European Semester key documents
Stability and Convergence Programmes
A Stability or Convergence Programme presents a member state's medium-term budgetary strategy, i.e. how it intends to achieve or safeguard a sound fiscal position in the medium term, in accordance with the requirements of the Stability and Growth Pact.
The Pact aims at maintaining fiscal discipline in the EU. It applies reference values to limit annual national budget deficits (3% of GDP) and public debt (60% of GDP).
Convergence programmes
These programmes are prepared by countries that do not use the euro as their currency. The Pact's requirements serve as a key criterion for achieving the fiscal sustainability that must be met by every country before joining the euro area (hence "convergence programmes"). This requirement applies to all member states that do not have a permanent exemption from the euro adoption.
Stability programmes
Stability programmes are prepared by countries whose currency is the euro. The requirements are the minimum that is needed to ensure fiscal stability within the single currency area (hence "stability programmes").
The stability or convergence programmes are the main elements of the preventive arm of the Pact.
Medium-term budgetary objective
An important part of the assessment under the Semester addresses compliance with the minimum annual benchmark figure set for each individual country’s structural budget balance.
This benchmark figure is called the medium-term budgetary objective (MTO). The MTO refers to the budgetary balance (between government revenue and government expenditure) that an individual country should achieve within a given time frame in order to comply with the reference value for public debt established in the Pact.
The progress that countries should make every year towards this objective is called the adjustment path towards the MTO and is specified for each individual country. The stability or convergence programmes show how individual countries follow this adjustment path.
If there is a breach of the Pact's rules, the excessive deficit procedure is opened - this is the corrective arm of the Pact.
Countries receive deadlines for correcting their policies in order to comply with the Pact's reference values. If euro area countries do not follow these recommendations, sanctions may be imposed on them.
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National Reform Programmes
The National Reform Programme is a document in which a member state outlines its structural reform plan, focused on promoting growth and employment in line with the Europe 2020 strategy.
The strategy aims to create the conditions for smart, more sustainable and more inclusive economic growth in the EU. It sets out five EU objectives to be achieved by 2020 in the areas of employment, education, social inclusion, innovation, and climate /energy use.
Based on these objectives, the member states have adopted their own national targets in each of the five areas.
These targets and measures for their achievement are outlined in the member states' yearly National Reform Programmes which they submit for coordination and evaluation under the European Semester.
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The Annual Growth Survey
The Annual Growth Survey presents the Commission's view of policy priorities that Member States should take into account when designing their economic policies for the coming year.
The Commission issues it already in November.
The purpose of the Annual Growth Survey is to feed into a debate on overall priorities agreed at EU level and consequently national economic and budgetary decisions. Member states set out the latter in their stability or convergence programmes (under the Stability and Growth Pact) and national reform programmes (under the Europe 2020 strategy) in April.
The Annual Growth Survey is based on:
- progress achieved on Europe 2020 targets in the areas of employment, education, social inclusion, innovation, and climate /energy use
- the Macroeconomic Report which gives an overview of the economic situation in the EU
- the Joint Employment Report, which analyses the employment and social situation in the EU
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Alert Mechanism Report
The Alert Mechanism Report by the European Commission identifies in which member states the macroeconomic situation may warrant a further in-depth review. The review helps to determine the nature and the scope of potential imbalances.
It is issued in November, before the European Semester process begins.
It is part of the Macroeconomic Imbalance Procedure, designed to monitor and prevent macro-economic imbalances across the EU.
The Alert Mechanism Report is based on a scoreboard of 11 indicators. They focus on developments in member states':
- competitiveness
- indebtedness
- asset prices
- adjustment and
- links with the financial sector.
The risk of imbalances is evaluated by combining the scoreboard data with additional information and taking due account of each country's circumstances.
If some of these indicators in a given country exceed the agreed ranges, this is the first signal of potential macroeconomic imbalances and it helps the Commission to decide whether to conduct an in-depth review.
The subsequent in-depth reviews provide a detailed analysis of the situation in member states where the risk of macroeconomic imbalances is deemed to be high. On the basis of these in-depth reviews, the Commission presents draft policy recommendations.
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Country-specific recommendations
The country-specific recommendations are documents issued by the European Commission for each member state. They provide an analysis of each state's economic situation and recommend measures that each country should take over the coming 12 months.
The Commission issues them in May, after it finishes evaluating member states' policy plans, i.e. national reform programmes and stability or convergence programmes.
The country-specific recommendations are tailored to the circumstances of each member state. They may address areas such as the state of public finances, reforms of pension systems, measures to create jobs and to fight unemployment, education and innovation challenges, etc.
The member states are invited to implement these recommendations after they are endorsed by the national leaders in the European Council (in June) and adopted by the Council of the EU (in July).
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