The European Semester will continue to identify socio-economic challenges and provide guidance on the policy action needed to address them. For this purpose, the 2025 European Semester cycle will improve its analytical basis and strengthen the dialogue with Member States and other stakeholders on concrete policy actions. Based on this, the European Semester Spring Package will provide country-specific recommendations (CSRs) to tackle main country-specific challenges identified in the Country Reports.
Proposal for a recommendation on the euro area economic policy for 2025
The euro area recommendation presents policy advice to euro area Member States on issues that affect the functioning of the euro area as a whole.
This year’s euro area recommendation calls on Member States to act both individually, including through the implementation of their Recovery and Resilience Plans, and collectively within the Eurogroup to improve competitiveness, to foster economic resilience and to continue ensuring macroeconomic and financial stability.
In particular, the recommendation calls to:
- Strengthen innovation, including in critical technologies.
- Improve the business environment, reinforcing access to funding and reducing administrative burden and regulatory complexity.
- Support public and private investment in areas of common priorities, such as the green and digital transitions and the build-up of defence capabilities.
- Promote upskilling and reskilling of the workforce, while further increasing labour market participation.
- Ensure compliance with the new fiscal framework, improve debt sustainability and monitor risks to macro-financial stability.
Alert Mechanism Report
The Alert Mechanism Report (AMR) serves as a screening tool to identify potential macroeconomic imbalances that could impact the economy of individual Member States or the EU as a whole. It marks the start of the annual cycle of the macroeconomic imbalance procedure, highlighting which Member States require in-depth reviews to determine whether they are experiencing imbalances.
In 2025, in-depth reviews will be prepared for the nine countries that were identified as experiencing imbalances or excessive imbalances in 2024: Cyprus, Germany, Greece, Italy, Hungary, the Netherlands, Romania, Slovakia and Sweden.
This year’s AMR concludes that an additional in-depth review is warranted for Estonia due to specific risks of newly emerging imbalances. The country continues to face accumulating cost competitiveness losses driven by strong cost pressures, a worsening current account, and rising house prices and household borrowing.
Proposal for a Joint Employment Report
The proposal for a Joint Employment Report (JER) confirms that the EU labour market remains remarkably resilient. The EU employment rate reached a record high of 75.3% in 2023 and rose further to 75.8% in the second quarter of 2024. At the same time, the unemployment rate decreased to a historic low of 6.1% in 2023, a trend that continued in 2024. Labour productivity continued to decelerate in 2023, after slowing significantly between 2010 and 2019. This could harm the EU’s ability to compete globally and sustain economic growth, job creation and improvements in living standards.
Real wages began to recover in the second half of 2023, as inflation pressures eased. However, these gains have not yet fully restored the purchasing power lost in previous years. Adequate minimum wages remain essential to protect low-wage earners and reduce in-work poverty, boosting demand and strengthening incentives to work. Widespread labour and skills shortages remain bottlenecks for productivity gains, innovation and competitiveness. In March 2024, the Commission presented an Action Plan to tackle labour and skills shortages, building on existing initiatives and setting out new actions to be implemented by the EU, Member States and social partners.
The 2025 Joint Employment Report maintains a strong country-specific focus on employment, skills and social aspects based on the principles of the Social Convergence Framework, as foreseen in the new economic governance framework. The report also monitors progress towards the 2030 targets set out in the European Pillar of Social Rights Action Plan. The EU is well on track to achieve its headline employment rate target of 78% by 2030. However, significant progress is still needed to ensure that 60% of adults participate in learning every year, and to reduce by at least 15 million the number of people at risk of poverty or social exclusion.
Next steps
The European Commission invites the Eurogroup and Council to discuss the second part of the Autumn Package and to endorse the guidance offered today. It looks forward to engaging in a constructive dialogue with the European Parliament on the contents of this package and each subsequent step in the European Semester cycle, as well as further engagement with social partners and stakeholders.
