The European Union's (EU) cycle of economic policy coordination, known as the European Semester, starts with the European Commission publishing the Annual Growth Survey (AGS). Every November the AGS is released, setting out priorities for fiscal and economic policymaking for the year ahead. This year's survey is slated to be released Nov. 22.
Based on the AGS and economic progress reports from individual member states, the European Commission proposes country-specific recommendations (CSRs) to achieve economic growth. The European Union also aims to devote a share of its budget to AGS priorities.
However, two areas in relation to the AGS remain unclear. Firstly, whether any synergies exist between the objectives of the AGS and the contribution of the EU and national budgets. Secondly, the extent to which the CSRs are taken on board by individual member states.
Our analysis for the European Parliament Committee on Budgets showed that a notable share of the EU budget is devoted to AGS priorities, but that member states' national budgets do not necessarily follow the CSRs.
Indeed, there remains room for greater implementation of CSRs by individual member states. The number of instances where member states have not taken any action or do not plan to take even one CSR on board remains minimal. However, responses to CSRs and their subsequent implementation by member states tend to be 'work in progress', with only a small portion of the recommendations fully addressed.
Synergies do exist between the EU budget and the objectives of the AGS, particularly around the accomplishment of common AGS-related goals. However, the extent to which the EU helps individual member states achieve AGS priorities in their own national budgets remains more difficult to assess.
The general consensus is that the AGS can lead to positive outcomes for the EU and member states. Our study found that the most positive outcomes are often achieved in adopting measures that aim to address two out of the three priority areas for the AGS—investment and structural reforms.
Regarding the final AGS priority area—fiscal consolidation—there are concerns about its suitability as a goal or recommendation for individual member states, particularly in times of economic downturns.
The impact of the AGS on the budgets of the EU and member states remains unclear. From our research, it seems that the budgets of EU and individual member states are working towards common goals described in the AGS, but the impact from this work is hard to assess.
Our study recommended that the concept of European added value (PDF) could be more strongly embedded in the European Semester. This refers to the additional value created by the actions of individual Member States, such as greater legal certainty, and not just economic growth. The 'added value' element could help in understanding the unique contribution of the AGS and the coordination process across member states.
At the same time, some longer-term measurement could be beneficial. Currently, the CSRs operate on a one-year timeframe, but the effects of reforms may take much longer to materialize.
Taking on board these recommendations and addressing wider concerns about the AGS could help the EU and individual member states clearly identify the benefits of the AGS to their budgets and overall economic situation.
Jirka Taylor is a policy analyst at the RAND Corporation. Marco Hafner is a research leader at RAND Europe. The authors were involved in the study “Synergies Between the Objectives Set Out in the Annual Growth Survey and the Contribution of the EU Budget and National Budgets.”
This commentary originally appeared on E!Sharp on November 21, 2017. Commentary gives RAND researchers a platform to convey insights based on their professional expertise and often on their peer-reviewed research and analysis.