REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE Alert Mechanism Report 2017 (prepared in accordance with Articles 3 and 4 of Regulations (EU) No 1176/2011 on the prevention and correction of macroeconomic imbalances)
Date: 2016-11-16
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: EU Member State, economic disparity, economic growth, economic recovery, economic statistics, euro area, macroeconomics, multilateral surveillance, national accounts, public debt

EUROPEAN 
COMMISSION 

Brussels, 16.11.2016  
COM(2016) 728 final 

REPORT FROM THE COMMISSION 

TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN 
CENTRAL BANK AND THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE 

Alert Mechanism Report 2017 

(prepared in accordance with Articles 3 and 4 of Regulations (EU) No 1176/2011 on the 
prevention and correction of macroeconomic imbalances) 

{SWD(2016) 354 final} 

EN 

   EN 

 
 
 
 
  
 
 
 
 
The  Alert  Mechanism  Report  (AMR)  is  the  starting  point  of  the  annual  cycle  of  the 
macroeconomic imbalance procedure (MIP), which aims to identify and address imbalances 
that hinder the smooth functioning of the economies of Member States or the economy of the 
EU and may jeopardise the proper functioning of the economic and monetary union.  

The AMR uses a scoreboard of selected indicators, plus a wider set of auxiliary indicators, to 
screen  Member  States  for  potential  economic  imbalances  in  need  of  policy  action.  Member 
States  identified  by  the  AMR  are  then  analysed  in  an  in-depth  review  (IDR)  by  the 
Commission  to  assess  how  macroeconomic  risks  in  the  Member  States  are  accumulating  or 
winding down, and to conclude whether imbalances or excessive imbalances exist. Following 
established practice, for Member States for which imbalances were identified in the previous 
round of IDRs, a new IDR will in any case be prepared. 

Taking  into  account  discussions  with  the  European  Parliament  and  within  the  Council  and 
the  Eurogroup,  the  Commission  will  prepare  IDRs  for  the  relevant  Member  States.  The 
findings  will  feed  into  the  country-specific  recommendations  (CSRs)  under  the  European 
semester of economic policy coordination. The IDRs are expected to be published in February 
2017 as part of the country reports, ahead of the European semester package of CSRs. 

1. 

EXECUTIVE SUMMARY 

This report initiates the sixth annual round of the macroeconomic imbalance procedure 
(MIP)1.  The  procedure  aims  to  identify  imbalances  that  hinder  the  smooth  functioning  of 
Member State economies and to spur appropriate policy responses. The implementation of the 
MIP is embedded in the European semester of economic policy coordination so as to ensure 
consistency with the analyses and recommendations made under other economic surveillance 
tools.  The  annual  growth  survey  (AGS),  which  is  adopted  at  the  same  time  as  this  report, 
takes stock of the economic and social situation in Europe and sets out broad policy priorities 
for the EU as a whole for the coming year. 

The  report  identifies  Member  States  for  which  in-depth  reviews  (IDRs)  should  be 
undertaken to assess whether they are affected by imbalances in need of policy action2. 
The alert mechanism report (AMR) is a screening device for economic imbalances, published 
at the start of each annual cycle of economic policy coordination. In particular, it is based on 
an economic reading of a scoreboard of indicators with indicative thresholds, alongside a set 
of auxiliary indicators. 

The  alert  mechanism  report  emphasises  euro  area  considerations.  In  line  with  the  21 
October  2015  Commission  Communication  ʽOn  Steps  Towards  Completing  Economic  and 
Monetary  Unionʼ,  the  AMR  also  aims  at  a  systematic  analysis  of  the  euro  area  wide 
implications  of  countriesʼ  imbalances  and  it  examines  how  such  implications  require  a 
coordinated approach to policy responses. 

The  assessment  in  this  report  is  set  against  the  background  of  a  continuing  but  still 
fragile  economic  recovery.  The  European  Commission  autumn  2016  economic  forecast 
projects real GDP growth in the EU to be 1.8% in 2016 and to fall to 1.6% in 2017 against the 

1   This  report  is  accompanied  by  a  Statistical  Annex  which  contains  a  wealth  of  statistics  which  have 

contributed to inform this report.  

2   See Article 5 of Regulation (EU) No 1176/2011. 

2 

 
 
                                                 
backdrop of softening domestic demand, notably private consumption and investment. GDP 
forecasts  for  the  euro  area  are  1.7%  and  1.5%  for  2016  and  2017,  respectively.  Inflation  is 
expected to remain at historically low levels in 2016 and 2017, with core inflation of around 
1% despite the highly accommodative monetary policy stance. Labour markets conditions are 
expected  to  further  improve,  with  the  EU  unemployment  rate  projected  to  fall  from  an 
estimated 8.6% in 2016 to 8.3% in 2017. The tail winds that have supported the recovery so 
far are fading (falling oil prices, a depreciating euro), and risks to the outlook persist. Despite 
the  recovery  in  some  emerging  markets,  uncertainties  remain  linked  to  the  rebalancing  in 
China  and  the  implications  of  the  normalisation  of  US  monetary  policy  for  global  capital 
flows.  Uncertainties  linked  to  geopolitical  tensions  remain  high,  while  risks  are  emerging 
concerning  the  policy  environment  amid  rising  populism  linked  in  some  cases  with  social 
hardship and reform fatigue and with growing protectionist sentiments around the world. 

The horizontal analysis presented in the AMR leads to a number of conclusions: 

•  The  adjustment  in  countries  with  external  deficits  or  debt  has  made  further 
progress,  while  large  current  account  surpluses  remain.  Significant  progress  has 
been  achieved  among  net  debtor  countries  in  correcting  their  external  imbalances. 
Unsustainable  current  account  deficits  have  been  eliminated  in  almost  all  Member 
States, including as a result of adjustments in cost competitiveness over the past few 
years,  although  stocks  of  net  foreign  liabilities  remain  high.  In  contrast,  current 
account surpluses are not adjusting in all net creditor countries and continue to grow in 
some cases.  

•  Private debt deleveraging continues, but at a slow and uneven pace, hampered by 
low  nominal  growth.  Vulnerabilities  linked  to  high  levels  of  private  debt,  often 
compounded  by  high  stocks  of  government  debt,  persist  in  a  number  of  countries. 
Private debt overhang depresses investment and finds a counterpart in the weakness of 
banksʼ balance sheets in some countries. Deleveraging is ongoing but in most cases at 
a  slow  pace  compared  with  past  experience,  notably  in  light  of  subdued  nominal 
growth3. Moreover, deleveraging is not always taking place where it is most needed, 
with some high-debt countries making slower progress in reducing their liabilities than 
low-debt countries. 

•  Despite improved capital positions, the banking sector is facing challenges linked 
to  falling  profitability  and  a  legacy  of  bad  debt.  While  banks  have  generally 
improved their capital ratios and resilience to shocks, reduced  profitability prospects 
constrain the ability to raise new capital on the market against the background of new 
regulatory capital requirements. In some countries, the legacy of non-performing loans 
reduces the room for lending and raises the risk of capital misallocation. 

•  House  price  dynamics  are  gaining  momentum  and  deserve  monitoring  in  some 
countries.  Following  sharp  downward  corrections  during  the  post-crisis  recessions, 
house  prices  are  currently  growing  in  most  countries.  Despite  the  low  interest  rate 
environment,  house  price  dynamics  remain  well  below  the  growth  rates  recorded 
during  the  mid-2000s.  In  some  countries,  however,  strong  price  dynamics  are 
observed in a context of likely overvalued prices and rising net credit to households, 
which deserves close monitoring. 

3   See, e.g, IMF, Fiscal Monitor, October 2016. 

3 

 
 
                                                 
•  Labour  markets  continue  their  recovery,  but  social  distress  persists  in  some 
countries.  Labour  markets  have  been  improving  since  mid  2013,  accompanied  by  a 
reduction in the dispersion of unemployment rates across Member States after major 
divergent  trends  in  earlier  years.  However,  there  are  still  very  high  unemployment 
rates  and  stagnant  labour  income  in  a  number  of  EU  countries,  and  social  distress 
persists, especially in the countries hardest hit by the financial and debt crises. 

Euro  area  rebalancing  issues  continue  to  deserve  careful  consideration.  The  euro  area 
current account surplus further increased to 3.3%  of GDP  in 2015 and is projected to reach 
3.7% of GDP in 2016, reflecting aggregate demand dynamics weaker than output dynamics. 
The  weak  recovery  in  euro  area  aggregate  demand  has  underpinned  the  low  inflation 
environment and the persistent slack in the economy. The improved current account positions 
of net debtor countries need to be sustained in order to ensure a reduction of the stock of net 
external liabilities. In turn, some net creditor countries are yet to start correcting external flow 
imbalances. 

Overall,  despite  continued  improvements,  the  same  sources  or  risks  identified  in  the 
2016 AMR are confirmed. Progress continues in addressing external imbalances among net 
debtor  countries,  but  the  rebalancing  process  remains  uneven.  Internal  stock  imbalances  are 
adjusting slowly on the back of the low nominal growth environment, and progress is uneven. 
The banking sector witnesses reduced profitability prospects and a legacy of non-performing 
loans in some countries. In some countries, signs of possible overheating in housing markets 
or labour markets deserve monitoring. 

More detailed and encompassing analyses for Member States flagged by the AMR will 
be  performed  in  IDRs.  As  in  the  previous  cycle,  IDRs  will  be  embedded  in  the  country 
reports,  which  provide  the  Commission  servicesʼ  analysis  of  the  economic  and  social 
challenges  in  Member  States.  This  analysis  then  informs  the  European  semesterʼs  country 
specific  recommendations  (CSRs).  To  prepare  the  IDRs,  the  Commission  will  base  its 
analysis  on  a  rich  set  of  data  and  information.  All  pertinent  statistics,  all  relevant  data,  all 
material facts will be taken into account. As established by the legislation, it is on the basis of 
the  IDRs  that  the  Commission  will  conclude  whether  imbalances  or  excessive  imbalances 
exist,  and  subsequently  prepare  the  policy  recommendations  for  each  Member  State4. 
Countries for which imbalances or excessive imbalances have been identified in the previous 
MIP  cycle  are  now  all  subject  to  specific  monitoring,  which  is  modulated  according  to  the 
gravity of the underlying challenges (Box 1)5. 

Box 1: Application of the MIP: main developments since 2015 

Categorisation of macroeconomic imbalances 

The categorisation of macroeconomic imbalances was streamlined and stabilised in the previous cycle, 
as indicated in the April 2016 Commission Communication on the European semester and in line with 
the  October  2015  Commission  Communication  ʽOn  Steps  Towards  Completing  Economic  and 
Monetary  Unionʼ.  The  streamlining  reduced  the  number  of  possible  categories  from  six  to  four  (no 

4   Regulation (EU) No 1176/2011 (OJ L 306, 23.11.2011, p. 25). 
5   See ʽ2016 European Semester: Assessment of progress on structural reforms, prevention and correction of 
macroeconomic  imbalances,  and  results  of  in-depth  reviews  under  Regulation  (EU)  No  1176/2011ʼ  - 
COM(2016) 95 final/2 -, 7.4.2016. 

4 

 
 
 
                                                 
imbalances;  imbalances;  excessive  imbalances  and  excessive  imbalances  with  corrective  action). 
Among  the    19  countries  subject  to  an  IDR  in  2016,  six  were  found  to  experience  no  imbalances 
(Austria,  Belgium,  Estonia,  Hungary,  Romania  and  the  United  Kingdom),  seven  were  found  to 
experience imbalances (Finland, Germany, Ireland, the Netherlands, Slovenia, Spain and Sweden) and 
six  were  found  to  experience  excessive  imbalances  (Bulgaria,  Croatia,  Cyprus,  France,  Italy  and 
Portugal). 

Specific monitoring 

Specific monitoring aims to enhance the continuous monitoring of the policies taken in the context of 
the MIP. It does not replace the encompassing Commission monitoring of reform implementation in 
response to country specific recommendations that is presented in the country reports, but strengthens 
the basis for such an assessment.  

Specific monitoring was put in place for the first time in 2013 to follow up to the strengthened policy 
commitments  taken  by  Spain  and  Slovenia  after  they  were  identified  with  excessive  imbalances.  It 
consisted  of  two  missions  followed  by  reports,  in  the  autumn  and  in  the  winter,  discussed  in  the 
Council committees preparing the ECOFIN (EPC/EFC). Given the positive experience with these two 
countries,  in  2014  the  Commission  extended  specific  monitoring  to  all  countries  with  excessive 
imbalances and to selected euro area countries with imbalances of systemic relevance. In 2016, with 
the streamlining of MIP categories, specific monitoring was extended to all countries with imbalances 
or excessive imbalances, with monitoring taking place in the autumn only, and modulated on the basis 
of  the  scope  of  the  challenges  and  the  severity  of  the  imbalances.  Further  adaptations  in  the 
implementation  of  specific  monitoring  may  take  place  if  necessary  on  the  basis  of  the  accumulated 
experience. 

