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Europe – National economic reform plans lack ambition, says EC

09 June 2011

The European Commission (EC) has published a series of 27 reports articulating its recommendations for member state macro-economic policies under the new economic governance rules. However, the solutions proposed look very different to the prevalent economic model.
 
The Commission wants pension systems to be reformed and retirement ages raised along with labour market reforms which allow employers to easily sack people.
 
The Commission points out in a statement that there must be "lasting reduction in public debt and deficits" to ensure weak public sector finances do not harm Europe's growth potential.
 
This is the first of the annual review of all member state economic policies aimed at preventing a repeat of the current debt crisis. If a member state fails to comply with the recommendations, the European Union could impose sanctions.
 
In its review of the plans, the Commission claimed the forecasts made by the member states were "broadly speaking realistic" and acknowledged that the policy recommendations made in January this year have been accepted by the member states.

Yet, there were several areas where the Commission said member states could do better. The review pointed out that economic reform plans proposed by member states "lacked ambition" as well as specific details.

In terms of the UK, the country was advised to tackle the housing situation and stay on the path to reduce public sector deficit. It urged the government to tackle youth unemployment and skills shortages in the economy along with lending for SMEs.
 
The Commission believes French forecasts are too optimistic while wants Germany to tackle the troubled regional government sponsored Landesbanks.  The biggest economy in Europe was urged to open up its energy sector as well as reform its labour market.
 
Similarly, for France labour market reforms is a necessity, the Commission argued and called for lower labour taxes and proactive policies to help the young and low skilled gain employment.
 
Spain, who has been on the fringe of the debt crisis, have been urged to impose fiscal discipline on regional governments and take painful but necessary austerity measures and social reforms such as higher retirement ages.  It also called for better governance of the Spanish banking system.

To read the Recommendations by country please click here

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