# EUR-Lex - 52014DC0401 - EN

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# 52014DC0401

**Recommendation for a COUNCIL RECOMMENDATION on the implementation of the broad guidelines for the economic policies of the Member States whose currency is the euro /* COM/2014/0401 final */**

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Recommendation for a

COUNCIL RECOMMENDATION

on the implementation of the broad
guidelines for the economic policies of the Member States whose currency is the
euro

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 136 in conjunction
with Article 121(2) thereof,

Having regard to Council Regulation (EC) No
1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary
positions and the surveillance and coordination of economic policies[1], and in particular
Article 5(2) thereof,

Having regard to Regulation (EU) No
1176/2011 of the European Parliament and of the Council of 16 November 2011 on
the prevention and correction of macroeconomic imbalances[2], and in particular
Article 6(1) thereof,

Having regard to the recommendation of the
European Commission[3],

Having regard to the conclusions of the
European Council,

Having regard to the opinion of the
Economic and Financial Committee,

Having regard to the
opinion of the Economic Policy Committee,

Whereas:

(1) 
The current economic environment of the euro area is
characterised by a gradual, but
still fragile economic recovery. In 2013 and in early 2014, euro
area inflation declined markedly and is expected to
increase only very gradually over the forecast horizon,
reflecting the existing slack together with the ongoing relative price
adjustments in the vulnerable economies and continued appreciation of the euro
exchange rate. Furthermore, while the recovery is
becoming more broad-based, divergences between euro area countries
remain high.

(2) 
The euro area is more than
just the sum of its members. The economic and financial
crisis clearly exposed the close interrelations in the euro area and
underscored the need for stronger coordination of
fiscal, financial and structural policies among euro area members to
ensure a coherent  policy stance for the euro area as a whole. The Member States of
the euro area have committed themselves to a set of far-reaching policy reforms
and policy coordination by signing the Treaty on Stability, Coordination and
Governance (TSCG) in the Economic and Monetary Union on 2 March 2012. The entry
into force of the "Two Pack" regulations in 2013 has further deepened
budgetary and economic policy coordination within the euro area. Euro area
members have a specific responsibility for an effective implementation of the
new governance framework. This calls for increased peer
pressure to support national reform implementation and fiscal prudence, greater
assessment of national reforms from a euro area perspective, internalising
potential spillovers and stimulating policies of particular importance for a
well functioning EMU.

(3)      Given
the high interdependence between euro area
Member States there are potentially large spillovers
related to the implementation of structural reforms
which need to be taken into account in order to secure optimal policy design
and implementation for euro area members individually and for the euro area as
a whole.  For example, more concerted action in
the implementation of reforms would facilitate the necessary convergence
between Member States. Early discussion of reform plans of the euro area Member
States, building on existing practices and effective implementation of the
macroeconomic imbalances procedure are of key importance in this regard.

(4)       One of the key policy challenges facing the Euro area is to reduce
government debt by pursuing differentiated,
growth-friendly fiscal policies while boosting the
growth potential of the euro area.
Thanks to the consolidation efforts of the past years, the euro area fiscal situation
has improved but a number of Euro Area members still need to continue with
fiscal adjustment to bring down very high levels of debt. All euro area members
should improve the quality of public finances with the aim of boosting
productivity and employment.

(5)      Investment in the euro area fell strongly in the initial phase of the
crisis and has not yet recovered to its long term average. Sluggish investment
trends are being driven by the combined impact of private sector deleveraging, financial fragmentation,
and necessary fiscal consolidation efforts which have led to a reduction in public investment.  Increasing investment in
infrastructure and skills is essential to sustain the recovery and boost
potential growth. Much of the investment must come from the private sector, but
public authorities can play an important role in creating supporting
conditions.

(6)       In the euro area, the flow of credit to the real economy
remains subdued and financial market
fragmentation is still high in spite of reduced stress on sovereign debt. Access to finance, in particular for SMEs,
remains challenging in many Member States which risks undermining economic
recovery. This calls for initiatives aimed at restoring credit flows, deepening capital markets and boosting the long term
financing of the economy. Actions
such as completing banks' balance sheets repair, continuing to
strengthen equity buffers, where needed, asset quality reviews and stress tests
help identify any remaining pockets of vulnerability and reinforce confidence
in the sector as a whole. Significant progress has been achieved as regards the
Banking Union, notably with the establishment of the Single Supervisory Mechanism
and the agreement on the Single Resolution Mechanism.

(7)      The
financial crisis has exposed gaps in the architecture of Economic and Monetary
Union. On 28 November 2012, the Commission presented a blueprint for a deep and
genuine economic and monetary union with the aim of launching a European
debate. On 5 December 2012, the President of the European Council in close
collaboration with the President of the European Commission, the President of
the Eurogroup and the President of the European Central Bank, presented a
report building on a number of ideas from the Commission's blueprint, and
including a timeframe and a stage-based process towards the completion of the
Economic and Monetary Union. The European Parliament expressed its views in its
resolution of 20 November 2012. Significant steps have been taken since then. 
Further developing EMU will require a step by step approach combining
discipline with solidarity.  The Six Pack and Two pack legislation foresee a
first review of their implementation by the end of 2014.

HEREBY RECOMMENDS that euro area
Member States take action, individually and collectively, without prejudice to
the competences of the Council as regards the coordination of economic policies
of the Member States, but in particular in the context of economic policy
coordination in the framework of the Eurogroup, within the period 2014-2015 to:

1.           Promote and monitor, in
close cooperation with the Commission, the implementation of structural reforms
in those areas most relevant for the smooth functioning of the euro area in
order to foster convergence and adjustment of
internal and external imbalances. Assess and
stimulate progress in reform implementation in euro area Member States
experiencing excessive imbalances and in the euro area Member States with
imbalances requiring decisive action, to limit negative spillovers to the rest
of the euro area, and foster appropriate policies in countries with large
surpluses to optimise positive spillovers. Regularly hold thematic discussions
on structural policies with potentially large spillovers, focussing on reducing
the high tax wedge on labour and reforming services markets.

2.           Coordinate fiscal policies
of the euro area Member States, in close cooperation
with the Commission, in particular when assessing draft budgetary plans
to ensure a coherent and growth friendly fiscal stance across the euro area.
Improve the quality and sustainability of public finances by stepping up
material and immaterial investment at national and EU level. Ensure that
national fiscal frameworks, including national fiscal councils, are
strengthened.

3.           Ensure the resilience of the
banking system, in particular by taking the necessary
action in the follow up of the asset quality review and the stress tests, and
by implementing the Banking Union regulations
including on the further work foreseen in the SRM transition period. Stimulate private sector
investment and increase
the flow of credit to the economy via actions
to improve access to credit by SMEs,
deepening of capital markets, restarting the securitisation market, in line with the proposals and the calendar in the Commission Communication on long-term financing of the
European economy.

4.           Take forward work on
deepening Economic and Monetary Union and contribute to the improvement of the
economic surveillance framework in the context of the review foreseen for end
2014.

Done at Brussels,

For
the Council

The
President

[1]               OJ L 209, 2.8.1997, p. 1.

[2]               OJ L 306, 23.11.2011, p. 25.

[3]               COM(2014) 401 final.