IDRs are warranted for the countries identified with imbalances or excessive imbalances 
in  the  previous  round  of  IDRs6.  An  IDR  is  again  needed  to  assess  whether  existing 
excessive  imbalances  or  imbalances  are  unwinding,  persisting  or  aggravating,  while  paying 
due  attention  to  the  contribution  of  the  policies  implemented  by  these  Member  States  to 
overcome  imbalances.  The  Member  States  concerned  are  Bulgaria,  Croatia,  Cyprus, 
Finland,  France,  Germany,  Ireland,  Italy,  the  Netherlands,  Portugal,  Slovenia,  Spain 
and Sweden. 

On the basis of the economic reading of the scoreboard, the Commission will not at this 
stage carry out further analyses in the context of the MIP for the other Member States. 
In particular, the countries that exited MIP surveillance in 2016 (Belgium, Hungary, Romania 
and  the  United  Kingdom)  do  not  signal  major  additional  risks  compared  with  last  year  to 
require  analysis  in  an  IDR  in  2017.  A  number  of  countries  not  recently  examined  in  IDRs 
exhibit  sustained  dynamics  in  house  prices  (Denmark,  Luxembourg)  and  labour  costs 
(Estonia,  Latvia,  Lithuania)  that  deserve  close  monitoring  but  do  not  require  a  screening  of 
vulnerabilities  and  risks  for  the  whole  economy  in  an  IDR.  In  the  case  of  Greece,  the 
surveillance of imbalances and the monitoring of corrective measures continues to take place 
in the context of the programme of financial assistance. Overall, the alert mechanism report 
therefore  calls  for  the  preparation  of  IDRs  for  13  Member  States  compared  to  19  in  the 
previous cycle. None of the countries that were not subject IDRs in the previous cycle will be 
so in 2017. 

6   See ʽ2016 European Semester: Assessment of progress on structural reforms, prevention and correction of 
macroeconomic  imbalances,  and  results  of  in-depth  reviews  under  Regulation  (EU)  No  1176/2011ʼ  - 
COM(2016)  95  final/2  -,  7.4.2016.  For  the  full  set  of  country-specific  recommendations  adopted  by  the 
Council, including those that are MIP-relevant, see OJ C 299, 18.8.2016. 

5 

 
 
                                                 
2. 

IMBALANCES, RISKS AND ADJUSTMENT: MAIN DEVELOPMENTS ACROSS COUNTRIES 

The  alert  mechanism  report  builds  on  an  economic  reading  of  the  scoreboard  of 
indicators.  The  AMR  scoreboard  of  indicators  and  the  indicative  thresholds  provides  a 
filtering  device  for  detecting  prima-facie  evidence  of  possible  risks  and  vulnerabilities 
deserving  further  investigation.  The  scoreboard  includes  a  range  of  indicators  and  reference 
thresholds regarding a number of areas, including external positions, competitiveness, private 
debt,  housing  markets,  the  banking  sector,  employment.  It  relies  on  ex-post  data  to  ensure 
data  stability  and  cross-country  consistency.  Hence,  the  scoreboard  used  for  this  report 
reflecting data  up to 2015. More recent data, in addition to a set of auxiliary indicators, are 
nevertheless  reviewed  in  the  economic  reading  of  the  indicators.  Scoreboard  values  are  not 
read mechanistically, , but subject to an economic reading that enables country-specific issues 
and contextual considerations to be taken into account7.  

The evolution of scoreboard indicators reflect the gradual adjustment process as well as 
remaining  imbalances  and  vulnerabilities.  The  correction  of  potential  current  account 
imbalances is evident from the evolution of the number of values beyond the threshold on the 
current  account  variable  in  the  AMR  scoreboard  (Graph 1).  While  the  current  account 
indicator was beyond the threshold for 14 countries as a result of deficits and for 2 countries 
as a result of surpluses in 2009, this was the case for only 5 countries in 2015, three of which 
as a result of surpluses. In light of resuming output and export growth for most EU countries, 
the  number  of  readings  beyond  the  threshold  concerning  unemployment,  other  social 
indicators and export markets shares has been falling. Price dynamics have resumed in a few 
countries in a context of generally low inflation, which results in a growing, but still limited, 
number of values beyond the threshold for the REER and real house prices. Values in excess 
of the threshold are numerous and persistent regarding stock imbalances. This is the case for 
15  countries  as  far  as  the  net  international  investment  position  is  concerned  in  2015,  one 
fewer  than  in  the  previous  year,  and  for  17  countries  on  the  government  debt  indicator,  the 
same  as  in  the  previous  year.  As  far  as  private  debt  is  concerned,  the  number  of  values  in 
excess of the threshold has remained stable at 13. 

7   A mechanistic reading of the scoreboard is ruled out by the MIP Regulation (Regulation (EU) 1176/2011). 
On  the  rationale  underlying  the  construction  of  the  AMR  scoreboard  and  its  reading  see  ʽThe 
Macroeconomic  Imbalance  Procedure.  Rationale,  process,  application:  a  compendiumʼ  (European 
Commission, 2016). 

6 

 
 
 
 
 
 
 
 
 
 
 
                                                 
Graph 1: Number of values beyond threshold per scoreboard indicators, 2013, 2014 and 2015. 

Source: Eurostat. 

Past  current  account  deficits  have  mostly  turned  into  surpluses  or  balanced  positions, 
while  large  surpluses  persist.  Net  debtor  countries  made  strides  in  correcting  excessive 
current account deficits in the immediate aftermath of the crisis (Graph 2). Following a pause 
in 2014, they further adjusted their position in 2015, mainly on account of export growth, but 
in few cases (e.g. Italy) also as a result of weak domestic demand. As a result, only Cyprus 
and  the  United  Kingdom  had  deficits  beyond  the  threshold.  In  contrast,  the  surpluses  in 
Denmark, Germany and the Netherlands continue to exceed the threshold. Germanyʼs already 
large current account surplus widened further to 8.5% of GDP in 2015 following a significant 
increase  in  2014  as  all  sectors  of  the  economy  continued  to  deleverage,  which  made  the 
countryʼs positive saving vs. investment imbalance even larger8. Low oil prices and terms of 
trade effects also contributed somewhat to further increasing the surplus in 2015. Germanyʼs 
surplus is larger still on a cyclically adjusted basis at 9.4% of GDP, as is the case for 15 other 
Member  States  that  have  actual  positions  below  cyclically  adjusted  ones.  The  Netherlands 
also  still  has  a  large  current  account  surplus,  but  it  has  decreased  over  the  past  two  years. 
Among net creditor countries, Denmark, Germany, Malta and the Netherlands had surpluses 
that  were  more  than  5 percentage  points  of  GDP  larger  than  what  can  be  explained  by 
fundamental  factors  such  as  demographics  or  manufacturing  intensity.  Among  net  debtor 
countries,  only  the  United  Kingdom  had  a  deficit  that  exceeded  fundamentals  by  a  similar 
magnitude,  while  the  majority  of  net  debtor  countries  had  current  account  positions  beyond 
fundamentals following the recent external rebalancing. Overall, the correction of imbalances 
in net debtor countries and continued surpluses in the main net creditor countries means that 
the  euro  area  current  account  surplus  expanded  by  another  0.8  percentage  point  of  GDP  in 
2015 to 3.3% of GDP, compared with a nearly balanced position in 2009-2010 (Box 2). 

8   Current account figures referred to here are on a national accounts basis. 

7 

 
 
 
 
 
 
                                                 
Graph 2: Current account balances of the euro area and select Member States 

Source: National accounts and European Commission autumn 2016 forecast (AMECO). 

Box 2: The euro area dimension of macroeconomic imbalances 

Euro area wide implications of macroeconomic imbalances deserve careful consideration. In line 
with proposals contained in the 22 June 2015 Report ʽCompleting Europeʼs Economic and Monetary 
Unionʼ by Jean-Claude Juncker, Donald Tusk, Jeroen Dijsselbloem, Mario Draghi and Martin Schulz, 
and the 21 October 2015 Commission Communication ʽOn steps towards completing Economic and 
Monetary Unionʼ, starting from last year the AMR contains a systematic analysis of the euro area wide 
implications  of  countriesʼ  imbalances  and  how  such  implications  require  a  coordinated  approach  to 
policy responses. 

The large euro area current account surplus keeps rising. The current account balance of the euro 
area is the largest in  the world at EUR 349 billion in 2015, or 3.3% of euro-area GDP9. The euro area 
surplus built up in the post-crisis period from a deficit of 0.7% of GDP in 2008. Its current level can 
hardly  be  fully  accounted  for  by  economic  fundamentals:  empirical  estimates  of  a  current  account 
norm for the euro area indicate that fundamental characteristics (including ageing, relative per-capita 
income, etc.) would imply a small surplus of about 0.3% of GDP in 201510. The euro area surplus is 
expected to increase further by 0.4 percentage points in 2016, even though oil prices have risen from a 
low basis since early 2016 and the euro has appreciated in effective terms. Looking forward, the large 
and growing current euro area account surplus could contribute to put upward pressure on the external 
value of the euro. 

The  euro  area  surplus  reflects  correction  of  former  current  account  deficits  and  widespread 
deleveraging as well as persisting large surpluses in some Member States. The swing of the euro 
area  current  account  position  immediately  after  the  crisis  coincided  with  a  sharp  correction  in 
countries  with  large  external  deficits  following  a  reversal  in  private  cross-border  financial  flows. 
Thereafter, the dynamics of domestic demand and imports remained subdued in net debtor countries. 
A  symmetric  post-crisis  correction  did  not  take  place  in  countries  with  positive  current  account 
balances,  and  surpluses  further  grew  in  the  countries  with  the  largest  surpluses  in  value,  notably 
Germany and the Netherlands. In 2015, the surpluses of Germany and the Netherlands accounted for 
respectively EUR 257 billion and EUR 57 billion of the euro area surplus. The large swing of the euro 
area current account surplus is rooted in a deleveraging process involving all sectors of the economy 
since 2009. The improvement in net lending positions concerned mostly households and corporations 
first,  and  the  government  sector  afterwards,  in  light  of  the  need  to  correct  deeply  deteriorated  fiscal 

8 

 
 
 
 
 
positions.  

Although  most  euro  area  countries  have  moved  to  external  positions  close  to  balance  or  in 
surplus,  rebalancing  within  the  euro  area  needs  to  continue.  Few  countries  are  left  with  sizable 
current account deficits, but this does not mean that further progress in terms of rebalancing within the 
euro area is not needed. Countries that had large deficits for a long time are still characterised by large 
negative  net  international  investment  positions  that  represent  vulnerabilities.  Winding  down  large 
stocks of liabilities requires maintaining current account balances in positive territory or small deficits, 
which in turn implies limited room for expanding domestic demand in net debtor countries. As large 
and negative net international investment positions are generally coupled with large stocks of private 
or  government  debt,  the  maintenance  of  prudent  current  account  positions  in  net  debtor  countries  is 
also the counterpart of a necessary internal deleveraging process. The extent to which the deleveraging 
process in net debtor countries comes at the expense of their recovery prospects crucially depends on 
the  growth  and  inflation  environment  and  debt-deflation  risks,  the  room  for  further  competiveness 
gains and demand dynamics in the net creditor surplus countries and in non-euro area countries, in a 
context of falling trade intensity of growth.  

The  persistence  of  the  large  euro  area  current  account  surplus  reflects  aggregate  demand 
dynamics that continue to lag behind that of economic activity. Real domestic demand in the euro 
area  is  expected  to  recover  to  levels  prevailing  before  the  economic  crisis  only  this  year  (Graph 3). 
This protracted trend of domestic demand recovering more slowly than output resulted from both the 
investment and the consumption component, and is reflected with output gap figures that have stayed 
in negative territory since 2009 and still remain below 1%. This persistent degree of slack underpins 
the  current  historically  low  levels  of  core  inflation,  which  remain  below  the  target  of  monetary 
authorities  and  create  a  challenging  environment  for  deleveraging  and  euro  area  rebalancing.  In 
addition, the large and growing euro area current account surplus could contribute to the persistence of 
low inflation via the exchange rate channel. 

