to be improved.

Despite the fact that womenare increasingly well qualified, even out-performing men in terms of educational attainment, women continue to be underrepresented in the labour market. The gender employment gap remains especially wide for parents and people with caring responsibilities. The substantial gender gap in pensions in the EU stands at 40% reflects the lower pay and shorter careers of women. Action is needed towards a comprehensive policy approach to work-life balance, including care facilities, leave and flexible working time arrangement, as well as tax and benefit systems free of disincentives for second earners to work or work more.

Member States have continued to modernise their social protection systems to facilitate labour market participation and to prevent and protect against risks throughout the life-course. Social protection systems must better protect against social exclusion and poverty and become encompassing instruments at the service of individual development, labour market and life-course transitions and social cohesion. Adequate pensions remain contingent on the ability of women and men to have longer and fuller careers with active ageing policies sufficiently covering health and training. Health systems contribute to individual and collective welfare and economic prosperity.

In the course of 2015, Member States have been faced with the need to respond to an increasing inflow of refugees. Some Member States have been affected more than others. In the medium to long term, labour market integration matters most.

PROPOSAL FOR A REGULATION ESTABLISHING A PROGRAMME FOR STRUCTURAL REFORM SUPPORT

What has the Commission adopted today and why?

The Commission has adopted a proposal for a Regulation of the European Parliament and the Council establishing the structural reform support programme (SRSP), a financing instrument that will allow the Union to support institutional, administrative and structural reforms in the Member States. This support will allow for the provision of assistance to Member-State authorities for measures aimed at reform of/in institutions, governance, administration, economic and social sectors in response to economic and social challenges, all with a view to enhancing competitiveness, growth, jobs, and investment, in particular in the context of economic governance processes. The support envisaged also includes assistance for the efficient and effective use of Union funds. The support will be triggered upon request from a Member State.

The design of reforms and their implementation - (also) in response to the Country Specific Recommendations (CSRs) - have not yet reached desired levels and outcomes in many Member States. Likewise, the application of Union law at Member State level is still lagging behind. Therefore, Member States may benefit from Union support to address these challenges. The proposed Programme will help step up administrative and institutional capacity and improve the implementation of Union legislation.

How can Member States receive the support?

Support under the proposed programme will be provided by the Commission upon request from a Member State and will be available for: (i) the implementation of reforms in the context of economic governance processes, in particular of the CSRs, and/or other actions related to the implementation of Union law; (ii) reforms associated with the implementation of economic adjustment programmes for Member States receiving Union financial assistance; and (iii) reforms that Member States undertake at their own initiative in order to achieve sustainable investment, growth and job creation.

What is the difference from other sources of EU support?

The Programme will be complementary to existing resources for capacity building and technical assistance available within other Union financing programmes under the Multi-annual Financial Framework as well as with technical assistance and other actions financed by Union funds. The proposed programme will add value and complement the existing support measures, by focusing on aspects of assistance that are linked in particular to offering advice and expertise on the ground, i.e. accompanying the national authorities of the requesting Member States throughout the reform process or in specific phases of this process. The support would be based on the most pressing country needs, as mutually agreed between the Commission and the Member State concerned.

MEMBER STATE INVESTMENT CHALLENGES

Why have the Commission's services identified these investment challenges?

Identifying and removing challenges to investment is part of the efforts to improve framework conditions and remove red-tape and regulatory bottlenecks, as part of the so-called "third pillar" of the Investment Plan for Europe. Indeed, in addition to initiatives at EU level to make Europe more attractive to investment and to create a true Single Market, Member States should identify and remove challenges to investment at national level.

As part of today's package, the Commission services have prepared an analysis to help Member States identify the main challenges to investment at national level.

**What is the main outcome of these investment fiches?**

This preliminary analysis of investment obstacles in each Member State confirms that there is a great deal of diversity across Member States in investment patterns and barriers to investment. In the euro area Member States most heavily hit by the crisis, both private and public investments have collapsed. The main challenges to investment identified for most of these Member States are linked to the legacy of private and public debt and the need to reallocate resources to the tradable sector, including through improvements in cost competitiveness and reform of the wage setting mechanisms. Challenges to investment often encompass difficult access to finance associated with weak insolvency frameworks, administrative challenges (regulatory burden or unpredictability of regulation) and low labour market responsiveness.

For most of the Member States in the group of the cohesion countries, investment including foreign direct investment is crucial to continue catching up.The main challenges to investment for them often relate to the unpredictability, complexity, and heavy burden of the regulatory framework, a lack of transparency of public administration, the judicial system and the tax system, and in many cases difficulties of access to finance. In addition, for many of these Member States, the innovation frameworks are not conducive to investment in the most innovative and productive activities, which can make catching up more difficult.

In the remaining group of Member States (including most euro area countries and some non-euro area countries), investment has been relatively resilient. However, there are different patterns in terms of levels and composition of investment.These Member States generally face fewer challenges to investment. Remaining obstacles can include sector-specific regulatory challenges (e.g. retail, construction, and business services and regulated professions). In addition, some of these Member States, despite showing resilient investment, face a marked decrease in equipment investment, associated with a deterioration of cost (and non-cost) competitiveness in their manufacturing sectors. Besides sector-specific regulatory challenges, challenges to investment also often include high taxation levels and insufficient labour market responsiveness.

What is to be done with this analysis?

The country specific investment fiches do not contain a definitive and exhaustive list of challenges to investment in each country. They are intended as a first contribution to the discussion. They will need to be refined and complemented in dialogue with the Member States, including in thematic discussions in the Council and its Committees. Challenges to investment will also be a priority of the 2016 European Semester. These challenges will be further analysed in the context of the Country Reports foreseen in February 2016.

TOWARDS COMPLETING ECONOMIC AND MONETARY UNION

Delivering a deeper and fairer Economic and Monetary Union was already one of President Juncker's 10 priorities in his Political Guidelines. The "Five Presidents’ Report", presented on 22 June 2015, is the basis for achieving this aim within the next decade. The report was prepared at the request of the Euro Summit of October 2014 and the European Council of December 2014.

The "Five Presidents' Report" proposes an ambitious yet pragmatic roadmap for completing EMU by making progress on four fronts in parallel: Firstly, towards a genuine Economic Union that ensures each economy has the structural features to prosper within the Monetary Union. Secondly, towards a Financial Union that guarantees the integrity of our currency across the Monetary Union by limiting risks to financial stability and increasing risk-sharing with the private sector. Thirdly, towards a Fiscal Union that delivers both fiscal sustainability and fiscal stabilisation. And finally, towards a Political Union that provides the foundation for all of the above through genuine democratic accountability, legitimacy and institutional strengthening.

Following the presentation of the "Five Presidents' Report", the Commission launched Stage 1 ("Deepening by doing") of the process of completing EMU on 1 July 2015.

It then adopted in October a package of measures entailing a revised approach to the European Semester, including through enhanced democratic dialogue and further improved economic governance, such as the introduction of national Competitiveness Boards and an advisory European Fiscal Board; a more unified representation of the euro area in international financial institutions, especially the IMF. On 24 November, the Commission proposed a euro-area wide insurance scheme for bank deposits and has set out further measures to reduce remaining risks in the banking sector in parallel.

To prepare the transition from Stage 1 to Stage 2, the Commission will present a White Paper in spring 2017 outlining the next steps needed, including legal measures to complete EMU in Stage 2.