Background
The European Semester provides a well-established framework for coordinating economic and employment policies of the Member States. Since its introduction in 2011, it has become a well-established forum for discussing EU countries’ fiscal, economic and employment policy challenges under a common annual timeline.
For more information
Quote(s)
Today’s package is an important step in the European Semester. Our analysis formulates policy guidance to promote growth, competitiveness and stability. This means: first, closing the innovation gap with our economic competitors; second, a joint plan for decarbonisation and competitiveness to accelerate the transition and lower the cost of energy; and, third, increasing security and reducing dependencies. Therefore, our recommendations and analysis lay the ground for the major policy initiative, which the European Commission will publish in January – the competitiveness compass.
Today’s report and the trends identified set the ground for our political action in the years to come. Despite the robust labour market outcomes, including a rebound of real wages, challenges persist in jobs distribution, especially for vulnerable and underrepresented groups, widespread skills and labour shortages, and stagnating poverty trends which call for ambitious actions. An ambitious competitiveness strategy requires ensuring developing skills, promoting quality jobs and a comprehensive anti-poverty strategy.
The EU is confronted with serious structural challenges which threaten our long-term prosperity. Urgent action is needed. Today, we are providing clear policy guidance to support Member States preserve macroeconomic stability while promoting growth, fiscal sustainability and improve their competitiveness. The challenging global context underlines the importance of coordinating economic and social policies across EU Member States. The European Semester is and will remain the key tool to achieve this and deliver on the objectives of our new economic governance framework.
Source – EU Commission
EU Commission Q&A on the second part of the 2025 European Semester Autumn Package
Brussels, 18 December 2024
Questions related to the European Semester in general
1. What is included in this year’s European Semester Autumn Package II?
Today, the Commission presents a package including the following:
- A Chapeau communication;
- A proposal for a recommendation on the economic policy of the euro area for 2025;
- The 2025 Alert Mechanism Report;
- A proposal for a Joint Employment Report for 2025.
2. What is the role of the Autumn Package and why was it split in two? How has the European Semester evolved since last year and why?
The European Semester Autumn Package marks the launch of a new cycle of the European Semester. This year, the Autumn Package was split into two parts. The first (fiscal) part of the Autumn Package, adopted on 26 November 2024 by the 2019-2024 College, launched the implementation phase of the new economic governance framework. The second part of the Autumn Package, adopted on 17 December 2024, includes the Alert Mechanism Report, the Euro Area Recommendation and the proposal for a Joint Employment Report. The later date of the second part of the Autumn Package aligns with the new College taking office.
The European Semester will continue to drive the EU’s economic and social policy coordination, ensuring consistency between the EU, national and regional dimensions. The 2025 Spring Package will aim to strengthen ownership of Member States, social partners and other stakeholders, including local and regional authorities and relevant civil society organisations, by deepening the structured dialogue with all parties.
These will include discussions on the implementation of existing recommendations, on current or future policy action to address identified challenges, as well as on opportunities for further economic growth and social progress.
Questions related to the euro area economic policy recommendation for 2025
3. What is the Proposal for a recommendation on the economic policy of the euro area?
The recommendation on the economic policy of the euro area presents tailored advice to euro area Member States for the period 2025-2026 and is underpinned by a Staff Working Document analysing the macroeconomic outlook and the main structural challenges that the euro area is currently facing. The recommendation reviews fiscal, financial and structural issues, as well as institutional aspects of Europe’s Economic and Monetary Union. The recommendation provides an agenda setting for the euro area as a whole and a framework to steer policy debates on priorities for the Monetary Union and its members, in particular in the Eurogroup.
The adoption of the Euro Area Recommendation (EAR) is by now an established step in the annual cycle of macroeconomic coordination. It has the same legal basis of all other acts of the European Semester cycle [art.121 of the Treaty on the Functioning of the European Union (TFEU)] although is limited to the euro area (art.136 of the TFEU). The EAR has contributed to setting the agenda of policy dialogues in the Eurogroup.