The  financial  sector  is  facing  a  number  of  challenges.  Banksʼ  capital  base  in  the  euro  area  has 
improved on average, but remarkable differences persist. The profitability of banks is below pre-crisis 
levels  and  is  expected  to  fall  further  as  the  low-inflation  environment  is  increasingly  reflected  in 
reduced  margins  and  low  returns  on  assets,  overbanking  and  the  persistence  of  outdated  business 
models  also  being  contributing  factors.  In  some  countries,  high  levels  of  non-performing  loans 
compound  narrowing  profit  margins,  and  the  work-out  of  the  large  stocks  of  non-performing  assets 
can weaken an already low capital base for a number banks. The combination of low inflation, high 
stocks  of  non-performing  loans  in  some  countries  and  regulatory  capital  buffers  still  to  be  built  up 
could limit the room for credit expansion. 

Graph 3: Euro area output, domestic demand, trade balance and core inflation 

9 

 
 
 
 
 
 
 
 
Source: National accounts and European Commission autumn 2016 forecast (AMECO). 

Stronger  demand  dynamics  and  a  more  robust  recovery  in  nominal  growth  would  help 
accelerate the deleveraging and rebalancing process. Investment rates persistently below pre-crisis 
levels can be seen as a possible manifestation of worsening expectations concerning future real returns 
on  capital  (the  ʽsecular  stagnationʼ  hypothesis).  In  turn,  the  persistently  weak  investment  does  not 
bode  well  for  productivity  growth  prospects.  In  such  a  context,  the  euro  area  risks  a  self-sustaining 
spiral of diminished expectations, low investment and low productivity growth.11 Coordinated action 
to mobilise resources for public and private investment and support the demand recovery could break 
such  a  vicious  circle.  More  active  support  to  domestic  demand  in  the  surplus  countries  could 
complement the action of monetary authorities and be consistent with rebalancing objectives. In turn, 
structural  conditions  that  favour  investment,  productivity  growth  and  competitiveness  gains,  in 
particular in net debtor countries, would support a durable correction of imbalances and help ease the 
debt burden.  

10 

 
 
 
 
 
 
 
 
 
 
 
 
 
Graph 4: Net international investment positions and net external debt, 2015 

Source: Eurostat (BPM6, ESA10), Commission service calculations. 

Stocks  of  net  external  liabilities  are  generally  falling,  though  in  most  cases  at  a  slow 
pace.  Many  net  debtor  countries  remain  vulnerable  on  account  of  their  negative  net 
international  investment  positions,  with  scoreboard  values  beyond  the  threshold  in  15 
Member  States  in  2015,  only  one  fewer  than  in  2014  (Czech  Republic).  Some  progress  has 
nevertheless been achieved recently, mainly as a result of positive current account balances, 
and  through  an  often  modest  impact  of  nominal  GDP  growth.  Negative  net  international 
investment  positions  are  the  largest  in  Cyprus,  Greece,  Ireland,  Portugal  and  Spain,  and 
significantly  above  the  scoreboard  threshold  in  Bulgaria,  Croatia,  Hungary,  Latvia,  Poland 
and  Slovakia  (Graph 4).  Risks  and  vulnerabilities  linked  to  negative  positions  vary 
considerably, however, owing to the different composition of external assets and liabilities. In 
particular,  liabilities  linked  to  foreign  direct  investment  (with  high  incidence  e.g.  in  many 
Eastern  European  countries  and  in  Ireland)  and  equity  liabilities  (proportionately  very 
significant  in  Bulgaria,  Czech  Republic,  Estonia,  Ireland  and  Romania)  represent  lower 
risks.12  The  current  account  balances  needed  for  net  international  investment  positions  to 
converge rapidly (within 10 years) towards the threshold of 35% of GDP are above the 2015 
balances  for  most  net  debtor  countries  (Graph 5).  Most  net  creditor  countries  (Austria, 
Belgium, Germany, Malta, the Netherlands and Sweden) have further increased their positive 
net  international  investment  position  over  the  past  few  years.  While  risks  associated  with 
large and growing stocks of net foreign assets cannot be assimilated to external sustainability 
issues,  the  fast  and  persistent  accumulation  of  net  creditor  risk  should  not  be  overlooked, 
mainly as a result of the valuation risks that such positions generate. 

Graph 5: Cyclically-adjusted current account balances and balances required to stabilise or reduce 
external liabilities, 2015 

11 

 
 
 
 
 
 
Source: Commission services calculations. 
Note:  cyclically-adjusted  balances  are  calculated  using  the  output  gap  estimates  underlying  the  European 
Commission  autumn  forecast  2016.  Current  account  balances  required  to  stabilise  or  reduce  net  external 
liabilities  rest  on  the  following  assumptions:  nominal  GDP  projections  stem  from  the  European  Commission 
autumn 2016 forecast (up to 2018), and the Commission T+10 methodology projections beyond that ; valuation 
effects  are  conventionally  assumed  to  be  zero  in  the  projection  period,  which  corresponds  to  an  unbiased 
projection for asset prices; capital account balances are assumed to remain constant as a percentage of GDP, at a 
level that corresponds to the median over 2015 and projections for 2016-2018. 

Cost competitiveness improvements in net debtor countries remain broadly supportive 
of rebalancing  but have slowed down recently.  The bulk of the adjustment in unit labour 
costs  in  countries  that  faced  external  imbalances  and  competitiveness  issues  occurred 
relatively  early-on  in  the  post  crisis  period.  The  current  low-inflation  environment,  with 
limited  dispersion  in  price  developments  across  countries,  limits  the  room  for  further 
adjustments in relative prices. Changes in unit labour costs have been muted in 2014 and 2015 
and  do  not  diverge  much  across  countries,  with  a  few  exceptions  (Graph 6).  In  2015,  the 
nominal unit labour cost indicator (changes over 3 years) exceeded the threshold only in the 
three Baltic countries and Bulgaria as wage growth outpaced productivity gains. Unit labour 
costs  increased  relatively  faster  in  net  creditor  countries  –  including  Austria,  Denmark, 
Germany and Sweden – than in most other countries, though not significantly more so than in 
France and Italy. Among euro area Member States, the convergence in inflation towards low 
rates  implies  that  real  effective  exchange  rates  are  driven  mainly  by  changes  in  the  euro 
exchange  rate  and  the  relative  importance  of  non-euro  area  countries  as  trading  partners. 
Cyprus, France, Greece, Ireland, Italy, Portugal and Spain recorded the largest real effective 
exchange rate depreciations in 2015, with values beyond the threshold in Cyprus, Greece and 
Ireland.  The  indicator  also  exceeded  the  threshold  on  account  of  appreciations  in  Estonia, 
while appreciation pressures are also evident in Latvia and Lithuania. Outside the euro area, 
the  Czech  Republic,  Hungary,  and  Sweden  recorded  the  largest  depreciations,  while 
appreciation pressures materialised in 2015 in Romania and the United Kingdom. 

Graph 6: Growth in unit labour cost and decomposition of factors, 2015 

12 

 
 
 
 
 
 
 
Source: AMECO and Eurostat. Commission services calculations 
Note:  The  decomposition  is  based  on  the  standard  breakdown  of  unit  labour  cost  growth  into  inflation,  real 
hourly  compensations  and  labour  productivity,  the  latter  being  further  broken  down  into  the  contribution  of 
hours worked, total factor productivity and capital accumulation using a standard growth accounting framework. 

Changes  in  export  market  shares  indicate  a  mixed  picture.  In  2015,  against  the 
background  of  weak  global  trade  dynamics,  scoreboard  values  were  no  longer  beyond  the 
threshold in Croatia, France, Germany, Ireland, Slovenia, Spain and the United Kingdom, but 
remained so in 11 countries. In the majority of the latter cases, 5-year losses in market shares 
slowed down as well. However, much of the improvement across Member States is driven by 
a  base  effect.  The  scoreboard  indicator  currently  includes  the  large  losses  of  market  shares 
that  affected  almost  all  Member  States  in  2010,  thereby  mechanically  lowering  cumulative 
losses in shares (Graph 7). On a year-on-year basis, the evolution of export market shares in 
2013, 2014 and 2015 also reflects the differentiated trends in EU and non-EU trade. Intra-EU 
trade picked up faster than trade outside the EU in 2013 and 2014 when global trade slowed 
down,  which  explains  the  better  performance  in  these  two  years.  As  trade  outside  the  EU 
recovered in 2015, the year-on-year evolution in export market shares of Member States were 
negatively affected again. 

Graph 7: 5-year change in export market shares, 2015 

13 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Source: Eurostat, Commission services calculations. 
Note: The decomposition rests on the shift-share methodology. Shaded bars represent the contribution to market 
share dynamics stemming from changes in the exposure to a given market; solid bars measure the contribution to 
market share dynamics coming from market share changes within a given market. Calculations use BPM6 data 
except for BG and FI where exports to EU are derived from national accounts; data partly unavailable for ES and 
HR. 

Private  sector  over-indebtedness  continues  to  affect  many  countries.  Scoreboard  values 
exceeded  the  threshold  in  13  countries  in  2015,  all  of  which  were  in  that  position  in  2009 
except France were this became the case in 2011. Cyprus, Ireland and Luxembourg have the 
highest  level  of  private  sector  indebtedness,  though  special  factors  linked  to  multinational 
companies are at play. Denmark, the Netherlands, Portugal and Sweden have the next highest 
scoreboard  indicator  value.  The  factors  underlying  high  private  sector  indebtedness  vary 
significantly  across  countries.  In  Belgium,  Cyprus,  Finland,  Ireland,  Luxembourg,  the 
Netherlands,  Portugal  and  Sweden,  both  households  and  non-financial  corporations  (NFCs) 
have levels of debt above the EU average due to a multiplicity of factors, including easy credit 
extension in the pre-crisis period for real estate transactions (Graphs 8a and 8b). In Denmark 
and the United Kingdom the high level of debt mainly derives from high household leverage. 
In France and Spain, high private debt levels stem from both households and NFCs, as neither 
sectorʼs  debt  levels  stand  out  strongly  in  comparison  to  EU  averages.  Variability  in  private 
debt levels across countries reflect to a large extent also differences in financial development, 
as manifested in large differences in the stock of financial assets held by the private sector, 
notably  households.  Large  stocks  of  household  assets  are  found  especially  in  Belgium, 
Denmark,  Italy,  Malta,  the  Netherlands,  Sweden  and  the  United  Kingdom.  Elevated  private 
sector  indebtedness  generates  a  number  of  vulnerabilities,  especially  in  a  low-growth,  low-
inflation  environment,  which  makes  deleveraging  difficult.  In  particular,  it  increases  the 
impact  of  potential  shocks  on  households  and/or  NFCs,  with  possible  repercussions  on  the 
banking  sector.  Risks  are  further  amplified  in  those  countries  (including  Croatia,  Hungary, 
Poland  and  Romania)  in  which  large  shares  of  domestic  debt  are  denominated  in  foreign 
currencies. 

Graph 8a: Consolidated household debt 

Graph 8b: Consolidated debt of NFCs 

14 

 
 
 
 
 
 
Source: Eurostat, Commission services calculations. 

Source: Eurostat, Commission services calculations. 

Deleveraging  is  ongoing  but  is  slow  and  uneven.  Among  households,  active  or  passive 
deleveraging – i.e. a reduction in debt ratios at least in part due to negative net credit flows or 
a  reduction  in  debt  ratios  through  increased  GDP,  but  with  positive  net  credit  flows  – 
continues in many countries, albeit at varying paces and with notable exceptions. The latest 
developments indicate that households in Croatia, Cyprus, Greece, Hungary, Ireland, Latvia, 
Portugal and Spain are deleveraging actively and reducing their net borrowing (Graph 9a).13 
In Denmark and the Netherlands, deleveraging also advances further but under a passive form 
(via nominal GDP growth). In the latter, net credit flows have turned mildly positive after two 
years of contraction. In contrast, debt ratios continue to increase from already elevated levels 
in Sweden and the United Kingdom, where net credit flows to households are positive on the 
back  of  persistent  strong  house  price  dynamics.  In  turn,  deleveraging  further  advanced  in  a 
number of countries where household indebtedness is least elevated (Graph 10a). This is the 
case in Austria, Germany, Italy, Slovenia and some non-euro area Member States. The latest 
developments also indicate that NFCs in a number of countries, including Bulgaria, Denmark, 
Italy,  the  Netherlands,  Portugal,  Slovenia,  Spain  and  the  United  Kingdom  are  deleveraging 
under an active form (Graph 9b). In other countries, mainly Austria and Germany, NFCs are 
not confronted with issues related to their indebtedness but are still deleveraging, including as 
a result of low investment and credit growth. In contrast, high-debt-level NFC sectors in some 
countries are increasing their leverage further, including in some cases as a result of positive 
credit flows. This is the case mainly in Belgium, Finland and Ireland (though in the latter case 
special factors are at play related to the operations of multinational companies). 

