European Semester Research Articles

Impact of the European Semester on the Budgetary Process in Croatia

Year after year, the Ministry of Finance and governments are justly berated for not keeping to timetables, for unrealistic assumptions and the insubstantiality of the key documents (strategic plans, strategies and guidelines) meant to underpin the three-year budget. These shortcomings have led to frequent budget revisions and unsatisfactory fiscal outcomes. How is the entry of Croatia into the EU going to affect the economic policy and the public finances in the country? How will it be reflected in the budgetary process – from strategy and guidelines to budget plan? What exactly is going to happen when we do get into the EU? And what has already started to happen?

Sustainable tax policy

The current academic and political debate about the quality of tax systems does not systematically take into account aspects of sustainability. For some time now, OECD, International Monetary Fund and European Commission have been pushing the case for enhancing the growth-friendliness of tax systems. Ecological and social/equity considerations appear to have lower priority in the hierarchical order of objectives guiding the recommendations for the design of tax systems. The European Commission and the OECD regularly publish an increasing number of indicators and the underlying data that can be used to assess different sustainability dimensions of tax systems and/or individual tax categories also in a cross-country comparison and over time. In particular, the European Commission has developed a set of indicators trying to capture the contribution of member states’ tax systems to the goals of the Europe 2020 strategy. This set of indicators, however, focuses on the growth-friendliness of member states’ tax systems, while indicators for their distributional and environmental impact play a less prominent role. The paper attempts at establishing a conceptual basis for the development of a consistent set of indicators to capture the sustainability impact of tax systems. Firstly, we formulate fundamental objectives underlying a sustainable tax system. Then we present some fundamental deliberations about the function of indicators and a classification of indicators which may be useful to assess the sustainability impact of tax systems. Against this background, we critically review the European Commission’s indicator-based approach to evaluate EU member states’ tax systems within the European Semester. Finally, we address open questions and next research steps.

Policy learning in the Eurozone crisis: modes, power and functionality.

In response to the attacks on the sovereign debt of some Eurozone countries, European Union (EU) leaders have created a set of preventive and corrective policy instruments to coordinate macro-economic policies and reforms. In this article, we deal with the European Semester, a cycle of information exchange, monitoring and surveillance. Countries that deviate from the targets are subjected to increasing monitoring and more severe ‘corrective’ interventions, in a pyramid of responsive exchanges between governments and EU institutions. This is supposed to generate coordination and convergence towards balanced economies via mechanisms of learning. But who is learning what? Can the EU learn in the ‘wrong’ mode? We contribute to the literature on theories of the policy process by showing how modes of learning can be operationalized and used in empirical analysis. We use policy learning as theoretical framework to establish empirically the prevalent mode of learning and its implications for both the power of the Commission and the normative question of whether the EU is learning in the ‘correct’ mode.

Reform of labour taxes in Latvia 2011-2013

The paper analyses the motives for and results of the labour tax reforms undertaken by the Latvian government in 2011-2013 with a special focus on the lowwage sector. The reforms were developed with the goal of overcoming negative effects on the labour market caused by the deep economic crisis in 2008-2010 as well as of coping with an increase in labour tax burdens during consolidation. In 2008-2010, Latvia was seriously affected by the global economic crisis and during these years real gross domestic product (GDP) declined by 21 percent. Labour market conditions became worse rapidly and at the beginning of 2010, the unemployment rate reached 21.5 per cent of the economically active population. For the period of 2011-2016, the reforms provide for a reduction in the rates of personal income tax (PIT) and social security contributions (SSC) as well as for an increase in PIT allowances. Taking into account the changes made in labour tax laws, we employed forecasts of average wages and applied the Eurostat methodology to calculate the tax wedge for different groups of employees depending on income level and on the number of their dependants. The results show that the impact of the reform varies greatly and it is more beneficial for employees with dependants and for low-wage earners. The findings of the paper contribute to policy discussions and decisions on the tax wedge, especially in the Euro area. In the period covered by the paper, about half of the Euro area member states (including Latvia) received a country-specific recommendation to address this issue in the context of the European Semester.