4. What are the main elements contained in this year’s euro area recommendation?
This year’s euro area recommendations focus on three key policy areas: competitiveness, resilience, and macro-economic and financial stability.
Oncompetitiveness, the recommendations aim to enhance productivity and boost innovation by deepening the Single Market and reducing regulatory burdens to improve the business environment. They emphasise the importance of innovation through upskilling, reskilling and increased R&D investment, while promoting targeted industrial policies that do not disrupt the level playing field. Additionally, developing a European Savings and Investment Union, by strengthening links between the Capital Markets Union (CMU) and the Banking Union (BU), is a priority, as is mobilizing venture capital to support start-ups and scale-ups.
Regardingresilience, the focus is on fostering stronger and more adaptable economies. Increasing labour market participation, through measures supporting underrepresented groups – women, older workers, younger workers – as well as managed legal migration, is essential, as is promoting wage and productivity growth while ensuring competitiveness dynamics are reflected in wage bargaining. Social protection and inclusion systems need to adapt to evolving needs including access to housing. The implementation of an EU-wide strategy for electrification and green transition, supported by cross-border interconnection grids is also essential for resilience.
Formacroeconomic and financial stability, the recommendations highlight the importance of prudent fiscal policies and maintaining macro-financial stability. This includes compliance with the new fiscal framework to improve debt sustainability and defining fiscal strategies that enhance the quality and efficiency of public finances. Monitoring financial stability risks is also critical to mitigating potential vulnerabilities.
5. What are the next steps following the presentation of the euro area recommendation?
The Commission will present its proposal for the euro area recommendation at the Eurogroup on 20 January 2025 and at the Economic and Financial Affairs Council on 21 January 2025 with the aim of exchanging preliminary views. Following preparatory work in the Council’s committees in January 2025, the proposal is expected to be agreed by the Eurogroup on 17 February 2025 and approved by the Economic and Financial Affairs Council on 18 February 2025. Endorsement by the European Council is expected in March, with formal adoption by the Economic and Financial Affairs Council later in April.
Questions related to the Alert Mechanism Report (AMR)
6. What is the AMR?
The Alert Mechanism Report (AMR) is an annual report aimed at facilitating the early identification and the monitoring of imbalances. The AMR initiates the next annual round of application of the Macroeconomic Imbalance Procedure. The Macroeconomic Imbalance Procedure aims to detect, prevent and correct imbalances that hinder the proper functioning of Member States’ economies, the Economic and Monetary Union or the Union as a whole, and at eliciting appropriate policy responses.
The AMR is based on the economic reading of a scoreboard of macroeconomic and macrofinancial indicators (the MIP scoreboard). This year’s AMR is based on a revised scoreboard, which has been changed following the resumption of the regular scoreboard reviews. It focuses on the outturn data for 2023 and, in a forward-looking approach, also considers 2024 in-year developments and the Commission’s Autumn Forecast. The AMR screens all Member States to identify those that may be affected, or may be at risk of being affected, by macroeconomic imbalances, and on that basis selects those for which an in-depth review should be prepared to assess whether they are experiencing imbalances.
7. What are the findings of the Alert Mechanism Report in terms of the evolution of macroeconomic imbalances?
The evolution of imbalances has largely been driven by the unusually strong inflation of the past few years, which delivered strong reductions to debt ratios. In 2023 inflation rates fell strongly, coming within sight of the central banks’ targets by the end of the year. Throughout the year, however, price and cost increases were the determining factor for the outlook for imbalances. High GDP deflators delivered strong denominator effects to the main debt ratios. In this way, legacy imbalances – principally high debts – have continued to correct, and many aggregates, especially the debt of corporations and households, are now at their lowest levels for many years. An exception to this is government debt for some countries, where, despite the further reductions in 2023, debt ratios have not yet returned to their pre-pandemic levels and are projected to rise again in some cases.
