Resolution of the European Committee of the Regions — The economic policies for the euro area and in view of the 2019 Annual Growth Survey

(2018/C 461/01)

Submitted by the EPP, PES, ALDE, EA and ECR political groups

THE EUROPEAN COMMITTEE OF THE REGIONS,

— having regard to the European Commission’s Communication on the Annual Growth Survey 2018 (AGS) (1) and to the 2018 European Semester;

— having regard to its resolution of 11 October 2017 on the 2017 European Semester, in view of the 2018 Annual Growth Survey (AGS), and to its resolution of 1 February 2018 on the European Commission’s Annual growth Survey 2018;

— having regard to the European Parliament resolutions of 26 October 2017 on the economic policies of the euro area (2) and of 14 March 2018 on the 2018 AGS;

1. takes note of the overall slow and uneven pace of EU-relevant structural reforms across the EU, as measured by the implementation rate of the Country-specific recommendations (CSRs) ( 3 ) ; stresses that reforms are needed in all Member States to foster competitiveness and growth and to increase economic, social and territorial cohesion and economic convergence, as well as resilience to external shocks, which is crucial for the stability of the euro area; stresses that above all lack of ownership at country level and to some extent also insufficient administrative and institutional capacity are widely seen as the main factors contributing to the unsatisfactory implementation record of the Country-specific recommendations (CSRs) ( 4 )

2. notes the strong increase in the number of CSRs directly addressed to local and regional authorities (LRAs) (36 % in 2018, compared to 24 % in 2017) ( 5 ) ; also notes that, taking into account those CSRs involving the LRAs, even if indirectly, and those not involving the LRAs but having a territorial impact, territory-related recommendations account for 83 % of all CSRs (compared to 76 % in 2017);

3. takes note that 48 % of the 124 specific recommendations which are addressed in 2018 to local and regional authorities and/or which raise challenges related to territorial disparities, repeat what was already published in 2015; welcomes therefore the European Commission’s multi-annual assessment of the implementation of Country-specific recommendations, which shows that more than two-thirds of Country-specific recommendations issued since the outset of the European Semester in 2011 have been implemented with at least ‘some progress’ ( 6 ) ; regrets however the persisting lack of transparency regarding the criteria upon which such assessment is based;

4. stresses that the European Semester needs to be aligned with an EU long-term strategy translating the UN 2030 Agenda for Sustainable Development at EU level. The transition to a new European strategic framework succeeding the Europe 2020 strategy would be an appropriate juncture for reforming the governance of the European Semester;

5. strongly insists that the Country-specific recommendations should explicitly address territorial challenges and the role of the local and regional authorities in identifying and implementing them, while territory-related challenges and future scenarios should be explicitly analysed and addressed in the AGS and the Country Reports and be reflected in the National Reform Programmes;

6. stresses the need to ensure that the European Semester is fully coherent with the objective of economic, social and territorial cohesion set in the Treaty on European Union, and suggests that the Country-specific recommendations address Member States’ multi-annual cohesion challenges;

7. welcomes the European Semester’s focus on the European Pillar of Social Rights, and underlines that 45 % of Country-specific recommendations for 2018 give a role to local and regional authorities and/or raise challenges related to territorial disparities in the field of social rights ( 7 )

8. reiterates that the involvement of the LRAs as partners in planning and implementing the European Semester, along with the adoption of multilevel governance arrangements and a structured, ongoing and explicitly recognised role for LRAs, would substantially increase ownership of CSRs at country level; stresses that this involvement is all the more important in the context of stricter links between cohesion policy and the European Semester under the 2021-2027 MFF and of the possible adoption of the Reform Support Programme, which would also be managed within the framework of the European Semester;

9. points out therefore a strong need to ensure better coordination and synergies between the European Semester process and the shared management approach, and the decentralized character of the ESI Funds; reiterates its proposal that the EU adopt a Code of Conduct to involve the LRAs in the European Semester ( 8 ) , and stresses that such proposal is consistent with the subsidiarity principle and the current division of powers and competences across levels of government within the Member States; notes that the Code of Conduct should take into account the relevant experience of the European code of conduct on partnership in the framework of cohesion policy’s ESI Funds ( 9 ) , as well as existing good practices of involving LRAs extensively in the Semester, in some countries;