Redirecting national parliaments: Setting priorities for involvement in EU affairs

While national parliaments in the European Union have learned to internalize new opportunities for influence given to them by the Lisbon Treaty, European integration has evolved and places ever more serious demands and constraints on domestic legislatures. Following the euro crisis, key decisions about national macro-economic policies are taken in the European Council and the European Semester. These are the issues traditionally at the heart of both democratic governance and citizens’ concerns. Relating these developments to the key functions national parliaments ought to perform, we develop the normative argument that a redirection of national parliaments’ resources away from less salient matters and particularly the Early Warning Mechanism towards the European Council and European economic governance would be welcome.

Fighting social exclusion under the Europe 2020 strategy: Which legal nature for social inclusion recommendations?

In this paper, we take a closer look at the promotion of social inclusion in the framework of the Europe 2020 strategy, in particular the legal consequences of the incorporation of the social inclusion guidelines under the European Semester. Since the employment guidelines under the Europe 2020 strategy are now connected in a structural way to the economic guidelines, we first look at the monitoring procedures that accompany the implementation of these economic guidelines. Furthermore, we test the potential legal consequences of the integrated approach by unravelling (the formulation of) the social inclusion-related Country Specific Recommendations, and look at to what extent they answer to the economic, employment or social inclusion objectives.The first legal consequence relates to the question of whether and to what extent the harder sanctioning tools, which have been developed for controlling the EU’s economic-oriented Country Specific Recommendations, can be similarly applied to the guidelines relating to social inclusion (such as the application of sanctions in cases when the recommendations are not followed by states). In our opinion, there is a spillover effect only in relation to social inclusion recommendations that have sufficient economic or budgetary relevance (‘social inclusion recommendations of the negative kind’, supporting economic or budgetary goals). In other words, social inclusion recommendations that support only social objectives (or only employment objectives) do not enjoy the stronger legal effects of the integrated monitoring approach.From analysing the concrete Country Specific Recommendations, we demonstrate that the incorporation of social inclusion into the employment guidelines has two additional consequences. On the one hand, social inclusion recommendations are nowadays formulated mainly in terms of employment objectives. On the other hand, the link with social inclusion also has implications for recommendations in the field of employment and economy that should not be to the detriment of social inclusion

Taking Budgetary Powers Away from National Parliaments? On Parliamentary Prerogatives in the Eurozone Crisis

This paper analyses if and how the position of national parliaments has changed after the adoption of Euro-crisis measures and their first enforcement and tries to draw some conclusions on whether these changes are just temporary or, rather, are likely to endure in the long term and hence to represent a permanent transformation of national constitutional systems. The paper challenges the mainstream assumption that the powers of national parliaments in budgetary procedures have been annulled. It is argued that once the ratification/application and implementation of the most contested Euro-crisis provisions – Fiscal Compact, European Stability Mechanism Treaty and rescue packages – have taken place, in reaction to the most acute phase of the crisis, the combination of national and EU rules, for example on the European Semester are likely to preserve the budgetary powers of national parliaments compared to the pre-crisis period. Parliamentary passivity does not derive, or at least not primarily, from the Euro-crisis legal measures; rather from the political context that the Euro-crisis has triggered. Thus any analysis of the role of parliaments in the Eurozone crisis has to take into account parliamentary institutions ‘in context’, which are influenced by the peculiar political and economic situation of each country. Far from being a uniform category, national parliaments in the Eurozone crisis show asymmetries and a significant variety of positions and powers, since their role depends primarily on national constitutional arrangements.

The role of enterprise and entrepreneurship within higher education and effective economic governance across Central and Eastern Europe