At the same time, while improving overall, cost competitiveness concerns remain relevant, particularly for some countries. Increases in unit labour costs have reached historical highs in 2023 and services inflation remains elevated. While inflation differentials have reduced very strongly, they have not disappeared, and they leave behind them a legacy of much higher relative prices and costs. That potentially puts pressure on competitiveness, particularly where they came on top of already weakened competitiveness positions from before the pandemic.
In addition, house prices continue to be an important concern in some EU countries as prices continued to grow visibly despite some recent moderation in various other Member States. There are signs of an acceleration in growth in house prices in several countries in 2024 given the long-standing gap between buoyant housing demand and constrained supply.
8. For which Member States will an in-depth review now be carried out?
This AMR concludes that In-Depth Reviews (IDRs) are warranted for ten Member States. These are the nine Member States for which we concluded that there were imbalances or excessive imbalances in the previous annual cycle in spring 2024 (Cyprus, Germany, Greece, Hungary, Italy, The Netherlands, Romania, Slovakia, and Sweden). In addition, this year’s AMR concludes that an additional in-depth review is warranted forEstoniadue to specific risks of newly emerging imbalances. The country continues to face accumulating cost competitiveness losses driven by strong cost pressures, a worsening current account, and rising house prices and household borrowing.
For the remaining Member States, we believe there is no need to carry out In-Depth Reviews at this juncture.
9. What are the next steps following the presentation of the AMR?
Discussions on the AMR with the European Parliament and within the Council will focus on the findings of the report. The Commission will then prepare in-depth reviews for the Member States concerned in the coming months. They will be technical documents and will provide the basis for the Commission’s assessment regarding macroeconomic imbalances and the extent to which policies are addressing them. These will be prepared in two batches in early 2025, ahead of the European Semester spring 2025 package, which will then present the Commission findings of imbalances for the Member States concerned.
Questions related to the Joint Employment Report
10. What is the Proposal for a Joint Employment Report?
The Joint Employment Report provides an annual overview of the main employment and social developments in the EU, as well as of Member States’ actions in line with their Guidelines for the Employment Policies. In addition, the Joint Employment Report monitors how Member States perform regarding the indicators of theSocial Scoreboard, which accompanies theEuropean Pillar of Social Rights, including in relation to upward social convergence, as foreseen in the revised economic governance framework. The report fully integrates the three EU headline targets on employment, skills and poverty reduction by 2030 and covers the national targets put forward by the Member States.
The Report shows the main employment and social challenges in Europe as well as policy measures taken by Member States to address them. Member States can therefore compare their own performance to that of others and take steps to align policy measures more closely.
11. What are the main findings of this year’s Joint Employment Report?
The EU’s targets for employment, skills and poverty reduction to be reached by 2030 continue to drive policy actions across the relevant policy domains at EU level and in the Member States.
Employment:Solid employment growth, on average over the last two years, has put the EU well on track towards its headline employment target by 2030 (from the 2023 level of 75.3%, the employment rate will need to increase by another 2.7 percentage points until 2030 for the EU to achieve the 78% target). Most recent quarterly data point to sustained progress (75.8% in Q2-2024). By 2023, all Member States had made progress, five already achieved or surpassed their employment targets. In many Member States, the employment rates of the lower qualified harbour the largest scope for improvement, followed by those of older women (55-64) and the youth (20-29).
Skills:The share of adults participating in learning saw only limited progress in the EU, from 37.4% in 2016 to 39.5% in 2022, remaining significantly below the 60% EU headline target. Also, the majority of Member States lost ground in the pursuit of their national targets. This points to the need for substantial further efforts for Europe to remain competitive, innovative and inclusive in the green and digital transformations and against the backdrop of population ageing.