10. welcomes the EU Task Force on Subsidiarity’s ‘strong’ recommendation ‘that Member States follow the guidance the Commission has given on encouraging greater participation and ownership of the Country-specific recommendations in light of the fact that […] economic reforms […] may have implications for all levels of governance[…] This should go beyond the national administrations and include local and regional authorities, the social partners, and civil society generally ( 10 ) ’;

11. is concerned that the European Commission has still not provided a definition of ‘structural reforms’ in the context of the economic governance of the EU and possible support through EU programmes such as the proposed Reform Support Programme. Reiterates, therefore, that in accordance with the principle of subsidiarity, the scope of the structural reforms eligible for EU funding should only include the strategic policy areas relevant to the implementation of the Treaty objectives and which relate directly to EU competences. The CoR rejects any proposal to finance unspecified structural reforms in the Member States which have not undergone a prior European added value assessment and which do not relate directly to the Treaty-based EU competences. In this context, the CoR points to its resolution of 1 February 2018 rejecting the European Commission proposal for a regulation amending the Common Provisions Regulation (EU) No 1303/2013 of 6 December 2017 ( 11 )

12. highlights that the state of local and regional finances deserves renewed attention at European and national levels, and welcomes therefore the Austrian Presidency’s request for the CoR to explore the subject; recalls that LRAs’ budgets, including social spending and welfare in particular, were among the first to be affected by the financial and economic crisis, and by the ensuing budget consolidations and cuts in transfers from central government; notes that while the crisis is a decade old, many LRAs’ finances are still constrained;

13. reiterates its concern regarding the persistent low level of public investment in the EU, and in particular investment by local and regional authorities, which in 2017 remains more than 30 % lower than its 2009 level expressed as a share of GDP ( 12 ) ; notes with regret, therefore, that public investments are often the most affected by fiscal consolidation policies despite such investments having a direct impact on local economies and on the daily lives of citizens; is further worried by the growing centralisation of investment: the share of public investment made by local and regional authorities — while still above 50 % in the EU on average — having fallen noticeably compared to the level of 60 % seen in the 1990s ( 13 )

14. welcomes the Commission’s ambition to build on the experience of the European Fund for Strategic Investments (EFSI) and Investment Plan more broadly with its proposal for the InvestEU Programme; acknowledges that the proposal has the potential to simplify the use of financial instruments, a long-standing demand put forwards by the CoR since the current complexity is an obstacle to widespread and effective usage;

15. regrets the trend towards increased protectionism in international trade and warns of the negative consequences of jeopardising multilateral trade cooperation and dispute settlement systems; reiterates, nevertheless, its view that new free trade initiatives must be preceded by impact assessments, which facilitate the early identification of and quantify possible asymmetric impacts on European regions, to allow swift public policy responses;

16. highlights that trade policy is an exclusive EU competence and that the European Globalisation Fund (EGF) is currently one of the instruments mitigating the possible negative side effects of trade policy choices; regrets that in the past funds available through the EGF have not been fully used and notes that some Member States have previously opted for the use of ESF instead. The CoR will analyse in a separate opinion in detail whether the European Commission’s proposal to broaden the scope and the mission of the EGF, as well as the lowering of its thresholds, will guarantee that the reformed EGF brings added value and avoids overlaps and trade-offs with the ESF+, as is currently the case ( 14 )

17. reiterates its call for a strong and holistic EU industrial policy strategy, one that will allow European industry, particularly SMEs, to tackle the challenges and opportunities of digitalisation and decarbonisation with particular attention to be given to investment in the technological enhancement of SMEs and the specialisation of workers through lifelong training; emphasises again the crucial role of local and regional authorities in building regional innovation ecosystems and clusters that are essential for successful innovation; stresses that the European Single Market is at the core of the EU’s economic and political integration and points out that the creation of the Single Market is an ongoing project and it remains incomplete in important respects, which impact in particular consumers and SMEs; also welcomes the Commission’s proposal for a new Single Market Programme after 2020, which provides a framework to support measures for improving the competitiveness of European SMEs;