ABSTRACT. Economic governance across Central and Eastern Europe, in the light of transitions to market economies and deepening European Union governance and regulation, is a complex issue of multiple variables, including economic reforms, currencies, fiscal discipline and investments. Within that complexity also lie the perceived capabilities of upcoming generations of students graduating from universities in the region, or graduating elsewhere to return to the region, and starting their working careers. The aim of this study is to focus on university graduates, and to address aspects of the potential role of enterprise and entrepreneurship-related activities within higher education in helping to shape future economic governance across Central and Eastern Europe. The study also draws in part upon the impact of the European Union's Erasmus programme (European Community Action Scheme for the Mobility of University Students) that has now been in place for over a quarter of a century, as well as its 2014 successor Erasmus+ which combines all the EU's current schemes for education, training, youth and sport. Such investments in the continued evolution of higher education may in time help to establish some of the foundations for effective economic governance across the whole region.Keywords: enterprise, entrepreneurship, education, economy, economic governance, Europe.JEL Classification : L26, J68IntroductionEffective economic governance has risen to prominence in Europe in recent years, particularly since the European debt crisis established itself in 2009, following a series of international, regional and national financial and economic crises in the preceding years. The causes of the crisis are widely debated and include a combination of factors such as the globalisation of finance, relatively relaxed credit conditions, trade imbalances, real estate bubbles, recessions, fiscal policies, government bail-outs and other related issues. It even resulted in the President of the European Central Bank (Trichet, 2011) using the phrase quantum leap in describing the magnitude of change required. The causes will be the subject of much further analysis over future years and this research concentrates more on the solutions being adopted rather than the causes.The European Commission has therefore, by necessity, reacted to the crisis by adopting a succession of reforms to the European Union rules. These were introduced through the Six Pack, the Two Pack and the Treaty on Stability, Coordination and Governance (European Commission, 2014). These include new surveillance systems for budgetary and economic policies and a new budgetary timeline known for the Euro area that is laid out in the EU's policy-making calendar known as the European Semester. The key elements of the new system are:* Coordination throughout the year: The European Semester.* More responsible budgeting.* Stepped-up surveillance in the Euro area.* Monitoring extended to macro-economic imbalances.Whether or not these reforms prove enough, and whether indeed they are implemented in the manner necessary to achieve the desired results, will be seen in the coming years and subsequent reforms may well yet be needed. However, it is a step-change in initiating such reforms in the first place and it is worth noting that, in the definition of economic governance provided by Dixit (2008), the focus is on the existence of both formal and informal processes to support economic activity. These EU reforms reflect that in that they do represent a stepchange in economic governance in Europe, with the aim of establishing a more solid platform for what is the overall aim for Europe: Growth (Gill and Raiser, 2012). Much of the growth agenda will rely on effective management and it is parts of this issue that this research addresses.At a time when some regional economies outside Europe are experiencing degrees of strength and growth, it is important for Europe to re-establish its growth and competitiveness agenda so that it can invest in achieving prosperity across the region. …

A Design for an Operational Capacity of the European Semester

Since 2011, the European Semester constitutes the main instrument for strengthening economic policy coordination between member states. Economic policy coordination is of particular importance in a monetary union deprived of a full-fledged fiscal union as a backstop for shock-smoothing capacity. Against this background, the European Semester -- despite its two reforms occurred in 2011 and 2013 -- has proven unable to provide effective coordination. The existing system is flawed by two main weaknesses: on the one hand, it lacks an effective incentive mechanism for member states to implement the country-specific recommendations; on the other hand, its democratic legitimacy provisions are not sufficiently developed and prevent the European Parliament to actively participating in the system. Against this background, this policy contribution proposes the creation of an operative arm for the European Semester in order to address both flaws and strengthen the effectiveness and legitimacy of the Semester.

Internal and International Corruption

This subject, whence the name of this paper originates from, must be addressed with courage and intellectual integrity by all of us, the different parts of the civil society, the public institutions, the entrepreneurs and the legal professionals, the youth and the new generations.All the public policies of the European governments share the belief of a direct correlation between the criminal density connected to corruption of States political and economic protagonists and the lack of availability of investments on young talents, new generations, both in the entrepreneurial and in the professional fields. In most Member States, anticorruption policies have gained an increased prominence in government agendas and the financial crisis has drawn attention to the integrity and accountability of policy-makers.Most Member States that are currently in serious financial difficulties have acknowledged the seriousness of issues related to corruption and have created (or are planning) anticorruption programs in order to deal with the risks deriving from this issue and with the diversion of public funds. In some Member States, the economic adjustment programs provide for explicit obligations related to anti-corruption policies. Even when not formally connected to adjustment programs, anticorruption policies complement the adjustment measures, especially in those countries in which corruption is a serious issue. During the European Semester of economic policy coordination, recommendations for efficiently fighting corruption have been laid out; Among the most vulnerable sectors, urban development and building projects are certainly very exposed to corruption risks and to infiltration of internal and transnational organized crime.

