# EUR-Lex - 52015PC0099 - EN

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# 52015PC0099

**Recommendation for a COUNCIL RECOMMENDATION On broad guidelines for the economic policies of the Member States and of the Union /* COM/2015/099 final - 2015/ () */**

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EXPLANATORY MEMORANDUM

The Treaty on the
Functioning of the European Union provides that Member States are to regard
their economic policies and promoting employment as a matter of common concern
and shall coordinate their action within the Council. In two distinct articles,
it provides that the Council is to adopt broad economic policy guidelines
(Article 121) and employment guidelines (Article 148), specifying that the
latter must be consistent with the former. Given this legal basis, the
guidelines for employment and economic policies are presented as two distinct –
but intrinsically interconnected – legal instruments:

· 
A Council Recommendation on broad guidelines for
the economic policies of the Member States and of the Union – Part I of the
Integrated Guidelines;

· 
A Council Decision on guidelines for the
employment policies of the Member States – Part II of the Integrated
Guidelines.

The guidelines were first
adopted together (‘integrated package’) in 2010, underpinning the Europe 2020
strategy. It was also decided in 2010 that the integrated guidelines should
remain largely stable until 2014. Whilst the broad economic policy guidelines
remain valid for any duration of time, the employment guidelines
need to be drawn up each year.

The guidelines, other than
framing the scope and direction for Member States’ policy coordination, also
provide the basis for country specific recommendations in the respective
domains.

The current set of
'integrated guidelines' are to underpin the Europe 2020 strategy within the
context of the new approach to economic policy making built on investment,
structural reform and fiscal responsibility as set out in the Commission's 2015
Annual Growth Survey. At the same time, the integrated guidelines are to
support the achievement of smart, sustainable and inclusive growth and the aims
of the European Semester of economic policy coordination.

The "Integrated Guidelines"
are the following:

Guideline 1:    Boosting investment

Guideline 2:    Enhancing growth by the
implementation of structural reforms

Guideline 3:    Removing key barriers to
growth and jobs at EU level

Guideline 4:    Improving the
sustainability and growth-friendliness of public finances

Guideline 5:    Boosting demand for labour

Guideline 6:    Enhancing labour supply and
skills

Guideline 7:    Enhancing the functioning
of labour markets

Guideline 8:    Ensuring fairness,
combatting poverty and promoting equal opportunities

Recommendation for a

COUNCIL RECOMMENDATION

On broad guidelines for the economic
policies of the Member States and of the Union

THE COUNCIL OF THE EUROPEAN UNION,

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

Having regard to the recommendation from
the European Commission,

Having regard to the conclusions of the
European Council,

Whereas:

(1) Member States should regard their
economic policies as a matter of common concern and coordinate them within the
Council. Employment guidelines and broad economic policy guidelines should be
adopted by the Council to guide Member States’ and Union policies.

(2) In accordance with the Treaty
provisions, the Union has developed and implemented policy coordination
instruments for fiscal policy and macro-structural policies. The European
Semester combines the different instruments in an overarching framework for
integrated multilateral economic and budgetary surveillance. The streamlining
and strengthening of the European Semester as set out in the Commission's 2015
Annual Growth Survey will further improve its functioning.

(3) The financial and economic crisis
revealed and emphasised important weaknesses in the economy of the Union and
its Member States. It has also underscored the close interdependence of the
Member States' economies and labour markets. Moving the Union to a state of
strong, sustainable and inclusive growth and job creation is the key challenge
faced today. This requires coordinated and ambitious policy action both on
Union and national level, in line with the provisions of the Treaty and the Union
economic governance. Combining supply and demand side measures, these actions
should encompass a boost to investment, a renewed commitment to structural
reforms and exercising fiscal responsibility.