18. notes that the need to improve administrative and institutional capacity is at the heart of most structural reforms identified within the European Semester; stresses that different political priorities are one of the key reasons for the unsatisfactory implementation of structural reforms in the context of the European Semester; in some countries this compounded by insufficient administrative and institutional capacity at different levels of government, which hinders public and private investment, reduces the quality of public services provided to citizens and slows down implementation of the ESI funds and other EU programmes; stresses that, in 2018, 63 % of all recommendations directly addressed to local and regional authorities were about improving administrative capacity;

19. notes that, although applications submitted under the Structural Reform Support Programme (SRSP) came from most Member States, the challenge of the quality and capacity of the public administration is more serious in many Southern and Eastern European countries ( 15 ) ; welcomes the possibility for LRAs to have access to the SRSP and calls the Commission to encourage Member States to address the capacity building needs of sub-national governments; welcomes the Commission’s engagement in strengthening coordination between the different EU-funded capacity-building strands, and reiterates that the Commission should do this in a transparent manner by issuing a single strategic document ( 16 )

20. calls on the Commission to carry out an assessment of how EU rules on public procurement have been transposed into national legislation and how they are being implemented, emphasising both the way in which they are implemented at local and regional level — in light of the weight of subnational authorities in the field of public procurement — and the extent to which new standards have simplified or complicated regulation in this area; notes that more progress needs to be made on digital public procurement and that Member States should strive for a rapid digital transformation of procedures and for the introduction of e-processes for all major stages;

21. instructs the President to forward this resolution to the European Commission, the European Parliament, the Austrian Presidency of the Council and the President of the European Council.

Brussels, 10 October 2018. The President of the European Committee of the Regions Karl-Heinz LAMBERTZ

(1) COM(2017) 690 final.

(2) http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P8-TA-2017-0418&language=EN&ring=A8-2017-0310

(3) Commission Communication on the 2018 CSRs, p. 3, (https://ec.europa.eu/info/sites/info/files/2018-european-semester-country-specific-recommendation-commission-recommendation-communication-en.pdf); see also the European Commission impact assessment of the proposal of a Reform Support Programme (http://ec.europa.eu/transparency/regdoc/rep/10102/2018/EN/SWD-2018-310-F1-EN-MAIN-PART-1.PDF).

(4) See p. 23-26 of the impact assessment mentioned in the previous footnote.

(5) http://portal.cor.europa.eu/europe2020/Documents/publi-file/2018-Territorial-Analysis-of-CSRs/2018_CSRs_draft_final.pdf

(6) Commission Communication on the 2018 CSRs, p. 3.

(7) http://portal.cor.europa.eu/europe2020/Documents/publi-file/2018-Territorial-Analysis-of-CSRs/2018_CSRs_draft_final.pdf

(8) See CoR Opinion on Improving the governance of the European Semester: a Code of Conduct for the involvement of local and regional authorities of 11 May 2017.

(9) Delegated Regulation on the European code of conduct on partnership in the framework of the European Structural and Investment Funds (No 240/2014).

(10) https://ec.europa.eu/commission/files/report-task-force-subsidiarity-proportionality-and-doing-less-more-efficiently_en

(11) COM(2017) 826 final.

(12) Source: Eurostat (https://ec.europa.eu/eurostat/tgm/refreshTableAction.do?tab=table&plugin=1&pcode=tec00022&language=en).

(13) European Commission, 7th Cohesion Report (p. 168).

(14) https://www.eca.europa.eu/Lists/ECADocuments/SR13_07/SR13_07_EN.pdf

(15) Evidence on that is summarised on p. 27 of the European Commission impact assessment of the proposal of a Reform Support Programme (http://ec.europa.eu/transparency/regdoc/rep/10102/2018/EN/SWD-2018-310-F1-EN-MAIN-PART-1.PDF).

(16) https://memportal.cor.europa.eu/Handlers/ViewDoc.ashx?doc=COR-2018-00502-00-00-AC-TRA-EN.docx