Graph 9a: Drivers of household deleveraging 
(2016Q1) 

Graph 9b: Drivers of nonfinancial corporations 
deleveraging (2016Q1) 

15 

 
 
 
 
 
 
 
Sources: Eurostat, Commission services calculations. 
Notes: the graphs present a breakdown of the evolution of the debt-to-GDP ratios into four components: credit 
flows, real GDP growth, inflation and other changes. A reduction of leverage can be achieved through different 
combinations of debt repayment, growth of the economy and other changes in the outstanding debt stock. Active 
deleveraging involves net repayment of debt (negative net credit flows), usually leading to a nominal contraction 
of the sectorʼs balance sheet and having, ceteris paribus, adverse effects on economic activity and asset markets. 
Passive  deleveraging,  on  the  other  hand,  consists  in  positive  net  credit  flows  being  outweighed  by  higher 
nominal GDP growth, leading to a gradual decrease in debt/GDP. 

Graph 10a: Evolution of private sector debt-to-GDP 
(2015 vs. peak) and private debt levels (2015) 

Graph  10b:  Evolution  of  government  debt-to-GDP 
(2015 vs. peak) and government debt levels (2015) 

Source: Eurostat. 
Note:  Luxembourg  is  excluded  from  the  chart  as 
special factors related to the presence of multinational 
companies  are  behind  a  59.2  percentage points  fall  in 
the private sector debt to GDP ratio between the peak 
and 2015. 

Source: Eurostat. 
Note:  Ireland  is  excluded  from  the  chart  as  special 
factors  related  to  the  large  GDP  revision  in  2015, 
mainly  attributed  to  the  activities  of  multinational 
companies, are behind a 40.9 percentage points fall in 
the general government debt to GDP ratio between the 
peak and 2015 (78.6% of GDP). 

Banks have strengthened their capital ratios and their resilience is generally improving, 
but  challenges  remain.  The  phasing-in  of  new  prudential  requirements  and  banking  sector 

16 

 
 
 
 
 
deleveraging  supported  the  increase  in  capital  ratios  in  euro-area  banks  to  14.2%  (Tier  1 
capital to risk-weighted assets) at the end of 2015 from 10.4% at the end of 2011 (Graph 11a). 
The  overall  improvement  in  banksʼ  capital  positions  contributes  to  enhance  resilience  and 
provided  the  basis  for  a  recent  recovery  in  credit  against  the  backdrop  of  resuming  output 
growth in most Member States. Capitalisation nevertheless continues to vary across Member 
States, with ratios (Tier 1) in excess of 17% in 10 countries (including Bulgaria, Luxembourg, 
Romania, Slovenia and Sweden), but below 13% in 6 countries, including Italy, Portugal and 
Spain (Graph 11b). Net credit growth to the private sector was positive in 17 Member States 
in 2015 (and beyond threshold value only in Luxembourg), up from 16 in 2014, suggesting an 
incipient  improvement  in  access  to  finance,  confirmed  by  survey  evidence.  Financial  sector 
liabilities are gradually starting to rise again on an annual basis, though increases are small in 
most Member States and below threshold values. Banking sector challenges are mostly linked 
to  profitability  prospects  (Graph  11c),  in  addition  to  non-performing  loans  in  a  number  of 
countries (Graph 11d). Retained earnings have been the main instrument to raise bank capital, 
but profitability remains low in most Member States and the build-up of low-yielding assets 
in  a  low-rate  environment  and  the  persistence  of  outdated  business  models  is  expected  to 
further affect profitability going forward. Low profitability in turn impacts equity valuations 
and affects the ability of banks to raise new capital on the market, thereby limiting the room 
for  credit  expansion.  In  addition,  legacy  issues  in  the  form  of  still  high  levels  of  non-
performing  loans  continue  to  weigh  on  banksʼ  balance  sheets.  A  number  of  countries 
(Bulgaria, Croatia, Cyprus, Greece, Hungary, Ireland, Italy, Portugal, Romania and Slovenia) 
record high system-wide average but banks with high NPL rations can be found also in other 
Member  States.  In  Italy  and  Portugal,  high  levels  of  NPLs  combine  with  low  capitalisation 
ratios.  Balance  sheet  clean-up  is  currently  ongoing,  but  progress  remains  uneven,  and  loan-
loss provisioning practices diverge across countries. 

17 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Graph 11a: Capital ratios in the euro area  

Graph  11b:  Capital  ratios 
2015Q4 

in  Member  States, 

Source: European Central Bank. 

Source: European Central Bank. 

Graph 11c: Banksʼ return on equity 

Graph  11d:  Non-performing  loans,  percent  of  total 
loans and advances 

Sources:  European  Central  Bank  and  International 
Monetary Fund, European Commission calculations. 

Source: European Central Bank. 

Real  house  prices  increased  in  the  majority  of  Member  States  in  2015.  The  scoreboard 
indicator shows increases in prices in 22 Member States, with values exceeding the threshold 
in  Denmark,  Estonia,  Ireland,  Luxembourg,  Hungary  and  Sweden.  In  Croatia,  Italy  and 
Latvia,  house  prices  declined  from  levels  that  were  already  estimated  to  be  under-valued, 
thereby  further  widening  the  negative  valuation  gap  (Graph 12).  In  contrast,  moderate 
decreases  in  real  house  prices  in  Finland,  France  and  Greece  contributed  to  reducing  a 
persistent  overvaluation.  In  a  number  of  other  Member  States,  the  increase  in  real  house 
prices  in  2015  added  further  pressure  to  already  overvalued  housing  markets.  Tensions  are 
particularly visible in Sweden, where the increase in real house prices in 2015 came on top of 

18 

 
 
 
 
 
 
 
 
 
 
a substantial overvaluation gap. In addition, the further price increases have been fuelled by 
rising  net  credit  to  households  coming  on  top  of  already  elevated  debt  levels.  Denmark, 
Luxembourg  and  the  United  Kingdom  are  three  other  countries  where  price  increases  were 
significant in 2015 and coming on top of overvaluation gaps. In all three cases, this was also 
fuelled by rising net credit flows to households. These situations will therefore call for careful 
monitoring  of  future  developments.  In  Estonia,  Ireland,  Hungary  and  Slovakia,  prices  are 
recovering  from  under-valued  levels,  while  elsewhere  prices  rises  are  moderate  and  coming 
on top of limited overvaluation gaps or contributing to closing an under-valuation gap. 

Graph 12: House prices valuation levels and variations in 2015 

Source: Eurostat, ECB, BIS, OECD and Commission services calculations. 
Note:  the  overvaluation  gap  estimated  as  an  average  of  the  price/income,  price/rent  and  fundamental  model 
valuation gaps. 

Government  debt  ratios  declined  somewhat  in  many  Member  States  in  2015,  but 
typically not in the most indebted countries. Scoreboard values exceeded the threshold in 
17  Member  States  in  2015.  For  10  of  these,  including  Cyprus,  France,  Ireland,  Spain  and 
Portugal,  it  combined  with  private  sector  indebtedness  also  beyond  threshold,  generating 
economy-wide deleveraging pressures. The prevailing low-growth, low-inflation environment 
still does not support a robust decline  in government debt  ratios in spite of Member Statesʼ 
efforts to cut budget deficits (which declined in structural terms in 21 countries in 2015) and 
generate  primary  surpluses  (which  were  achieved  in  19  countries).  Declines  in  government 
debt ratios are taking place predominantly in Member States with lower levels of indebtedness 
(Graph 10b),  with  the  most  sustained  drops  occurring  in  Denmark,  Germany,  Latvia,  Malta 
and  the  Netherlands.  In  contrast,  none  of  the  Member  States  with  the  highest  general 
government  debt-to-GDP  ratios  (Belgium,  Croatia,  Cyprus,  France,  Greece,  Italy,  Portugal, 
Spain)  has  yet  embarked  on  a  sustainable  decline  in  its  debt  ratio.  Among  countries  with 
elevated debt levels, Ireland is the only one that has initiated a robust and sustained reduction 
in  government  indebtedness,  driven  by  strong  real  and  nominal  GDP  growth.  Although  the 
trend has been amplified by recent upward revisions in GDP figures led by the activities of 
multinationals, the underlying trend remains sustained. 

19 

 
 
 
 
 
 
Box 3: Employment and social developments 

Labour  markets  conditions  continued  to  improve  in  2015  and  the  first  half  of  2016.  Annual 
growth in employment in the euro area and the EU as a whole amounted to around 1% during most of 
2015 and accelerated to  around 1.6% in the first half of 2016. Employment growth in the euro area 
caught  up  with  non-euro  area  countries  growth,  after  lagging  behind  it  between  2012  and  2015. 
Similarly,  unemployment  rates  declined  further  in  2015  and  the  first  half  of  2016.  Disparities  in 
unemployment rates across the EU decreased from high levels, although they remain high in several 
countries,  in  particular  Greece  and  Spain  –  where  unemployment  affects  around  20%  of  the  labour 
force – and in Croatia, Cyprus, Italy and Portugal where unemployment still exceeds 10%. Scoreboard 
values  for  the  three-year  average  unemployment  rate  exceed  the  threshold  for  all  these  countries  in 
2015, in addition to Bulgaria, France, Ireland, Latvia, Lithuania and Slovakia. Overall, in the second 
quarter of 2016, the unemployment rate remains 1.5 percentage points higher in the euro area than in 
the EU as whole, reflecting the significant extent of remaining adjustment needs in a number of euro 
area  countries.  In  addition,  while  employment  growth  and  the  fall  in  unemployment  has  been 
relatively  strong  so  far  in  view  of  the  only  modest  increase  in  output  growth  in  the  past  couple  of 
years,  it  remains  to  be  seen  whether  a  sustained  improvement  in  labour  market  conditions  can  be 
achieved with a subdued recovery. 

Employment rates increased in almost all Member States. The employment rate (20-64 years old) 
reached 70% in 2015 for the EU as a whole and continued rising to 71% in the second quarter of 2016, 
surpassing the 2008 peak of just over 70% for the first time. Activity rates (15-64 years old) increased 
nearly everywhere, but declined in Cyprus, and receded marginally in Belgium and Germany. Activity 
rates  in  the  EU  and  the  euro  area  in  2015  were  at  72.5%  and  72.4%,  respectively,  about  3  and  2 
percentage  points  above  the  pre-crisis  levels.  This may  reflect  entry  in  the  labour  market  during  the 
crisis to contribute to household income in a situation of increased uncertainty about jobs and labour 
income as well as higher labour market participation by older workers and women. 

Job-finding rates for jobseekers with spells of unemployment longer than 12 months started to 
recover in 2015. In contrast, the decline in unemployment observed at the beginning of the recovery 
was  linked  mostly  to  reductions  in  the  job  separation  rates.  Consequently,  the  long-term 
unemployment  rate  declined  in  most  of  the  EU  in  2015  but  still  remained  elevated.  Eight  countries 
recorded rates in excess of those of 3 years ago by 0.5 percentage points or more. The highest shares 
were observed in Croatia, Greece and Spain, with more than 10% of the active population being out of 
a job for more than a year.  

Youth  unemployment  is  falling.  The  youth  unemployment  rate  fell  in  all  Member  States  except 
Finland  and,  to  a  lesser  extent,  in  Austria,  France  and  Malta.  Youth  unemployment  has  fallen 
frequently faster than total unemployment, reflecting a higher cyclical response and the unused labour 
potential in countries with high unemployment. Values exceed the 3-year change scoreboard threshold 
in Belgium, Cyprus, Finland and Italy. In 2015, declines in the share of young people that are neither 
in  employment,  education  nor  training  were  also  common,  but  less  frequent  than  the  ones  on  youth 
unemployment, in fact remaining above double-digit marks in two thirds of EU Member States. 

Labour mobility and migration have helped mitigate labour market imbalances. Their size and 
relevance to smooth unemployment nevertheless remains limited in overall terms. In 2015, net inflows 
of  population  were  the  strongest  in  countries  with  the  lowest  unemployment  rates  in  2014  (notably 
Austria, Germany and Luxembourg); some of the highest net outflows happened in parallel with some 
of  the  highest  declines  in  joblessness  in  2015  (e.g.  Croatia,  Greece,  Latvia  and  Lithuania).  The 
apparent disconnection between rising inflows in receiving and outflows in sending EU countries may 
be  driven  by  the  rising  importance  of  extra-EU  migration,  including  refugees  from  Middle  Eastern 
countries. 