(4) Member States and the Union should also
address the social impact of the crisis and aim at building a cohesive society
in which people are empowered to anticipate and manage change, and can actively
participate in society and the economy. Access and opportunities for all should
be ensured and poverty and social exclusion reduced, in particular by ensuring
an effective functioning of labour markets and social welfare systems and
removing barriers to labour market participation. Member States should also make sure that the benefits of economic growth reach all
citizens and all regions.

(5) Action in line with the guidelines is
an important contribution to reaching the goals of the Europe 2020 strategy.
The guidelines constitute an integrated set of European and national policies,
which Member States and the Union should implement in order to achieve the
positive spill-over effects of coordinated structural reforms, an appropriate
overall economic policy mix and a more consistent contribution from European
policies to the Europe 2020 strategy’s objectives.

(6) While these guidelines are addressed to
Member States and the Union, they should be implemented in partnership with all
national, regional and local authorities, closely associating parliaments, as
well as social partners and representatives of civil society.

(7) The broad guidelines for economic
policies give guidance to the Member States on implementing reforms, reflecting
interdependence. They are in line with the Stability and Growth Pact. The
guidelines should form the basis for country-specific recommendations that the
Council may address to the Member States.

HAS ADOPTED THIS RECOMMENDATION:

(1) Member States and, where relevant, the
Union should take into account in their economic policies the guidelines set
out in the Annex. These guidelines shall form part of the ‘integrated
guidelines’.

Done at Brussels,

For
the Council

The
President

ANNEX

Broad Guidelines for the economic policies of the Member States and
of the Union
Part I of the Integrated Guidelines

Guideline 1: Boosting investment

Increasing the level of productive
investment in Europe is key to boost demand and improve competitiveness and
long term growth potential in Europe. Efforts should focus on mobilising
finance for investment, making finance reach the real economy and improving the
investment environment.

The potential of EU funds, including the
European Fund for Strategic Investment and structural funds, and national funds
to finance growth enhancing investments in key areas should be fully exploited.
The result-oriented management of funds as well as increasing the use of
innovative financial instruments are crucial elements in this regard.

Making finance reach the real economy calls
for increasing transparency and information provision, in particular through
the implementation of an European investment advisory hub under the auspices of
the European Investment Bank and the establishment of a transparent pipeline of
projects, both at European and national level. Close co-operation with all
relevant stakeholders is key, in order to ensure smooth carrying out of
operations, adequate risk taking and maximum value added.

Macroeconomic and financial stability, as
well as regulatory predictability and openness and transparency of its
financial sector, are critical elements for keeping the Union an attractive
host for foreign financial investment.

Guideline
2: Enhancing growth by the Member States implementation of
structural reforms

Ambitious implementation of structural
reforms by the Member States in both product and labour markets and social
welfare systems is crucial to strengthen and sustain the economic recovery, correct
harmful macro-economic imbalances and unleash the potential of the Union
economies. This would also help in achieving economic and social cohesion.
Competition-enhancing reforms, notably in the non-tradable sector, a better
functioning of the labour markets, and an improved business environment
contribute to removing obstacles to growth and investment and increasing the
adjustment capacity of the economy. Member States should coordinate closely
such reforms and regard their economic policies as a matter of common concern
in order to maximise positive spillovers and minimise negative ones.

Labour market and social system reforms
need to be pursued to promote growth and employment, while ensuring access for
all to high quality, affordable and sustainable social services and benefits. Action in the area of labour market reforms, including wage setting
mechanisms, should be pursued in line with the more detailed guidance in the
employment guidelines[1].
Actions on legal migration should make the Union an attractive destination for
talent and skills.

Reforming and further integrating product
markets should be continued to ensure that Union consumers and business benefit
from lower prices and a wider choice of goods and services. Better-integrated
markets give companies access to a substantially larger market than their own
domestic market, thus providing them with more opportunities for expansion.
More competitive and better-integrated product markets can also help increase
the speed of adjustment and resilience to economic shocks.