Poverty reduction:Decisive policy action at both EU and Member States’ level has helped reduce poverty risks, despite a challenging socio-economic context over the past three years. In 2023, the number of people at risk of poverty or social exclusion decreased by 703,000, the second consecutive year of decline, following a period of stability over 2018-21. Half of the Member States have made some progress towards their national poverty reduction targets since 2019. Further efforts and monitoring will therefore be needed to reach the national targets and achieve at least 15 million fewer people at risk of poverty or social exclusion in the EU by 2030, in comparison with 2019.
12. What are the new features in this year’s Joint Employment Report?
The proposal for a 2025 Joint Employment Report maintains astrong country-specific focusbased on the principles of the Social Convergence Framework (SCF), now in line with the new economic governance framework which entered into force earlier this year. Relying on existing tools (the Social Scoreboard and an agreed traffic-light methodology), Member States’ labour market, skills and social challenges are analysed to identify potential risks to upward social convergence that require deeper analysis in a second stage. All in all, the first-stage analysis of the SCF points at the following:
- upward convergence in the labour market persisted in 2023;
- risks to upward convergence persist regarding skills, despite slight improvements at EU level;
- some risks to upward convergence regarding social outcomes were identified, despite the slight decrease in the at-risk-of poverty or social exclusion rate atEU level.
The Commission will conduct a more detailed second-stage analysis (using a wider set of quantitative and qualitative evidence) for the countries for which potential risks to upward social convergence are identified in the first stage (Bulgaria, Estonia, Spain, Italy, Lithuania, Hungary, Romania, which were subject to the second-stage analysis also last year, as well as Greece, Croatia and Luxembourg).
In addition, the 2025 JER measures, for the first time, progress towards the 2030 EU and national targets on skills. With labour and skills shortages and an ageing population, broad participation in adult learning is key to ensure that workers keep their skills up to date. Despite this, recent figures from the Adult Education Survey (AES) indicate only a mild rise in participation rates in adult learning (excluding guided on-the-job training) over the previous 12 months, from 37.4% in 2016 to 39.5% in 2022 for the EU, with wide disparities across Member States.
13. What are the next steps following the presentation of the Proposal for a Joint Employment Report?
The proposal for a Joint Employment Report will now be discussed in two advisory bodies of the Council, the Employment Committee and the Social Protection Committee. EU employment and social affairs ministers are then set to adopt the report in their March 2025 meeting.
More Information
- Press release – The Second part of the European Semester Autumn Package addresses Socio-Economic Challenges for 2025
- 2025 European Semester Autumn package – Documents
- Autumn 2024 Economic Forecast
- The European Semester
Remarks by Executive Vice-Presidents Séjourné and Mînzatu and Commissioner Dombrovskis at the press conference on the second part of the European Semester Autumn Package 2025
Brussels, 18 December 2024
Vice-président exécutif Stéphane Séjourné
Bonjour à tous,
C’est un plaisir de vous retrouver à Strasbourg pour cette première conférence de presse en tant que vice-président exécutif à la stratégie industrielle et à la prospérité.
Dans ce cadre, j’ai la charge de vous présenter avec la vice-présidente exécutive Mînzatu et le commissaire Dombrovskis, ce paquet d’automne du Semestre européen.
Pour commencer, permettez-moi de rappeler, en ce début mandat, la place importante du Semestre européen dans la gouvernance économique et sociale de l’Europe.Le Semestre européen a été établi en 2010 en réponse à la crise financière de 2008. Il est alors apparu urgent pour l’Europe de mieux coordonner les politiques économiques et fiscales.
D’une part, entre États membres.
D’autre part, entre les politiques nationales et les objectifs économiques que nous nous fixons au niveau européen.
Le paquet que nous présentons aujourd’hui est la seconde partie du paquet dit d’Automne du Semestre.
La première partie présentée en novembre, couvrait la dimension budgétaire et notamment la mise en œuvre du nouveau cadre de gouvernance économique.
Le paquet d’aujourd’hui contient : les recommandations pour la zone euro, le rapport sur le mécanisme d’alerte et le rapport commun sur l’emploi.