The social situation is slowly improving but remains difficult in a number of Member States. The 
share  of  people  at  risk  of  poverty  or  social  exclusion  (AROPE)  decreased  from  24.4%  in  2014  to 
23.7%  in  2015,  with  a  decline  in  over  three  quarters  of  Member  States  in  2015  in  comparison  with 
2014  and  over  half  of  the  countries  when  compared  with  3  years  ago  –  the  AMR  scoreboard 

20 

 
 
indicator.14  15 Declines over the past three years were the strongest in Bulgaria, Hungary, Latvia and 
Romania,  while Cyprus, Greece, the  Netherlands, Portugal and Spain recorded  the largest increases. 
Rates  vary  considerably  from  around  40%  in  Bulgaria  and  Romania  to  less  than  20%  in  the  Czech 
Republic, France, the Netherlands and the Nordic countries. In comparison with the pre-crisis years, 
these  risks  receded  for  several  Central  and  Eastern  European  countries  (most  notably  Poland  and 
Romania)  and  increased  for  most  of  the  remainder  (especially  for  Cyprus,  Greece  and  Spain).  The 
prolonged weak social situation can have a negative impact on potential GDP growth in a variety of 
ways and risks compounding macroeconomic imbalances. 

Trends in risks of poverty or social exclusion stem from various factors. First, the share of people 
at  risk  of  poverty  (monetary  poverty)  has  been  increasing  in  most  Member  States  in  recent  years  – 
both in terms of 3-year changes and year-on-year changes. Second, severe material deprivation (SMD) 
has  declined  over  a  3-year  period  in  many  Member  States.  Marked  declines  in  SMD,  an  absolute 
measure of poverty, in the poorest Member States have been observed, reflecting the catching up of 
these countries to higher levels of income. An increase in SMD has been seen in countries with higher 
per capita GDP but more affected by the crisis, notably Greece, Italy and Spain. Finally, whereas there 
has been a recent decline or stabilisation in the share of people (under 60) living in households with 
very  low  work  intensity,  the  3-year  change  still  points  out  that  a  majority  of  EU  countries  had 
increases or at best stabilisation compared with 2012. 
Income  inequality  grew  in  most  of  the  EU  countries  over  the  crisis  period.16  However,  income 
inequality stabilised or declined in 2015 in a considerable number of Member States.  Yet,  countries 
like  Lithuania  and  Romania  have  recorded  the  sharpest  increases  in  income  inequality  from  already 
worse-than-average situations. 

Graph 13: Evolution of the unemployment rate (20-64 years old), 2014Q1 vs. 2016Q2 

21 

 
 
 
 
 
 
 
 
 
 
 
Source: Eurostat. 

Overall, risks and vulnerabilities stemming from legacy issues and/or recent trends are 
present in a majority of Member States. The degree of severity and the urgency in bringing 
forth  adequate  policy  responses  vary  significantly  across  Member  States  depending  on  the 
nature of the vulnerabilities or trends, as well as their confinement to one or several sectors of 
the economy: 

•  A number of Member States are affected by multiple and interconnected stock and/or 
flow vulnerabilities. This is the case of countries that were hit most severely by boom-
bust  credit  cycles  –  frequently  associated  with  liquidity  and  solvency  issues  in  their 
banking sectors – and the sharpest reversals of current account positions. In a number 
of cases (Cyprus, Croatia, Portugal), elevated private indebtedness combines with high 
levels  of  public  debt,  large  negative  net  international  investment  positions  and 
remaining issues within the banking system. These countries still confront the issue of 
addressing significant  deleveraging needs in the context of limited  fiscal space,  high 
unemployment, low inflation and low real GDP growth. In Bulgaria, Ireland, Slovenia 
and  Spain,  vulnerabilities  are  also  multiple  and  interconnected  but  faster  progress  in 
addressing them has been achieved than in the countries above. 

• 

In a few Member States, vulnerabilities are driven mainly by large stocks of general 
government debt and concerns relating to potential output growth and competitiveness. 
This  is  particularly  the  case  of  Italy,  where  vulnerabilities  are  also  linked  to  the 
banking  sector,  in  particular  the  large  stock  of  non-performing  loans.  Belgium  and 
France  also  face  general  government  debt  and  potential  growth  issues,  but  are  not 
confronted with similar potential risks stemming from vulnerable banks. 

•  Some  Member  States  are  characterised  by  large  and  persistent  current  account 
surpluses  that  reflect  subdued  private  consumption  and  investment.  This  is  the  case 
notably of Denmark, Germany, the Netherlands and Sweden. In the case of Germany, 
this  is  combined  with  deleveraging  in  all  sectors  of  the  economy,  even  though  debt 
levels  are  not  comparatively  high.  The  large  and  persistent  surpluses  may  imply 
forgone growth opportunities and growing creditor risks. In addition, the shortfalls in 
aggregate demand bear consequences for the rest of the euro area in a context of low 
growth and low inflation. 

22 

 
 
 
 
• 

• 

In some Member States, developments in price or cost variables show potential signs 
of  overheating.  In  Sweden,  as  well  as  in  Denmark,  Luxembourg  and  the  United 
Kingdom,  price  pressures  relate  mainly  to  the  housing  sector  in  combination  with 
significant  levels  of  household  debt.  In  Bulgaria,  Estonia,  Latvia  and  Lithuania,  unit 
labour costs continue to grow at a relatively strong pace. 

In  some  Member  States,  vulnerabilities  and  possibly  unsustainable  trends  are 
concentrated  mainly  on  a  particular  sector  of  the  economy.  In  the  Netherlands, 
vulnerabilities  persist  linked  to  household  indebtedness  and  the  housing  market,  in 
combination  with  the  large  current  account  surplus.  In  Finland,  vulnerabilities  relate 
mainly to competitiveness arising from a structural shift in the economy. 

Overall,  in-depth  reviews  are  warranted  for  13 countries.17  All  of  these  countries  were 
subject to an IDR  in the  previous cycle, during  which  IDRs  were  prepared  for  19  countries 
overall.  While  the  reduction  in  the  number  of  IDRs  reflects  the  recent  progress  made  in 
addressing  imbalances,  vulnerabilities  remain  even  in  countries  for  which  IDRs  are  not 
warranted  at  this  stage,  and  developments  will  continue  to  be  monitored,  as  indicated  in 
section 3. Relative to the AMR 2016, progress has been most notable in addressing external 
imbalances  among  net  debtor  countries,  and  labour  markets  have  continued  to  improve  in 
general. Internal and external stock imbalances nevertheless only adjust slowly and remain a 
source  of  risks  and  vulnerabilities  in  many  Member  States,  in  addition  to  weighing  on 
investment  prospects  and  the  economic  recovery.  In  turn,  the  incipient  building-up  of  price 
pressures warrant close monitoring in some countries. 

23 

 
 
3. 

IMBALANCES, RISKS AND ADJUSTMENT: COUNTRY-SPECIFIC COMMENTARIES 

Belgium: In the previous round of the MIP, no macroeconomic imbalances were identified in 
Belgium.  In  the  updated  scoreboard,  a  number  of  indicators  are  beyond  the  indicative 
threshold,  namely  the  change  in  export  market  shares  and  indebtedness,  both  private  and 
government, as well as the change in the rates of long-term and youth unemployment. 

the 

conjunction  with 

External sustainability is underpinned by 
the balanced current account position and 
the  very  favourable  net  international 
investment position. Accumulated export 
market share losses remain large but have 
stemmed in recent years despite losses in 
2015.  This  trend  is  expected  to  continue 
notable 
in 
slowdown  in  unit  labour  cost  growth. 
Private  debt  remains  relatively  high,  in 
particular  for  non-financial  corporates, 
though  widespread  intra-group  lending 
inflates  debt  figures.  Risks  related  to 
household  debt  originate  predominantly 
from  the  housing  market.  Real  house 
prices  have  been  relatively  flat  in  recent 
years  but  no  correction  has  taken  place 
for  the  fast  increase  prior  to  2008. 
Government  debt  is  stable  but  at  a  high 
level and continues to represent a major challenge for the long-term sustainability  of public 
finances.  Recent  data  suggest  that  the  increase  in  long-term  unemployment  is  cyclical  in 
nature,  while  the  high  and  persistent  youth  unemployment  is  a  more  structural  feature.  The 
number of persons living in households with very low work intensity is one of the highest of 
all Member States, highlighting the increasingly polarised state of the Belgian labour market. 

Overall,  the  economic  reading  highlights  issues  relating  to  competitiveness,  public 
indebtedness,  house  prices  and  labour  market  functioning,  though  the  risks  linked  to  these 
issues remain contained. Therefore, the Commission will at this stage not carry out further in-
depth analysis in the context of the MIP.  

Bulgaria:  In  March  2016,  the  Commission  concluded  that  Bulgaria  was  experiencing 
excessive macroeconomic imbalances, due to remaining fragilities in the financial sector and 
high corporate indebtedness in a context of high unemployment. In the updated scoreboard, a 
number  of  indicators  are  beyond  the  indicative  threshold,  namely  the  net  international 
the 
investment  position  (NIIP), 
unemployment rate. 

labour  cost  (ULC)  growth  and 

the  nominal  unit 

24 

 
 
 
 
 
slow 

deleveraging 

The negative NIIP remains beyond the 
scoreboard threshold but has continued 
to improve against the background of a 
positive  current  account.  The  export 
market  share  increased  over  the  last 
five years despite losses in 2015. ULC 
growth is steadily decelerating, even if 
the three-year average remains beyond 
the  indicative  threshold.  Private  sector 
indebtedness  remains  of  concern,  in 
particular  for  non-financial  corporates, 
with  recent  data  indicating  an  orderly 
process. 
but 
Vulnerabilities  are  still  present  in  the 
financial  sector  and  fragilities  remain 
in the insolvency framework. The level 
of non-performing loans has decreased 
but remains high. Asset quality review 
and  stress  tests  in  the  banking  sector 
have been completed and did not identify a significant need for additional capital across the 
sector. They will nevertheless require strict implementation of the follow-up action, including 
via the recommendations that the BNB has issued to individual banks. Similar reviews in the 
insurance  and  pension  fund  sectors  are  ongoing.  The  unemployment  rate  is  beyond  the 
indicative  threshold,  albeit  on  a  decreasing  trend  due  to  the  recent  strengthening  of  GDP 
growth, while the growth of long-term unemployment rate is no longer beyond its indicative 
threshold. Persistent structural issues on the labour market, such as low participation as well 
as skills and qualification mismatches remain a concern.  

the  economic  reading  highlights 

Overall, 
internal 
vulnerabilities,  including  in  the  financial  sector.  Therefore  the  Commission  finds  it  useful, 
also  taking  into  account  the  identification  of  an  excessive  imbalance  in  March,  to  examine 
further the persistence of macroeconomic risks and to monitor progress in the unwinding of 
excessive imbalances. 

to  external  and 

issues  related 

Czech Republic: In the previous round of 
the  MIP,  no  macroeconomic  imbalances 
were identified in  the Czech Republic. In 
the  updated  scoreboard  no  indicators  are 
beyond the indicative thresholds. 

The current account balance has improved 
considerably  in  recent  years,  with  the 
three  year  average  turning  positive  in 
2015.  The  net  international  investment 
position  has  been  gradually  falling  and 
moved  within  the  threshold  in  2015, 
partly due to the ongoing accumulation of 
foreign-denominated  assets  by  the  Czech 
National Bank as part of an exchange rate 

25 

 
 
 
 
floor  in  operation  vis-à-vis  the  euro.  Risks  related  to  the  external  position  remain  overall 
limited as much of the foreign liabilities are accounted for by foreign direct investment and, 
consequently, net external debt is very low. There were further competitiveness gains in 2015, 
with  a  small  increase  in  export  market  shares  and  a  slight  decrease  in  nominal  unit  labour 
costs.  Accelerating  wage  growth  and  possible  exchange  rate  appreciation,  following  the 
removal of the exchange rate floor, could partly reverse these recent gains. Risks of internal 
imbalances appear low. Despite higher confidence of households to enter the housing market, 
the private sector debt level slightly decreased in 2015 and remains within the threshold. Real 
house  price  growth  also  accelerated  somewhat  in  2015.  The  largely  foreign-owned  banking 
sector remains stable, with total financial sector liabilities increasing only marginally in 2015. 
Government  debt  has  declined  and  is  expected  to  continue  to  fall  and  remains  within  the 
threshold. Unemployment is low. 