Efforts should continue to streamline the
regulatory environment in which enterprises operate, and should include
modernisation of public administration, greater transparency, the fight against
corruption, tax evasion and undeclared work, the improvement of the
independence, quality and efficiency of judicial systems, alongside with
contract enforcement and well-functioning insolvency frameworks.

Information and communication technologies
and the digital economy are important drivers of productivity, innovation and
growth in all sectors of the economy. Promoting private investment in research
and innovation should be accompanied by in-depth reforms to modernise the
research and innovation systems, to enhance cooperation between public institutions
and the private sector and to improve the broader framework conditions for
companies to become more knowledge-intensive. Raising the quality of public
investments in research and innovation will continue improving the quality of
public finances.

Guideline 3: Removing key barriers to
growth and jobs at Union level

Further integrating the Single Market, increasing competition and improving the business environment is key
to keep Europe an attractive location for businesses both domestic and foreign.
To move Europe's productivity frontier, it is necessary to increase
innovation and human capital and to ensure an integrated well-functioning
Digital Single Market. Increasing the uptake of information and communication
technologies by both consumers and business can contribute to creating a
borderless digital Europe and increasing productivity.

A well-functioning financial sector is key
to a smooth functioning of the economy. The strengthened regulatory and supervisory provisions and consumer protection in the
area of financial markets and financial institutions should be fully
implemented. Measures need to be taken to build a sustainable  market for
securitisation in Europe, which will improve the effective funding capacity of
Union banks. Building on the achievements of the single market for financial
services and capital, a genuine Capital Markets Union needs to be established.

Delivering a strong Energy Union should
ensure affordable, secure and sustainable energy for businesses and households.
Implementation of the 2030 climate and energy framework and transition to a
resource efficient low carbon economy should be pursued including demand and
supply side reforms. In this regard, the energy and transport sector require
particular attention.

Union legislation should focus on those
issues that are best dealt with at European level, and designed taking into
account their economic, environmental and social impact. Creating a level playing field across the borders with greater
regulatory predictability and in full compliance with competition rules will
further attract investment. A better and more
predictable business environment is particularly important in network
industries characterised by long investment horizons and large-scale initial
investments. The external
dimension of the internal market should be further developed.

Guideline 4: Improving the
sustainability and growth-friendliness of public finances

Stable public finances are key for growth
and job creation. Fiscal sustainability is vital to secure investor confidence
and the fiscal space necessary to counter unexpected developments and maximise 
the positive contribution of public finances to the economy. Member States
should secure long term control over the deficit and debt levels. Fiscal policies
must be conducted within the Union rules-based framework complemented by sound
national budgetary arrangements. Fiscal policies should reflect the economic
conditions and sustainability risks at Member State level, while ensuring a
good co-ordination of economic policies and a coherent fiscal stance across the
Union and the euro area, making use of fiscal space where available to support
growth and investment.

In designing and implementing budgetary
consolidation, strategies should prioritise growth-enhancing expenditure items
within areas such as education, skills and employability, research and
development and innovation and investment in networks with positive impacts on
productivity, for example high-speed Internet, energy and transport interconnections
and infrastructure. Expenditure reforms should target
efficiency gains in public administration;such reforms can be prepared notably
by spending reviews,with a view to secure long term sustainability.

Expenditure reforms that promote efficient
resource allocation to support growth and employment while preserving equity
should be complemented by modersnising revenue systems. Common consolidated
corporate tax base should be pursued. Reducing taxation on labour, while
ensuring budget neutrality by shifting it towards consumption taxes, recurrent
taxes on immovable property and environmental taxes can help correcting market
inefficiencies and lay foundations for a sustained rates of growth and job
creation.The efficiency of the tax system can be enhanced by broadening tax
bases, such as  removing or reducing the use and generosity of exemptions and
preferential regimes, and by strengthening the tax administration, simplifying
the tax system, and combatting tax fraud and aggressive tax planning.

[1]               Insert cross reference to EG