European semester  

The financial crisis and the more recent turmoil in sovereign debt markets have clearly highlighted challenges in the European Union's economic governance. There is a need for a stronger economic governance and coordination at EU level.                     

The European semester is one of the first key initiatives to emerge from a Task Force on economic governance set up at the request of the European Council in March 2010 and chaired by the President of the European Council, Herman Van Rompuy.

It is a six-month cycle of economic policy coordination which covers all 27 EU Member States. It relates to a procedure for the ex ante assessment of Member States' structural reforms, budget plans, and macroeconomic imbalances. The main innovation introduced by the European Semester is that the enforcement of economic policy coordination is now being extended right through to the budgetary process of all the Member States.

The tools of the European semester are firmly rooted in the jointly agreed Europe 2020 Strategy and in the Stability and Growth Pact.


1997: meeting in Amsterdam, the European Council agreed on a Stability and Growth Pact (SGP). This framework of rules was designed to ensure budgetary discipline after the creation of the euro and a new exchange rate mechanism. It was set up to provide stability both for the euro and the national currencies of countries that had not yet entered the euro zone. The SGP was underpinned by Council Regulation 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies (preventive arm), Council Regulation 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure (dissuasive arm), as well as a European Council resolution. Council Regulation 1466/97 provided both for stability programmes (for euro-zone members) and convergence programmes (for Member States outside the euro area) that the Member States were to submit annually to the Commission.

The criteria to be respected by Member States were the following:

  • an annual budget deficit no higher than 3% of GDP (this includes the sum of all public budgets, including municipalities, regions, etc.)
  • a national debt lower than 60% of GDP or approaching that value.

1999: 1 January 1999 saw the beginning of the third stage of EMU, when the euro became a fully-fledged currency and a single monetary policy was introduced under the authority of the European Central Bank. Several pieces of legislation were adopted to pave the way for this third stage of EMU.

2005: the European Council of March 2005 agreed that Council Regulations 1466/97 and 1467/97 should be amended to strengthen and clarify the implementation of the SGP and Regulations 2005/1055 and 2005/1056 were subsequently adopted in June 2005. The two original criteria were maintained but other aspects were introduced, including the long-term sustainability of public finances in the assessment of the stability and convergence programmes.

March 2010: one of the earliest Task Force recommendations to reinforce policy coordination, the so-called "European semester", was agreed.

May and June 2010: the Commission presented two communications on economic governance: a communication on Reinforcing economic policy coordination (May 2010) and a communication on enhancing economic policy coordination for stability, growth and jobs - Tools for stronger EU economic governance (June 2010). It proposes a set of tools to effectively strengthen the preventive and the corrective arms of the Stability and Growth Pact, extend surveillance to macro-economic imbalances and enforce effectively economic surveillance through appropriate sanctions and incentives.

The establishment of a "European Semester" from January 2011 would become the cornerstone of economic policy coordination. The series of proposals, based on Articles 121 and 136 of the Treaty on the Functioning of the European Union (TFEU), aimed to improve the EU's economic governance.

The establishment of the European Semester that would provide a European input to national policy decisions, leading to more effective ex-ante policy coordination was at the core of these proposals. The European Semester would also apply to the structural reforms and the growth enhancing elements of the Europe 2020 strategy.

Following the European Commission's proposals and the EU political agreement of 7 September (Ecofin), the Commission would already table its amendment proposal for the relevant Regulation 1466/97 on 29 September.

September 2010: the Commission presented the EU economic governance "Six-Pack" consisting of five Regulations and one Directive. These proposals represented the most comprehensive reinforcement of economic governance in the EU and the euro area since the launch of the Economic Monetary Union almost 20 years ago. The legislative package already brought a concrete and decisive step towards ensuring fiscal discipline, helping to stabilise the EU economy and preventing a new crisis in the EU.

12 January 2011: the Commission adopted the first Annual Growth Survey, marking the start of a new cycle of economic governance in the EU and the first European semester of ex-ante and integrated policy coordination, which is anchored in the Europe 2020 strategy.

