EU economic governance: what role for European regions?

1
EU economic governance what role for European
regions?

• Strengthening the role of regional parliaments
  in EU affairs
• Committee of the Regions
• 2 July 2014
• Nicolas Brookes, CPMR Director

2
The Stability and Growth Pact
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The European Semester how does it work?

• October Eurozone countries submit draft budgets
  for following year to the Commission
• November Commission publishes Annual Growth
  Survey
• April Member States submit National Reform
  Programmes
• June Commission publishes Country Specific
  Recommendations
• July Council adopts Country Specific
  Recommendations
• Rest of the year implementation of the
  recommendations

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Three key issues

• Subsidiarity European Semester results in
  recommendations made on policies of traditional
  competence to local and regional government
• Clash between stability and growth policies EU
  economic governance reforms incompatible with EU
  investment policies (mainly Cohesion Policy)
• Multilevel governance no mechanism for regions
  to input into EU economic governance

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Subsidiarity left aside?

• Policy areas covered by the European Semester
  include employment, housing, innovation, energy,
  social inclusion but also internal governance
  issues !
• Examples
• The coordination between the centre and the
  autonomous regions still poses a risk to
  effective delivery. 2013 Annual Growth Survey on
  Spain regarding active labour market policies
• Financing to better target benefits addressing
  poverty and social exclusion to all southern
  regions will depend on the reprogramming of
  national contribution to EU structural funds.
  2013 AGS on Italy
• Strengthen expenditure control by adopting
  binding multiannual spending ceilings for local,
  regional and central government which are
  consistent with the overall medium-term general
  budget targets 2013 CSR to Denmark

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CPMR messages

• Many Country Specific Recommendations (CSRs)
  assume a one size fits all to policy
  implementation in the Member States
• Some CSRs are about institutional reform
  involving infra-national relationships (e.g,
  relationships between regions and their central
  governments) and public administration reform
  others even impose budgetary controls on local
  and regional authorities (Denmark)
• Mechanism to allow regional characteristics and
  challenges to be fed in to the Annual Growth
  Survey and eventually the Country Specific
  Recommendations would be welcome
• ... Territorial dimension for EU economic
  governance!

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What about growth policies?

• EU economic governance ambition is to safeguard
  sound public finances Stability but no Growth ?
• Connection between Regional Policy (ERDF
  investments, ESF grants...) and EU Economic
  Governance macroeconomic conditionality
• Funds can be suspended if a Member State fails to
  meet its EU economic governance objectives
• Hungarian precedent 495 million Cohesion Fund
  suspended in March 2012 due to the countrys
  failure to address its excessive government
  deficit

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Stability or growth?

• Structural funds rely on match-funding from
  national (or regional) sources...
• but national public investments (including
  match-funding for structural funds) are bound to
  Stability and Growth Pact obligations
  (country-specific medium-term objective (MTO)
• Decision making process for policy
  recommendations under the Macroeconomic Imbalance
  Procedure is solely based on economic indicators
  (not social, environmental, territorial)
• This is an issue for countries in the Excessive
  Deficit Procedure with large Structural Funds
  envelope for 2014 2020 !

9
The investment clause

• Commission introduced investment clause in July
  2010 to exclude certain priority investments
  from the limits of the Stability and Growth Pact
• Italy proposed to earmark 4bn for 2014 budget
  for co-financing structural funds (infrastructure
  investment, fight againt poverty and social
  inclusion), but application was rejected
• Contradiction between EU policies, and risk
  for Cohesion Policy on the long term !

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CPMR messages

• Obvious inconsistency between EU Cohesion Policy
  (and funds at the disposal of regions to support
  investment) and the rules of EU economic
  governance, which are about restoring stability
• Macroeconomic surveillance and EU economic
  governance process should be more transparent
  (IMF, Member State forecasts different from
  Commission forecasts)
• Investment clause should be reinforced all
  public investments match funding EU funds should
  be excluded from limits of Stability and Growth
  Pact