D’un côté, la recommandation pour la zone euro appelle les membres de la zone euro à agir individuellement sur la compétitivité et la productivité. D’autre part, le mécanisme d’alerte identifie les États membres pour lesquels une revue en profondeur est nécessaire pour savoir s’il y a bien des déséquilibres.
Je laisserai Roxana et Valdis vous présenter en détail ce contenu.
Un point à préciser cependant. Ce paquet d’automne ne contient pas l’étude annuelle sur la croissance durable. La raison est que nous devons discuter et adopter en janvier – la boussole de la compétitivité – the competitiveness compass. Cette initiative stratégique, annoncée par la présidente, définira la direction politique de notre politique d’innovation, de décarbonation et de sécurité économique.
Let me conclude with an important point. The European Semester has evolved since its creation. We have strengthened the social and environmental aspects. Today, the issue of competitiveness has emerged as the major challenge of this mandate.
As called for by the Draghi report, we need strong coordination tools at this level too, in order to align our investments. The European Semester could be such tool. We also need to coordinate all the Commission’s initiatives even more effectively.
For my part, I will do my utmost, together with all the Commissioners in my cluster, to ensure that this spirit of coherence and integration of public policies is put into practice. The presentation of the Competitiveness Compass in January will be a key moment in this new method.
Executive Vice-President Roxana Mînzatu
Thank you Stéphane and good morning everyone.
An important part of today’s package is the Joint Employment Report a proposal from the Commission that will be endorsed by Ministers for Labour and Social Policies in the EPSCO Council in March.
It is an important component because it sheds light, it shows strengths on the evolution of labour markets in the European Union.
I would like to stress today three directions of these trends which are very important, politically speaking as well for our decision-making process.
I would refer to first of all employment, second of all to skills and third of all to living conditions, which are the most important elements for every European citizen.
As you might have seen in the Report, despite the economic slowdown the European Union labour markets have proven in the past years and to date, extremely resilient.
We have some record highs that as you might have seen, last year’s EU employment rate was nearly 76 percent which is very close to our Porto target for 2030 of 78 percent employment. Record lows in unemployment as well, the rate in the European Union fell below 6 percent and it’s continuing to decrease.
However, these are not figures which should allow us to stay very comfortable because we have an important phenomenon that is plaguing our European economies and it’s the labour shortages.
We have obviously continued to have important labour shortages in critical sectors; critical for our preparedness as well such as healthcare, education, the construction sector, the transport sector and all the sectors that require STEM jobs including engineering technical jobs, which are a lot, from energy to innovation technology to cyber, IT.
These are important trends that we need to rely on in designing our policies and our budgets.
I would also underline that we should and we need to look at the way that the underrepresented groups in the labour market are still are still missing. I am talking about youth unemployment, about the young generation, about women, about persons with disabilities and persons from migrant backgrounds. Numbers are here to show us that we need to act much more decisively to integrate them on the labour market.
Second of all, skills. We also have a Porto target in terms of skills and we are far from reaching it. The reality is that in terms of skills we have to also correlate what the Joint Employment Report says with the outcomes on education for our young generation. We are starting some from some important figures: almost one in three teenagers, that is 15-year-olds – lack basic skills while one in four are underachievers or are failing in the basic skill of reading.
Barely half of all EU adults have basic digital skills in 2023. Less than 40 percent of adults have participated in a training which is well below the 60% Porto target for 2030. These are figures that alert us in the face of the green transition and the digital transition because we need to understand that in order to profit from these fantastic opportunities and to use the digital transition, we do risk to leave our citizens behind.
This is a very important trend that we have to incorporate in our decision making. These skill shortages combined with the labor shortages, that I have mentioned are also a major drag on our productivity.
Productivity in the European Union has been structurally declining in the past 14 years from the financial crisis that Stephane has mentioned. It is one of the main reasons why the EU is lagging behind the United States.