Overall,  the  economic  reading  points  to  contained  external  risks  and  low  internal  risks. 
Therefore,  the  Commission  will  at  this  stage  not  carry  out  further  in-depth  analysis  in  the 
context of the MIP. 

Denmark: In the previous round of the MIP, no macroeconomic imbalances were identified 
in  Denmark.  In  the  updated  scoreboard,  a  number  of  indicators  are  beyond  the  indicative 
threshold, namely the current account balance, the change in export market shares, real house 
prices and private sector debt.  

net 

effects. 

valuation 

The  current  account  balance  continues 
to  show  large  surpluses.  This  reflects 
strong  private  and  public  savings,  high 
revenues  from  investment  abroad  as 
corporate 
well 
compressed 
as 
investment.  The 
international 
investment position is positive and high, 
although  decreasing  in  2015  due  to 
negative 
The 
accumulated  losses  in  export  market 
shares  decreased  in  2015,  although  on 
an  annual  basis  there  were  additional 
losses, and are expected to be limited in 
the  coming  years.  The  recent  relative 
weakness  of  export  can  also  be  partly 
attributed  to  the  decline  of  oil  and  gas 
extraction  and  the  sea  freight  sector. 
Cost  competitiveness  indicators  have 
remained rather stable. Private sector debt declined marginally in 2015 but remains very high. 
The comparatively high household debt reflects also a specific mortgage bank funding model 
and an advanced pension system. Deleveraging is slow as incentives to pay down debt is low, 
while they are high for building housing equity. Real house prices growth accelerated beyond 
the threshold in 2015 against the background of very low interest rates, which warrants close 
monitoring. However, the banking sector remains sound and credit developments contained. 
Regulatory and supervisory measures to increase the financial sectorʼs stability and to reduce 
the debt incentive for households are taking effect gradually. Unemployment remains low. 

26 

 
 
 
 
Overall,  the  economic  reading  points  to  possible  issues  related  to  private  debt  and  the 
housing sector, but risks still appear contained. Therefore, the Commission will at this stage 
not carry out further in-depth analysis in the context of the MIP. 

Germany:  In  March  2016,  the  Commission  concluded  that  Germany  was  experiencing 
macroeconomic imbalances, in particular involving risks stemming from excess savings and 
subdued private and public investment. In the updated scoreboard, a number of indicators are 
beyond the indicative threshold, namely the current account surplus and government debt. 

In  2015,  the  current  account  surplus 
continued  to  increase  from  already  very 
high  levels,  further  boosted  by  stronger 
positive  terms  of  trade  due  to  lower  oil 
prices  and  a  favourable  exchange  rate. 
This surplus is expected to remain high in 
coming  years.  Investment  is  forecast  to 
remain  subdued  and  as  a  share  of  GDP 
has  remained  broadly  at  the  same  low 
level  since  2011.  The  very  large  net 
international 
position 
continued  to  grow  rapidly.  Unit  labour 
the  euro  area 
costs 
average,  gradually  closing  the  negative 
gap  to  euro  area.  Private  sector  credit 
flows  picked  up,  while  private  sector 
deleveraging 
amid 
strengthening  business  and  household 
savings.  The  rise  in  real  house  prices  accelerated,  but  the  indicator  remains  within  the 
threshold.  The  government  debt  ratio  continued  to  decrease.  The  financial  sector  remains 
under pressure from low profitability. Very low and declining unemployment rates reflect the 
robust labour market in Germany. 

increased  above 

investment 

continued 

Overall,  the  economic  reading  highlights  issues  relating  to  the  very  large  and  increasing 
external  surplus  and  strong  reliance  on  external  demand,  which  expose  growth  risks  and 
underline  the  need  for  continued  rebalancing  towards  domestic  sources.  Therefore,  the 
Commission  finds  it  useful,  also  taking  into  account  the  identification  of  an  imbalance  in 
March, to examine further the persistence of imbalances or their unwinding. 

Estonia: In the previous rounds of the MIP, no macroeconomic imbalances were identified in 
Estonia.  In  the  updated  scoreboard,  a  number  of  indicators  are  beyond  the  indicative 
thresholds, namely the negative net international investment position (NIIP), the real effective 
exchange rate (REER), unit labour costs and real house prices.  

27 

 
 
 
 
 
 
in 

The  negative  NIIP  remains  beyond  the 
threshold  but  it  has  further  improved. 
More  than  half  of  the  external  liabilities 
consist  of  foreign  direct  investments 
which reduces risks. The current account 
has  been 
since  2014, 
surplus 
supported by strong and stable exports of 
services.  While  there  are  still  large 
in  export  market 
accumulated  gains 
shares,  there  was  substantial  losses  in 
2015.  The  real  effective  exchange  rate 
indicator  slightly  exceeds  the  threshold 
but  is  expected  to  decline.  The  increase 
in  nominal  unit  labour  costs  reflects  the 
continuous  decline 
in  working-age 
population  pulling  up  wage  growth. 
Furthermore, the fall in oil prices and the 
the  rouble  curtailed 
depreciation  of 
Estoniaʼs  exports, 
its 
including  of 
relatively large oil shale industry. The increase in real house prices is decelerating as housing 
supply is catching up with demand. Private sector debt is within threshold but bottoming out 
as lending, especially to enterprises, is gradually rising. In contrast, government debt is stable 
and at the lowest level in the EU. Long-term and youth unemployment and the severe material 
deprivation rate have further declined.  

Overall, the economic reading highlights issues related to pressures in the domestic economy 
but risks remain contained. Overall, the Commission will at this stage not carry out further 
in-depth analysis in the context of the MIP.  

related 

imbalances, 

Ireland:  In  March  2016,  the  Commission 
concluded  that  Ireland  was  experiencing 
macroeconomic 
to 
large  stocks  of  external  liabilities  and 
vulnerabilities from private and public debt. 
In  the  updated  scoreboard,  a  number  of 
indicative 
indicators  are  beyond 
international 
threshold,  namely 
investment  position 
real 
effective  exchange  rate  (REER),  private 
debt,  real  house  prices,  government  debt 
and unemployment. 

the  net 

(NIIP), 

the 

the 

The  NIIP  worsened  significantly  in  2015, 
partially explained by some of the activities 
of  multinationals  with  limited  implications 
for  the  domestic  economy.  Ireland  has  run 
large  current  account  surpluses  in  the  past 
few years. This reflects, to some extent, the 

28 

 
 
 
 
rebalancing  of  the  economy  and  improved  competitiveness  with  supportive  REER 
developments. However, the underlying current account and external position are difficult to 
assess due to the size and impact of the activities of multinationals. The private debt-to-GDP 
ratio remains high and households have continued to deleverage actively but the situation of 
domestic  non-financial  companies  is  more  difficult  to  interpret  given  the  weight  of 
multinationals  on  total  corporate  debt.  The  non-performing  loans  ratio  is  high  but  at  a 
declining  trend  with  long-term  mortgage  arrears  a  concern.  Real  house  price  increases  have 
moderated, although with substantial regional variation, mainly driven by insufficient housing 
supply.  In  relation  to  peak  levels,  property  prices  remain  well  below  while  rents  are  now 
above. Government debt is on a downward trend and also fell substantially in 2015 due to the 
exceptional upward level-shift in GDP. The 3-year average unemployment rate is close to the 
threshold  as  it  has  continued  to  fall  thanks  to  strong  employment  creation.  Long-term  and 
youth unemployment have also fallen substantially.  

Overall,  the  economic  reading  highlights  issues  relating  to  external  sustainability, financial 
sector,  private  and  public  debt.  Therefore,  the  Commission  finds  it  useful,  also  taking  into 
account  the  identification  of  an  imbalance  in  March,  to  examine  further  the  persistence  of 
imbalances or their unwinding. 

the  Commission  concluded 

Spain:  In  March  2016, 
that  Spain  was  experiencing 
macroeconomic imbalances, in particular involving risks related to the high levels of external 
and  internal  debt,  both  private  and  public  and  in  a  context  of  high  unemployment.  In  the 
updated  scoreboard,  a  number  of  indicators  are  beyond  the  indicative  threshold,  namely  the 
net  international  investment  position  (NIIP),  private  and  government  debt  and  the 
unemployment rate. 

4

2

0

0

-20

-40

f
o
%

P
D
G

Spain

from 

shifts 

Graph A8:  NIIP and CA balance

External  rebalancing  has  continued  and 
the current account balance is expected to 
remain  in  moderate  surplus  over  the 
medium  term.  However,  this  adjustment 
is  only  slowly  translating  in  a  reduction 
of  Spainʼs  external  liabilities.  The  NIIP 
has  improved  since  2014,  but  remains 
very negative and is mainly composed of 
debt,  which  exposes  the  country  to  risks 
stemming 
in  market 
sentiment. Furthermore, low productivity 
growth  makes  competitiveness  gains 
hinge  upon 
also 
affecting  working  conditions  and  social 
cohesion.  Private  sector  deleveraging 
2015, 
throughout 
continued 
also 
supported  by 
real  growth. 
robust 
Government  debt  was  generally  stable, 
despite  a  sizeable 
improving 
deficit. Although unemployment has been declining rapidly, it remains very high, especially 
among  young  people,  and  a  high  share  of  the  unemployed  has  been  without  a  job  for  more 
than one year. The improvement in the labour market is only slowly translating in a reduction 
of poverty, with poverty metrics remaining among the highest in the EU.  

Net international investment position
Current account balance (rhs)

Source:  Eurostat

advantages, 

though 

cost 

-100

-12

-10

-80

-60

10

13

07

08

09

12

14

15

06

11

-8

-6

-4

-2

29 

 
 
 
 
 
 
Overall,  the  economic  reading  highlights  issues  relating  to  external  sustainability,  private 
and  public  debt,  and  labour  market  adjustment,  in  the  context  of  weak  productivity  growth. 
Therefore,  the  Commission  finds  it  useful,  also  taking  into  account  the  identification  of 
imbalances in March and their cross-border relevance, to examine further the persistence of 
imbalances or their unwinding. 

France:  In  March  2016,  the  Commission  concluded  that  France  experienced  excessive 
macroeconomic imbalances, in particular involving a high and increasing public debt coupled 
with weak productivity growth and deteriorated competitiveness. In the updated scoreboard, a 
number  of  indicators  are  still  beyond  the  indicative  threshold,  namely  government  debt, 
private sector debt, unemployment as well as the change in long-term unemployment. 

stabilised 

to  balance, 

the  slowdown 

Indicators  of  external  imbalances  and 
in 
competitiveness  broadly 
2015,  as  reflected  in  a  current  account 
close 
in 
accumulated  export  market  share  losses, 
which is now within the threshold, and the 
labour  costsʼ  growth. 
contained  unit 
However,  weak 
labour  productivity 
growth is a risk factor for the evolution of 
unit labour costs. The high and increasing 
government  debt  remains  a  major  source 
of vulnerability and is forecast to increase 
in the coming years. Low potential growth 
and  low  inflation  compound  the  risks 
associated with the high government debt 
by  making  deleveraging  more  difficult. 
Private sector debt is beyond the threshold 
but  deleveraging  pressures  appear  contained.  Real  house  prices  are  slowly  correcting,  and 
private sector credit has stabilised at quite moderate positive levels. Unemployment increased 
further in 2015 against a background of low growth. Similarly, the long-term unemployment 
kept on rising. 

Overall,  the  economic  reading  highlights  issues  relating  mainly  to  internal  imbalances, 
especially  public  indebtedness  in  the  context  of  low  productivity  growth  and  weak 
competitiveness.  Therefore,  the  Commission  finds  it  useful,  also  taking  into  account  the 
identification  of  an  excessive  imbalance  in  March,  to  examine  further  the  persistence  of 
macroeconomic risks and to monitor progress in the unwinding of excessive imbalances. 

Croatia: In March 2016, the Commission concluded that Croatia was experiencing excessive 
macroeconomic  imbalances,  in  particular  involving  risks  related  to  high  levels  of  public, 
corporate and external debt in a context of high unemployment. In the updated scoreboard, a 
number  of  indicators  are  beyond  the  indicative  threshold,  namely  the  net  international 
investment position (NIIP), government debt and the unemployment rate. 

