Analytics, EU – Baltic States, Modern EU

Autumn-2018 Semester’s package has also shown some possible macroeconomic risks in the member states: for example, Germany and the Netherlands sell too much goods and services in the EU and abroad compared to other European states. In addition, the European Semester’s package included a review of the Italian budget and the first “enhanced surveillance” report for Greece; the latter is for the first time ever included in the normal budgetary assessment scheme. The Baltic States are in the good conditions with positive assessments in the autumn-18 semester.   

Below are some features of the autumn semester, which attracted our attention:

The good news: in 2019, Europe’s economy is set to continue expanding, providing jobs to a record number of people and lifting millions out of poverty. For example, employment has risen to a record level of 239 million people; Europe’s economy is now entering its sixth year of uninterrupted growth; dispersion of growth rates across the euro area is the smallest in the history of the Economic and Monetary Union, to name a few.

The risks: the Commission sees “low productivity growth; income inequality and slow reduction in poverty; disparities; high public and private debt and other remaining macroeconomic imbalances” as “persisting vulnerabilities.” Other concerns include: “rising protectionism and geo-political tensions affecting trade relations; slow diffusion of new digital technologies; gradual withdrawal of central bank stimulus” and the all-time classic “loss of reform momentum”, without even mentioning climate change and migration.

Perspectives: the report sets out the Commission’s economic and financial policy goals for next year, which will appear in the EU’s recommendations to governments. It’s a classic compromise paper, with something for every member state: from austerity measures to increased investment. There is also a 13-page implicit admonition for Italy’s economic and budgetary plans of the past and present governments to make the best of the favorable conditions and increase growth for the next decade.

Leaving and working abroad: the number of EU citizens living and working in another EU country has more than doubled over the past 10 years reaching 17 million (of whom 9.5 million are “economically active”) in 2017, up from 8 million in 2007.

According to recent Commission figures in the report on the single market, a total of 2 million commute cross-border daily; some 9 million have participated in an Erasmus exchange (however, these figures remain low for a continent of more than 512 million inhabitants; perhaps for the regret of employers in some states).

Another vital issue: eight EU countries, including Germany, the Netherlands and Sweden, have voiced in the Austrian Council’s presidency and the Commission on a key proposal to allow for “smoother police access” to data held by Facebook, Microsoft and Google. These countries want more changes in the draft text discussed in the Council’s configurations’ negotiations, and have asked for a new “compromising text” in the coming weeks, according to letters send to the Council.

Privacy concerns: The Commission showed some concern over e-evidences, one of the new single market proposals, which would allow investigators in Europe to directly request data from platforms like WhatsApp, Gmail and others for investigations.

Some countries are concerned that e-evidence could be misused to cover the present opposition to sensitive political issues in Hungary and Poland, and want stronger human rights safeguards. Others, including Hungary, fear it harms national sovereignty. The decisive date is going to be December 7, when member states’ justice ministers meet for this year’s final EU Council’s configuration on ICT and digital agenda.

Bottom-line: the Commission calls on the European Council to ensure that the Council works swiftly with the European Parliament to adopt by the end of March 2019 the legislative initiatives under the single market strategy, the digital single market, the capital markets union and banking union.

The report lists in great detail the state of play of 67 single market-related proposals made during last five years, only about a third of which have been agreed to by legislators. Among those still being debated are the European deposit insurance scheme, EU bonds and other measures aimed at deepening the monetary union. The report is a reminder to leaders that the single market they’ve been defending and enlarging still needs some “tender and loving care” from all the Union’s member states.