Raising productivity levels is crucial to boosting our competitiveness and our growth in the European market. I would like to emphasise this I have done it with colleagues, with MEPs and with social partners there is no competitiveness without skills and without a modernised labour market. This is essential.
And while we speak of investments, and we have investment and financial needs to invest in the tech sector, the area of security and our industries, it is equally important to have the human capital available, skilled and motivated.
For this of course, in the months to come as Executive Vice-President for skills, you will see ambitious proposals that we will put forward to work with Member States and social partners in order to tackle the challenges that I have I have mentioned.
The most important proposal will be the Union of Skills which will be proposed at the beginning of March and is one of the first 100 days proposals of the Commission.
It will be a proposal, that will focus on investment in skills, adult and lifelong learning, vocational education and training, skills retention and skills recognition across the Member States of European Union.
Protecting the purchasing power of our citizens-as I have mentioned in the beginning, the third direction that I would reflect on is that of fair living conditions.
The purchasing power of our citizens is essential, a decent standard of living is essential for our Europeans.
Real wages started to recover last year compared to the levels before the pandemic but they are still at lower levels. This affects people’s purchasing power. Statutory minimum wages in part offset the effects of inflation but it still calls for an ambitious implementation of the minimum wage directive.
This is also a call for me to Member States to have an ambitious rhythm in implementing the minimum wage directive which also includes the collective bargaining targets which are very important.
Only when we implement this mechanism will the fight, let’s say be complete.
As I have mentioned, the wage losses from the inflation crisis have not yet been fully recovered.
We also continued to have a phenomenon that is in-work poverty, an aspect on which I will also focus my attention in the quality jobs package in the year to come.
Today more than 8 percent of the workers are in in-work poverty, so that means that their wages – the salary, is not enough to cover their basic needs.
The job, as we know should be something that would be lifting you up out of poverty not maintaining you in poverty.
We also see that despite a resilient labour market, poverty has decreased only very slightly last year and we remain far away from our Porto 2030 target on reducing the number of people in poverty with 15 million Europeans.
Today, one in five adults and more than one in four children are still at risk of poverty in our European Union. This is not acceptable.
We need a bold and ambitious action to reach and surpass our 15 million target to lift 15 million Europeans out of poverty.
This is why we launched our first ever European Union anti-poverty strategy in the beginning of our activity in the first part of the mandate together with social partners of course and Member States.
Beyond these urgently needed initiatives, we will continue our work in the framework of the European Semester.
I am very happy to mention that for the first time, we have the Social Convergence Framework part of the package which is now part of the preventive arm of the new Economic Governance Framework.
Our analysis has shown that, ten Member States appear to face a risk to upward social convergence.
It is very important that at EU level with this important mechanism of the Semester, we are going beyond the analysis of physical elements and economic elements, and look at what social convergence risk are because those affect obviously all our trends and policy making in the European Union and in Member States.
Those ten Member States includes the one that were already identified last year, in risk to upward social convergence that be Bulgaria, Estonia, Spain, Italy, Lithuania, Hungary and Romania plus three new countries which were analysed this year those were Greece, Croatia and Luxembourg.
For all these countries, we will prepare a deeper second stage of analysis. Again, if we look at adult learning and basic digital skills, there have been no signs of convergence.
As I have mentioned, these are areas where we want to work with much more ambition and new impetus.
Well performing countries are improving faster and worse performing ones are falling further behind.
In short and to conclude, this Joint Employment Report, as is the master package – will show us that business as usual will not work and will not be an option for our future or for our future policy making.
There is indeed a new competitiveness priority comprised of social and environmental aspects.
However, this new priority should not be a substitute to the previous ones but rather a complementary approach.
There will be, as I have mentioned no European Union drive for competitiveness and associated economic benefits that we want without a strong investment in our human capital and in quality jobs across our European Union. With that, I will thank you and I pass the floor to my colleague Valdis.