March 2011: the Euro+ Pact was concluded in late March by the 17 euro zone countries, with the participation of six of the remaining ten Member States (Bulgaria, Denmark, Latvia, Lithuania, Poland and Romania) with the purpose of further improving the fiscal strength and competitiveness of Member States. The European Council invited the Member States participating in the Euro Plus Pact to present their commitments in time to be included in their Stability or Convergence Programmes and their National Reform Programmes.

25 March 2011: adoption of European Council Decision 2011/199/EU amending Article 136 of the Treaty on the Functioning of the European Union (TFEU) with regard to a stability mechanism for Member States whose currency is the euro.

September 2011: adoption of the "Six Pack" based on a compromise reached between Parliament and the Council.

CONTENT: the European semester was a first step in a raft of reforms that will substantially change the face of European economic policy. Given the interdependent nature of Member States' economies, and in particular in the Euro area, ex-ante coordination in the Council is the essential element of the European semester.

The first cycle of the European semester commenced in 2011 and will run for the period between January and July of each year.

The European Semester cycle is as follows:

  • In January, the Commission publishes the Annual Growth Survey. This report is then discussed in the various Council formations and in the European Parliament ahead of the European Council's Spring meeting.
  • At the Spring Council, Member States - essentially on the basis of the Annual Growth Survey - would identify the main challenges facing the EU and give strategic advice on policies.
  • Taking this guidance into account, the Member States will present and discuss their medium-term budgetary strategies through Stability and Convergence Programmes and, at the same time, draw up National Reform Programmes setting out the action they will undertake in areas such as employment, research, innovation, energy or social inclusion. These two documents would be then sent in April to the European Commission for assessment.
  • Based on the Commission's assessment, the Council would issue country-specific guidance by June and July and possible country-specific guidance to countries whose policies and budgets are out of line (for instance, if their plans are not realistic in terms of macroeconomic assumptions or if they do not address the main challenges in terms of fiscal consolidation, competitiveness, imbalances, etc).
  • Each July, the European Council and the Council of Ministers would provide policy advice before Member States finalise their draft budgets for the following year. Draft budgets would then be sent by Governments to the national Parliaments, which would continue to fully exercise their right to decide on budget.

Annual Growth Survey (AGS): in January 2011, the Commission published its 2011 Annual Growth Survey as the first step in the first European Semester exercise which changes the way governments shape their economic and fiscal policies.

This Annual Growth Survey brings together the different actions which are essential to strengthen the recovery in the short-term, to keep pace with the EU's main competitors and prepare the EU to move towards its Europe 2020 objectives. The Commission will continue its work on a broad range of other policy areas, including trade and a host of internal policies.

Given the urgency of the situation, the Commission chose to present 10 priority actions that can be grouped under three main areas:

(1) Fundamental Prerequisites for Growth:

  • Implementing a rigorous fiscal consolidation.
  • Correcting macroeconomic imbalances.
  • Ensuring stability of the financial sector.

(2) Mobilising Labour Markets, Creating Job Opportunities:

  • Making work more attractive.
  • Reforming pension systems.
  • Getting the unemployed back to work.
  • Balancing security and flexibility.

(3) Frontloading Growth:

  • Tapping the potential of the Single Market.
  • Attracting private capital to finance growth.
  • Creating cost-effective access to energy.

The Commission proposed that these actions should form the basis of an agreement by the European Council whereby Member States would commit to their implementation.

National Reform Programmes: based on the guidance of the European Council, Member States presented their national commitments in their medium term budgetary strategies under the Stability or Convergence Programmes and set out in their National Reform Programmes the measures needed to reflect this comprehensive response to the crisis anchored in the Europe 2020 Strategy.

In early June 2011, the Commission adopted a series of country-specific recommendations for each of the 27 EU Member States, as well as one for the euro zone as a whole, to help Member States gear up their economic and social policies to deliver on growth, jobs and public finances. These had the purpose of helping each country to focus on strategic levers in the next 12 to 18 months, and thus boost EU economy as a whole.