30 

 
 
 
 
 
 
The NIIP remains strongly negative but 
has  improved  with  the  current  account 
position  showing  an  increasing  surplus 
in 2015. Annual gains in export market 
shares  have  continued,  thus  broadly 
reversing  the  losses  accumulated  in  the 
pre-accession  years.  Both  public  and 
private  debt 
in  particular 
levels, 
corporate debt, are high. Following five 
years  of  rapid  increase,  government 
debt  has  stabilised  at  a  very  high  level 
and is now set to decrease as a share of 
GDP  over  the  forecast  horizon.  Private 
sector  debt  has  also  started  to  decline 
and,  although  within  the  threshold,  it 
remains  high  in  comparison  to  peer 
countries.  Moreover,  a  high  share  of 
domestic  debt  is  denominated  in  EUR, 
which  adds  to  the  currency  risks  stemming  from  the  high  external  liabilities.  Despite  being 
well-capitalised, the financial sector remains exposed to high rates of non-performing loans. 
Acceleration of writing-off and sell-off of loan has recently brought about a reduction in non-
performing  loans,  signalling  an  easing  of  credit  conditions.  The  high  unemployment  rate  is 
also falling, partly due to the rapidly shrinking labour force from an already low basis. With 
low employment and activity rates, a relatively large share of the population continues to be at 
risk of poverty and social exclusion.  

Overall, the economic reading highlights issues relating to the external position, public debt 
sustainability  and  labour  market  adjustment.  Therefore  the  Commission  finds  it  useful,  also 
taking into account the identification of an excessive imbalance in March, to examine further 
the persistence of macroeconomic risks and to monitor progress in the unwinding of excessive 
imbalances. 

Italy:  In  March  2016,  the  Commission 
concluded  that  Italy  was  experiencing 
excessive  macroeconomic 
imbalances, 
particularly  very  high  public  debt  and 
weak  external  competitiveness 
in  a 
context  of  low  economic  growth  and 
lacklustre  productivity  dynamics.  In  the 
a  number  of 
updated 
indicators  are  beyond 
indicative 
threshold,  namely  the  loss  of  export 
the 
market  shares,  government  debt, 
unemployment rate as well as the change 
in  long-term  and  youth  unemployment 
rates.  

scoreboard, 

the 

The  current  account  remained  in  surplus 
in 2015, contributing to the improvement 

31 

 
 
 
 
of  the  net  international  investment  position.  Yet,  this  surplus  also  mirrors  continued  weak 
domestic demand, as reflected in the historically low ratio of fixed investment of GDP. Losses 
in  export  market  share  remain  substantial.  The  external  performance  and  the  cost 
competitiveness  suffer  from  subdued  labour  productivity  growth,  despite  contained  wage 
growth and the depreciation of the real effective exchange rate. The weak economic recovery, 
low  inflation  and  expansionary  fiscal  policy  are  delaying  the  reduction  of  the  very  high 
government  debt  ratio  and  related  risks.  The  low  profitability  and  the  high  stock  of  non-
performing  loans  make  the  banking  system  increasingly  vulnerable  and  hamper  banksʼ 
capacity  to  support  the  economy.  In  particular,  the  capital  misallocation associated  with  the 
high stock of non-performing loans also contributes to low productivity growth, and the low 
lending volumes are associated with a subdued level of investment. Improving labour market 
conditions  are  gradually  reducing  the  unemployment  rate,  which  nevertheless  remains  far 
above pre-crisis levels, similarly to the long-term and youth unemployment rates.  

Overall, the economic reading highlights issues relating to high public indebtedness and the 
banking system in a context of weak productivity growth. Therefore the Commission finds it 
useful,  also  taking  into  account  the  identification  of  excessive  imbalances  in  March,  to 
examine  further  the  persistence  of  macroeconomic  risks  and  to  monitor  progress  in  the 
unwinding of the excessive imbalances. 

Cyprus:  In  April  2016,  the  Commission  concluded  that  Cyprus  was  experiencing  excessive 
macroeconomic imbalances, particularly involving large stocks of private, public and external 
debt  and  the  high  ratio  of  non-performing  loans  in  the  banking  system.  In  the  updated 
scoreboard, a number of indicators remain beyond the indicative threshold, namely the current 
account  deficit,  the  net  international  investment  position  (NIIP),  the  real  effective  exchange 
rate  (REER),  losses  in  export  market  shares,  private  sector  debt,  government  debt, 
unemployment as well as the change in 
long-term  and  youth  unemployment 
rates.  

Graph A12:  NIIP and CA balance

60

Cyprus

10

0

5

0

40

20

-60

-40

-20

f
o
%

P
D
G

to 

The  current  account  deficit  and  the 
negative  NIIP  remains  substantial  even 
if  there  were  some  improvement  in 
2015. The good performance of services 
tourism  have 
exports,  particularly 
contributed 
this  outcome.  The 
significant  depreciation  of  the  REER 
mainly  reflects  the  negative  inflation 
experienced  since  2015.  The  level  of 
private  indebtedness  remains  amongst 
the  highest  in  the  EU.  Although  real 
GDP  growth  resumed  in  2015  and  is 
expected to strengthen over the forecast 
horizon,  falling  prices    reduce  nominal 
GDP growth and make the deleveraging 
process  more  difficult.  The  very  high 
level  of  non-performing  loans  suggests  that  severe  risks  remain  for  the  restauration  of  a 
healthy flow of credit to the economy, which is required for supporting growth in the medium 
term. The very high government debt-to-GDP ratio is stable and is expected to have peaked in 

Source:  Eurostat. Note: * indicates BMP5 and ESA95

Net international investment position
Current account balance (rhs)

06* 07* 08*

-100

-160

-140

-120

-80

-10

-30

-15

-25

-20

10

09

12

13

14

15

11

-5

32 

 
 
 
 
 
 
2015. Unemployment is high but declining while long-term and youth unemployment remains 
relatively high.  

Overall, the economic reading highlights issues relating to external sustainability, public and 
private debt, vulnerabilities in the financial sector and labour market adjustment. Therefore 
the  Commission  finds  it  useful  in  the  case  of  Cyprus,  also  taking  into  account  the 
identification  of  an  excessive  imbalance  in  April,  to  examine  further  the  persistence  of 
macroeconomic risks and to monitor progress in the unwinding of excessive imbalances. 

Latvia: In the previous round of the MIP, no macroeconomic imbalances were identified in 
Latvia. In the updated scoreboard, a number of indicators are beyond the indicative threshold, 
namely the net international investment position (NIIP), unit labour costs and unemployment. 

125

120

130

105

115

110

in 

Latvia

0
0
1
=
0
1
0
2

2015. 

losses 

Graph A13:  Real effective exchange rate and ULC

The  current  account  deficit  is  narrowing 
and  the  negative  NIIP  ratio  remains 
significantly  beyond  the  threshold  but  is 
steadily  improving  and  the  outlook  is 
also favourable. A very large share of the 
external  exposure  reflects  foreign  direct 
investment  stocks.  Cumulated  gains  in 
export  market  shares  remains  substantial 
Cost 
despite 
competitiveness indicators points to some 
losses.  The  real  effective  exchange  rate 
appreciated  in  2015.  Unit  labour  costs 
the 
have 
indicative threshold posing some risks to 
external  cost  competiveness.  However, 
the  pace  of  increase  is  projected  to  slow 
down  in  the  light  of  the  latest  wage 
developments.  Public  and  private  debt 
ratios  are  clearly  within  the  thresholds. 
The  financial  sector  remains  robust.  Lending,  in  particular  to  corporates,  is  growing  again 
after  a  long  period  of  deleveraging.  Real  house  price  growth  has  abated.  The  three-year 
indicator for unemployment is marginally beyond the threshold but is on a declining trend.  

REER (HICP), vs EA19
REER (HICP), vs broad group (42)
Nominal ULC

Source: Eurostat, Commission services

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

further  beyond 

increased 

100

80

90

85

95

Overall, the economic reading highlights issues relating to the external sector of the economy 
and the labour market amid continuous rebalancing. Therefore, the Commission will at this 
stage not carry out further in-depth analysis in the context of the MIP. 

33 

 
 
 
 
 
Lithuania: In previous rounds of the MIP, no macroeconomic imbalances were identified in 
Lithuania. In the updated scoreboard a number of indicators are beyond indicative threshold, 
namely the net international investment position (NIIP), nominal unit labour costs (ULC), and 
the unemployment rate. 

120

115

110

105

100

the 

0
0
1
=
0
1
0
2

Lithuania

still  beyond 

Graph A14:  Real effective exchange rate and ULC

indicative 
While 
threshold,  the  NIIP  is  on  an  improving 
trend.  The  government  and  the  private 
sector  contribute  equally  to  the  total 
negative  net  position  and  private  sector 
liabilities  consist  almost  entirely  of 
foreign  direct  investment  implying  a 
lower  risk.  There  are  still  cumulated 
export market share gains but there were 
Cost 
large 
in 
losses 
competitiveness 
to 
some losses. The real effective exchange 
rate 
in  2015.  Weak 
productivity  and  strong  wage  growth 
implied  strong  ULC  growth  in  2015 
moving 
the 
threshold,  but  over  the  forecast  horizon 
a  deceleration  is  foreseen.  Public  and 
private  debt  levels  are  relatively  low. 
Real house prices continue to increase but at a lower growth rate and from a relatively low 
level.  The  unemployment  indicator  is  beyond  the  threshold  but  is  on  a  steadily  decreasing 
trend.  

REER (HICP), vs EA19
REER (HICP), vs broad group (42)
Nominal ULC

Source: Eurostat, Commission services

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

indicator  beyond 

indicators  points 

appreciated 

2015. 

the 

80

90

95

85

Overall, the economic reading highlights issues relating to external competitiveness but risks 
remain contained. Therefore, the Commission will at this stage not carry out further in-depth 
analysis in the context of the MIP. 

Luxembourg: In the previous round of the 
MIP,  no  macroeconomic  imbalances  were 
identified  in  Luxembourg.  In  the  updated 
scoreboard,  a  number  of  indicators  are 
beyond the indicative threshold, namely real 
house  prices,  private  sector  credit  flow  and 
indebtedness. 

the 

The  structurally  high  current  account 
surplus  was  stable  in  2015  and  is  narrowly 
within 
threshold.  The  positive  net 
international  investment  position  increased, 
mostly  reflecting  the  dominance  of  the 
financial  sector,  while  only  a  limited  share 
of the flows is related to domestic economic 
activity.  Wages  growth  is  low  contributing 
to  the  recent  labour  costs  moderation. 
in 
the 
Combined  with 

improvement 

34 

 
 
 
 
productivity recorded over the recent years, it helps to explain the recovery of export market 
shares.  The  low  government  debt  further  declined.  Credit  growth  remained  dynamic  and 
buoyant  growth  of  loans  for  housing  acquisition  has  pushed  up  the  level  of  household  debt 
close to the euro area average, while deleveraging pressures on householdsʼ and corporationsʼ 
balance  sheets  appear  contained.  Housing  prices  are  accelerating  from  already  high  levels, 
which  warrants  close  monitoring.  Several  factors,  such  as  sizeable  net  migration  flows,  a 
dynamic  labour  market  and  low  financing  costs  concur  to  sustain  housing  demand,  while 
supply  remains  relatively  constraint  as  also  reflected  in  a  low  growth  of  building  permits. 
Loan  to  value  ratios  have  decreased  as  has  housing  affordability.  Unemployment  increased 
but from a low level. 

Overall, the economic reading points mainly to issues related to the increasing housing prices 
although overall risks still appear relatively contained. Therefore, the Commission will at this 
stage not carry out further in-depth analysis in the context of the MIP. 

Hungary: In the previous round of the MIP, no macroeconomic imbalances were identified in 
Hungary.  In  the  updated  scoreboard,  a  number  of  indicators  are  beyond  the  indicative 
threshold,  namely  the  net  international  investment  position  (NIIP),  losses  in  export  market 
shares, real house prices and government debt. 

The continued strengthening of the current 
account  has  implied  a  very  rapid  and 
sustained  improvement  in  the  negative 
NIIP. Export market shares recorded gains 
in  2015  and  cumulated  losses  are  only 
narrowly  beyond  the  threshold.  This  is 
supported  by  a  growing  car  industry  and 
by  improvements  in  cost  competitiveness 
as reflected in a depreciating real effective 
exchange  rate  and  contained  growth  in 
unit  labour  costs.  Corporate  lending  by 
domestic  banks  continues  to  contract  but 
new household lending picked up in 2015. 
The  overall  pace  of  deleveraging  has 
slowed  down,  supported  by  sustained 
economic growth. The previous decline in 
real  house  prices  reversed  sharply  and 
house prices surged in 2015, exceeding the 
threshold, however still from undervalued levels. The subsequently introduced debt cap rules 
will  limit  the  risks  of  market  overheating.  Government  debt  has  continued  to  decline 
gradually, although it still remains relatively high for a middle income economy. The banking 
sector improved its profitability and its shock-absorbing capacity. The recovery in the housing 
market may contribute to reduce the problem of the still high non-performing mortgage loans 
of  households.  The  unemployment  indicator  remained  within  the  threshold  in  2015,  while 
employment has increased further in 2015 and 2016.  