Commissioner Valdis Dombrovskis
Thank you. Good morning everyone. Yesterday we adopted and today we are presenting the second part of our European Semester Autumn Package.
This is the first European Semester cycle following the entry into force of the ambitious and comprehensive reform of the EU’s economic governance framework which we finalised this year.
In November, we assessed the first set of medium-term plans, the draft budgetary plans of euro area Member States and took important steps under the Excessive Deficit Procedure.
Today, the Autumn Package is focused on:
promoting policy action that will benefit the euro area as a whole; monitoring macroeconomic imbalances; and the Semester’s social dimension.
The EU is confronted with several structural challenges related to low productivity growth, population ageing and the green and digital transformation of our economy, all in a context of heightened global tensions and fragmentation.
If not addressed, those will hold back growth in the EU for years to come, threatening our long-term prosperity. So, urgent action is needed.
The policy guidance reflected in the Autumn Packages will support Member States to preserve macroeconomic stability while promoting growth, fiscal sustainability and improve their competitiveness.
Today’s joint employment report also contains stronger country-specific analysis, as foreseen in the new economic governance framework.
Turning now to the euro area recommendation.
We are calling on Member States to take action to improve competitiveness and foster productivity across the euro area. Concretely, these actions include:
improving access to funding for businesses; promoting innovation; improving the business environment by reducing administrative burdens and regulatory complexity; removing obstacles to investment and supporting public and private investment in common priorities, such as the green and digital transitions and defence; further developing skills in the workforce.
Finally, the recommendation also calls on euro area Member States to comply with the new fiscal framework.
Sound public finances are a prerequisite for macroeconomic stability and sustainable economic growth. The new framework helps Member States to reduce public debt in a gradual and realistic way.
This brings me to the Alert Mechanism Report.
The report launches the annual macroeconomic imbalance procedure, which aims to detect, prevent and correct imbalances.
Three key findings:
First, cost competitiveness concerns remain relevant for some Member States. High inflation in the past years has put pressure on competitiveness, particularly where it was already weaker.
Second, we have seen a reduction in the high levels of debt in recent years, driven by high nominal growth. This effect is now fading out, and in some Member States public debt remains high and is projected to rise again.
Third, house prices require attention where they show signs of overvaluation and continue to increase.
Looking at individual Member States, we will again be carrying out in-depth reviews for the nine Member States identified last spring as having imbalances or excessive imbalances.
These are: Cyprus, Germany, Greece, Italy, Hungary, the Netherlands, Romania, Slovakia, and Sweden.
In addition, we will also carry out an in-depth review to assess the risk of newly emerging imbalances in Estonia. Estonia is experiencing a recession and faces accumulating cost competitiveness losses driven by strong cost pressures, a worsening current account, rising house prices and household borrowing.
The selection of Member States for in-depth reviews is a first step. It allows us to monitor the evolution of previously identified imbalances and assess the risk of newly emerging imbalances in the selected Member States.
We will present our conclusions on the existence of imbalances next spring.
The challenging global context in which we find ourselves underlines the importance of coordinating economic and social policies across EU Member States. The European Semester is and will remain the key tool for doing so. It will make a crucial contribution to achieving the new Commission’s broader objective of competitiveness and productivity, while strengthening our social market economy.
The Draghi report highlighted the structural barriers that can hinder the achievement of our objectives. We will soon set out our proposals to address the challenges identified in the report – including our new competitiveness compass.
Looking further ahead, the Recovery and Resilience Facility (RRF) is coming to an end in 2026. The Spring Package will see a gradual move to presenting a more comprehensive set of country-specific recommendations.
We will further strengthen our analysis and national ownership of these recommendations by basing them on the improved use of structured dialogues with Member States, social partners and other stakeholders.
This more comprehensive policy guidance will help to address the country-specific challenges identified in the context of the European Semester.
Thank you. I will stop here.
Source – EU Commission