European Semester in the Sejm of the Republic of Poland. Institutional and legal aspects

The article analyses the first years of the functioning of the European semester mechanism in the Sejm of the Republic of Poland from the institutional and legal perspectives. The author shows the evolution of the procedure in the lower house of the Polish parliament since the first edition of the Semester in 2011 until the last one recently ended in 2014. The research concerns the participation of different committees in the process of examining documents of the Semester cycle, EU inter-parliamentary cooperation, as well as the legal aspects of the government-parliament relations according to the cooperation act. The article also contains recommendations.

Europe 2020 and the Fight against Poverty – Beyond Competence Clash, Towards ‘Hybrid’ Governance Solutions?

AbstractThe supranational strategy ‘Europe 2020’ came along with two main innovations for social policy coordination in the EU: a quantified poverty reduction target and a new governance framework – the ‘European Semester’. Aiming to assess the effectiveness of the novel strategy in prompting the emergence of a European(‐ized) anti‐poverty arena – thus inherently multilevel and multi‐stakeholder, as well as integrated (across policy sectors) – the article first presents the strategy evolution at the supranational level in 2011–14. Then it analyzes its implementation in five member states – Germany, Italy, Poland, Sweden and the UK – through the first four annual cycles. By directing the analytical focus on processes – rather than outcomes – in order to capture the domestic changes produced by the Europe 2020 anti‐poverty strategy, the article argues that the latter marked significant discontinuity with the Social Inclusion Open Method of Coordination. The new strategy increased the political salience of the poverty issue both at the supranational level and in the selected member states, while leading to a ‘competence clash’ between national governments and the EU in Germany, Sweden and the UK. The emergence of such main tension substantially constrained the Europe 2020 potential in these three countries. Differently, in Italy and Poland, the implementation was smoother and the effects along the participation and integration dimensions were more evident. We contend that national policy legacies, the relevance of EU social funds, as well as partisan preferences, help to explain the differential effects of Europe 2020. The article concludes by suggesting that recent decisions at the EU level might eventually bring European anti‐poverty coordination beyond soft‐law towards ‘hybrid’ governance solutions.

A historical institutionalist explanation of the EU's responses to the euro area financial crisis

ABSTRACTHow can we understand the European Union's responses to the euro area financial crisis? This contribution examines this question through a historical institutionalist (HI) lens. First it reviews the design of existing institutions. With the help of HI it examines what challenges the institutional design posed on the European Union (EU) when the crisis hit. Next, the responses to the crisis by member state leaders and by EU-level actors are reviewed. An analysis is made of selected new EU institutions created to address the crisis: the European Financial Stability Facility; the European Stability Mechanism; the Six-Pack and Two-Pack; the European Semester; and the Fiscal Compact. Four ideal types – ‘displacement’, ‘layering’, ‘drift’ and ‘conversion’ – are examined and found not to fit well. In some cases institutions were ‘layered’ on top of existing institutions. Perhaps an amendment could be made by offering the ideal type ‘copying’ in those cases where new institutions that borrow from earlier institutions. Although no complex problem can be truly understood by looking at it through one single theoretical lens, this contribution argues that a large of part of the problems that emerged, and the solutions adopted, can be understood by examining it through an HI lens.

EU Country Specific Recommendations for health systems in the European Semester process: Trends, discourse and predictors

In the framework of “Europe 2020”, European Union Member States are subject to a new system of economic monitoring and governance known as the European Semester. This paper seeks to analyse the way in which national health systems are being influenced by EU institutions through the European Semester. A content analysis of the Country Specific Recommendations (CSRs) for the years 2011, 2012, 2013 and 2014 was carried out. This confirmed an increasing trend for health systems to feature in CSRs which tend to be framed in the discourse on sustainability of public finances rather than that of social inclusion with a predominant focus on the policy objective of sustainability. The likelihood of obtaining a health CSRs was tested against a series of financial health system performance indicators and general government finance indicators. The odds ratio of obtaining a health CSR increased slightly with the increase in level of general Government debt, with an OR 1.02 (CI: 1.01, 1.03; p=0.007) and decreased with an increased public health expenditure/total health expenditure ratio, with an OR 0.89 (CI: 0.84, 0.96; p=0.001). The European Semester process is a relatively new process that is influencing health systems in the European Union. The effect of this process on health systems merits further attention. Health stakeholders should seek to engage more closely with this process which if steered appropriately could also present opportunities for health system reform.