To formulate these recommendations, the Commission based itself on the analysis of national programmes - stability or convergence and national reform programmes - submitted by the Member States. An evaluation of progress made at EU level would be included in the following year's Annual Growth Survey. The Commission will examine the progress made by each Member State in its next set of country-specific recommendations to be issued in June 2012.

POSITION AND IMPACT OF THE PARLIAMENT: Parliament's Committee on Economic and Monetary Affairs appointed Pervenche Berès (S&D, FR) to draft its own-initiative procedure on the 2011 Annual Growth Survey.

In a resolution adopted on 1 December 2011, Parliament expresses its concern regarding the lack of democratic legitimacy of the introduction of the European Semester. It considers that Parliament should be recognised as the appropriate European democratic forum to provide an overall evaluation at the end of the European Semester and therefore should organise, from 2013, prior to the Spring European Council each year, an interparliamentary forum at the European Parliament for members of the competent national parliamentary committees. It also takes the view that its President should participate in the European Council's meetings on the European Semester.

Parliament invites the Commission to reflect better the comprehensive multidimensional (smart, sustainable and inclusive) approach of the EU2020 strategy in the benchmarks used to assess the progress made by Member States and to issue country-specific recommendations accordingly. It also calls for the AGS be transformed into 'Annual Sustainable Growth Guidelines' (AS2G), focusing on enhancing sustainable growth and subject to the codecision procedure. Country-specific recommendation should also be based on democratic procedures.

Although Parliament considers the European Semester to be the valid framework for the implementation of the EU strategy and for effective economic government, it expresses disappointment with the quality of Member States' National Reform Programmes and calls for these to be improved in the next cycle. It also asks the Commission to ensure that the national policies and targets announced in the National Reform Programmes together add up to a level that is sufficiently ambitious to reach the EU 2020 headline targets.

Lessons learned from the first European Semester: 2011 was the first year of the European Semester. The European Parliament raised some concerns in particular as regards the divergences between the national reform programmes in terms of correctness, transparency and feasibility. Member States are urged to improve the quality of their reports. Parliament also calls on the Commission to ensure that that the programmes are sufficient to reach the EU2020 headline targets which was apparently not the case in the first European Semester.


2012 European Semester exercise: the 2012 exercise began with the publication by the Commission of the 2012 Annual Growth Survey (AGS) on 23 November 2011. The key message of the 2012 AGS is that, faced with a deteriorating economic and social situation, more efforts are needed to put Europe back on track and sustain growth and jobs.

The AGS calls for the EU and Member States to focus on five priorities:

  • pursuing differentiated, growth-friendly fiscal consolidation;
  • restoring normal lending to the economy;
  • promoting growth and competitiveness;
  • tackling unemployment and the social consequences of the crisis;
  • modernising public administration.

In the coming weeks and months, the different Council formations will discuss the AGS and report to the March European Council so that it can adopt appropriate policy guidance for the Member States. This guidance should be incorporated into Member States' National Reform Programmes (regarding economic reforms) and Stability or Convergence Programmes (regarding public finances) presented in April/May. Having analysed these programmes, the Commission will issue its Country-Specific Recommendations in time for these to be endorsed by the June 2012 European Council. The Member States should then incorporate this policy guidance in their national economic and budgetary decisions.

In November 2011, the Commission also presented a new proposal on common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of the Member States in the euro area. This proposal sets out provision for enhanced monitoring of budgetary policies in the euro area by:

  • complementing the European semester with a common budgetary timeline,
  • complementing the multilateral surveillance system of budgetary policies with additional monitoring requirements in order to ensure that Union policy recommendations in the budgetary area are appropriately integrated in the national budgetary preparations; and
  • complementing the procedure for correction of a Member State 's excessive deficit by a closer monitoring of budgetary policies of Member States subject to an excessive deficit procedure in order to secure a timely durable correction of excessive deficits.