Proces wzmacniania unii gospodarczej i walutowej w konteśkcie kryzysu w stgrefie Euro

Process of strengthening of the Economic and Monetary Union in the context of the crisis in the euro area This article includes a description and an assessment of the key initiatives dedicated to strengthening the economic pillar of the Economic and Monetary Union (EMU) and puts emphasis on reform of the economic governance framework. As was pointed out, the crisis in the euro area has been the most important incentive to deep reshape construction of the EMU, especially in respect to its economic governance. This process – being, beside rescue actions, one of the dimensions of the response to the crisis in the euro area – has multistage and multidimensional character. The new solutions in this dimension, which encompass: the European semester, the “six‑pact”, the “two‑pact”, the Treaty on Stability, Coordination and Governance in the EMU (TSCG), European Stability Mechanism (ESM), Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM), strengthened economic pillar of the EMU. Above‑mentioned solutions can improve resilience of the EMU on risks of crises in the future, however these instruments do not provide a guarantee that this area will be instability free zone. Creation of the fiscal capacity mechanism would be important for reinforce the abilities of the EMU to counteract potential disturbances. The treaties change will be required for the completion of the EMU.

A Fiscal Governance Improvement Plan for a future Croatian Government

At its session of April 30, 2014, the Government of the Republic of Croatia accepted the Convergence Programme of the Republic of Croatia for the Period 2014-2018, the first Convergence Programme to be drafted by the Republic of Croatia as an EU Member State. The most specific part of the Programme deals with fiscal governance, explaining key changes in the budget system, necessary for compliance with the European Semester requirements. Improvements in fiscal governance, achieved through the planned changes, particularly in budget planning, public debt management and expenditure control, will not be seen until 2016

La consideración de la pobreza en la actual estrategia de coordinación y supervisión económica de la UE

This article deals with new instruments of the European Union strategy to address poverty in the current context of crisis. With this aim, we assess the main characteristics of poverty in the EU, emphasizing its connection with the objectives of the integration process. Among them, special attention is given to new reinforced economic governance, what we consider a determining factor of current poverty. In this context we outline the contributions of the initiatives given by the Commission to address poverty since the break out of the crisis. To assess the effectiveness of these proposals in the national policies, we evaluate the role of the European Semester, its incorporation of indicators of poverty and supervision of State Members actions.

Semestre européen et fiscalité : le cas de la Belgique

La coordination des politiques économiques est au cœur du semestre européen et la fiscalité en est un élément essentiel tant pour les politiques de consolidation budgétaire que de soutien à l’emploi et à la croissance. Cinq grandes priorités ont été mises en avant par la Commission européenne en matière de fiscalité. De ces priorités découlent des recommandations spécifiques aux États membres, dont la Belgique. JEL : E61, E62, H20

O.5. Round table: Is the ‘European Semester’ becoming the major driver for health systems policy development in Europe?

Objective Building on last year's workshop which examined the European Semester as a novel process requiring further attention, this roundtable provides an overview of the most recent developments, a theoretical and a practical presentation and a discussion amongst key stakeholders. Background: To ensure that the Member States who signed up to the ‘Europe 2020’ targets make progress and implement the requisite policies, a new system of economic monitoring and governance known as the ‘ European Semester’ has been established. In January of each year the Commission sets out its priorities in the Annual Growth Survey. On the basis of these priorities the EU …

The influence of the “European Semester”: A case study report from the Austrian health system<subtitle>Dorli Kahr-Gottlieb</subtitle>

The influence of the “European Semester”: A case study report from the Austrian health system<subtitle>Dorli Kahr-Gottlieb</subtitle>