35 

 
 
 
 
Overall, the economic reading highlights the improving external position and issues relating 
to the housing market although risks appear contained. The Commission will at this stage not 
carry out further in-depth analysis in the context of the MIP. 

Malta: In the previous round of the MIP, no macroeconomic imbalances were identified in 
Malta. In the updated scoreboard, a number of indicators are beyond the indicative threshold, 
namely the losses in export market shares, private debt and government debt. 

The  current  account  surplus  decreased 
somewhat  in  2015,  reflecting  also  the 
impact  of  a  strong  increase  in  import-
intensive  investment.  The  positive  NIIP 
strengthened.  Export  market  shares  have 
been  on  a  persistent  downward  trend 
since 2009, in particular due to exports of 
goods.  However,  cost  competitiveness 
developments  have  been  favourable  as 
rising  productivity  and  moderate  wage 
developments have kept unit labour costs 
in  check  and  the  real  effective  exchange 
rate mildly depreciating. The private debt-
to-GDP  ratio  is  on  a  firmly  downward 
trend on the back of orderly deleveraging 
among  non-financial  corporations  and 
robust  economic  growth.  House-price 
dynamics remained  subdued  in  2015,  but 
growing  demand  is  expected  to  result  in 
an  upward  pressure  on  prices  in  the  coming  years.  Government  debt  continued  to  decrease, 
approaching  the  indicative  threshold.  Labour-market  conditions  remained  favourable  and 
unemployment low.  

Overall,  the  economic  reading  highlights  the  robust  external  position  and  ongoing 
deleveraging in a context of relatively strong growth. Therefore, the Commission will at this 
stage not carry out further in-depth analysis in the context of the MIP. 

Netherlands:  In  March  2016,  the  Commission  concluded  that  the  Netherlands  was 
experiencing  macroeconomic  imbalances,  in  particular  involving  risks  stemming  from  the 
large and persistent current account surplus and the very large stock of household debt. In the 
updated  scoreboard,  a  number  of  indicators  are  beyond  the  indicative  threshold,  namely 
current account surplus, loss of export market shares, private sector debt, government debt as 
well as the change in long-term unemployment. 

The current account surplus remains at a level far beyond the indicative threshold. Structural 
features  partially  contribute  to  the  high  level,  including  high  re-export  activities  and  the 
presence of multinational companies. Also, the surplus reflects high savings of non-financial 
corporations,  in  a  context  of  low  investment  and  contained  corporate  profit  distribution. 
Nevertheless,  investment  is  forecast  to  grow  more  strongly  in  line  with  robust  domestic 
demand  which  may  result  in  a  moderate  decline  in  the  current  account  surplus.  Cumulated 

36 

 
 
 
 
 
export  market  share  losses  remained  beyond  the  threshold  on  the  back  on  annual  losses  in 
2015. Cost competitiveness indicators point to small gains in 2015.  

the 

leading 

such  as 

Private sector debt is very high but private 
deleveraging  continues, 
to  a 
marginal  reduction  in  debt  level.  Policy 
measures 
lowering  of 
mortgage  interest  deductibility  and  loan-
to-value ratios are expected to support the 
reduction  of  household  debt.  Real  house 
prices  started  to  grow  in  2015  after 
previous 
phase. 
Government  debt  is  moderately  beyond 
the threshold and slightly declining. While 
the 
is  showing  strong 
employment  growth,  leading  to  a  steady 
reduction  in  the  unemployment  rate,  the 
share  of  long-term  unemployed  remains 
elevated.  

labour  market 

correction 

years 

Overall,  the  economic  reading  highlights 
issues  relating  to  the  persistent  savings 
and  investment  imbalances,  and  the  high  private  debt  level,  in  particular  mortgage  debt. 
Therefore,  the  Commission  finds  it  useful,  also  taking  into  account  the  identification  of  an 
imbalance in March, to examine further the persistence of imbalances or their unwinding. 

Austria:  In  March  2016,  the  Commission  concluded  that  Austria  was  experiencing  no 
macroeconomic imbalances. In the updated scoreboard, a number of indicators are beyond the 
indicative  threshold,  namely  losses  in  export  market  shares,  government  debt  as  well  as  the 
change in long-term unemployment.  

the  net 

international 

The  current  account  shows  a  moderate 
surplus  that  increased  slightly  in  2015, 
investment 
while 
position  is  slightly  positive.  Cumulated 
losses  in  export  market  shares  remain 
beyond  the  threshold  and  there  were  some 
additional losses in 2015. The real effective 
exchange rate depreciated on a yearly basis. 
labour  productivity  growth  was 
Also, 
losses, 
three  years  of 
positive  after 
contributing  to  a  reduction  in  nominal  unit 
labour 
sector 
indebtedness remains within but close to the 
threshold, and continues its decline relative 
to  GDP  due  to  non-financial  corporations 
deleveraging in spite of the low interest rate 
environment. The growth rate of real house 
prices  accelerated  from  already  relatively 
high  levels  and,  although  the  indicator 

growth.  Private 

cost 

37 

 
 
 
 
remains within the threshold, this warrants close monitoring. Government debt increased, also 
due  to  the  protracted  restructuring  of  distressed  banks  which  still  may  pose  some  risks  to 
public finances. Financial sector liabilities have remained broadly stable as Austrian banks cut 
their  foreign  exposures  also  due  to  the  relatively  lower  asset  quality  in  Central  and  Eastern 
Europe, requiring monitoring as to potential spillovers to the domestic and partner economies. 
The  unemployment  rate  continues  to  increase  mainly  as  an  effect  of  the  growing  labour 
supply, but remains among the lowest in the EU even if long-term and youth unemployment 
have increased.  

Overall, the economic reading highlights issues relating to the external performance and the 
banking sector, but risks appear contained. Therefore, the Commission will at this stage not 
carry out further in-depth analysis in the context of the MIP.  

Poland: In the previous round of the MIP, no macroeconomic imbalances were identified in 
Poland. In the updated scoreboard, the net international investment position (NIIP) is beyond 
the indicative threshold.  

but 
2015. 

negative 
in 

The  current  account  3  year  average 
deficit  has  continued  to  narrow  towards 
balance.  The  NIIP  however  still  remains 
improved 
highly 
External 
substantially 
vulnerability  is  contained  by  that  foreign 
direct  investments  account  for  a  major 
part  of  foreign  liabilities.  In  2015,  the 
cumulated  gains  in  export  market  shares 
progressed  while  cost  competitiveness 
indicators  point  to  some  gains.  Both 
private  sector  debt  and  government  debt 
are relatively low and stable. The stability 
of the banking sector was maintained but 
profitability  was  reduced.  Real  house 
prices  showed  limited  positive  growth  in 
2014  and  2015  after  a  number  of  years 
with corrections. The unemployment rate 
kept falling further within the indicative threshold. 

Overall,  the  economic  reading  highlights  issues  in  the  external  position  where  overall  risks 
however remain limited. Therefore, the Commission will at this stage not carry out further in-
depth analysis in the context of the MIP. 

Portugal:  In  March  2016,  the  Commission  concluded  that  Portugal  was  experiencing 
excessive  macroeconomic  imbalances  relating  to  large  stocks  of  external  liabilities,  private 
and public debt, a large share of non-performing loans (NPL) and elevated unemployment. In 
the  updated  scoreboard,  a  number  of  indicators are  beyond  the  indicative  threshold,  namely 
the  net  international  investment  position  (NIIP),  private  sector  debt,  government  debt  and 
unemployment.  

38 

 
 
 
 
 
 
cost 

in  2015  and 

remains  very 

The  current  account  position  recorded 
the 
a  small  surplus 
improved 
negative  NIIP  position 
slightly  but 
large. 
Substantial  current  account  surpluses 
will be needed for a long time to reach 
a  more  sustainable  external  position. 
Previously  cumulated  losses  in  export 
market  shares  have  been  partially 
regained  also  against  a  background  of 
competitiveness 
supportive 
developments.  The 
elevated 
still 
private  debt  ratio  implies  that  further 
deleveraging  needs  remain.  The  high 
level  of  government  debt,  in  a  context 
of  low  potential  growth,  implies  risks 
to 
sustainability, 
vulnerabilities  to  adverse  shocks  and 
increases financing costs. The high stock of corporate NPLs, together with low profitability, is 
putting  pressure  on  the  banking  sector  impeding  the  productive  allocation  of  credit  and 
investment.  The  adjustment  in  the  labour  market  is  gradually  progressing,  also  as  regards 
youth and long-term unemployment even if they remain among the highest in the EU, which 
increases risks of human capital deterioration.  

medium-term 

Overall the economic reading highlights issues relating to external sustainability, public and 
private  debt,  banking  sector  vulnerability  and  the  labour  market  adjustment  process,  in  the 
context of low productivity growth. Therefore the Commission finds it useful, also taking into 
account  the  identification  of  an  excessive  imbalance  in  March,  to  examine  further  the 
persistence of macroeconomic risks and to monitor progress in the unwinding of the excessive 
imbalances.  

identified 

Romania:  In  the  previous  round  of  the 
imbalances 
MIP,  no  macroeconomic 
were 
the 
updated  scoreboard  the  net  international 
investment  position  (NIIP)  is  beyond  the 
indicative threshold.  

in  Romania.  In 

is  expected 

in  2015  but 

The  current  account  showed  a  small 
to 
deficit 
gradually  widen,  sustained  by  strong 
domestic  demand.  The  negative  NIIP 
continued to improve in 2015 on the back 
of relatively strong GDP growth. Almost 
half of the NIIP consists of foreign direct 
investments  while  net  external  debt 
continued  to  decline.  Cumulated  export 
market  gains  remains  substantial  despite 
Cost 
in 
small 

losses 

2015. 

39 

 
 
 
 
competitiveness  indicators  improved  moderately  in  2015  with  a  small  decrease  in  nominal 
unit labour costs, associated with an increase in labour productivity, and a depreciation of the 
real  effective  exchange  rate.  However,  competitiveness  may  worsen  if  the  current  pace  of 
wage  increases  is  sustained  ahead  of  productivity  gains.  The  overall  health  of  the  banking 
sector  has  improved  and  the  sector  remains  well  capitalized  and  liquid.  In  addition,  private 
sector credit stopped contracting. Although on a declining path, non-performing loans ratios 
remain  high,  while  recurrent  domestic  legal  initiatives  impact  legal  predictability  and  could 
negatively affect the stability of banking institutions. Government debt remains relatively low 
and  on  a  declining  path.  However,  fiscal  measures  and  ad  hoc  wage  increases  for  some 
categories of public employees point toward a fiscal relaxation and pro-cyclical fiscal policy 
in  2016-2017  which  could  deteriorate  debt  dynamics.  The  unemployment  rate  remained 
unchanged  in  2015,  partially  reflecting  structural  challenges  in  the  labour  market,  and  the 
activity rate increased somewhat in a context of strong economic growth.  

Overall, the economic reading highlights issues related to the external position and to fiscal 
relaxation. Risks currently seem contained but could increase as a result of policy initiatives, 
including in the financial sector. The Commission will, at this stage, not carry out further in-
depth  analysis  in  the  context  of  the  MIP,  but  will  closely  monitor  initiatives  that  could 
adversely affect financial stability. 

Slovenia:  In  March  2016,  the  Commission  concluded  that  Slovenia  was  experiencing 
macroeconomic imbalances, in particular involving fiscal risks and vulnerabilities stemming 
from the banking sector and corporate indebtedness. In the updated scoreboard, a number of 
indicators  are  beyond  the  indicative  threshold,  namely  the  net  international  investment 
position and government debt.  

and 

and 

strong 

remained 

international 

The  current  account  surplus  remained 
highly  positive  in  2015  and  expanded  as 
investment  remained  weak.  The  negative 
investment  position 
net 
improved 
is 
substantially 
approaching the threshold. Export growth 
5-year 
has 
cumulated losses  in export  market shares 
substantially  declined.  Unit  labour  costs 
growth  was  low  and  the  real  effective 
rate  depreciated  supporting 
exchange 
competitiveness.  Credit  growth  was 
negative  and  corporate  deleveraging 
continued  in  2015,  but  the  pressures  are 
easing.  Government  debt  is  high  but 
expected  to  have  peaked  in  2015.  The 
situation in the banking sector has further 
loans 
stabilised. 
continued  to  decline,  but  still  remain  relatively  high,  while  bank  profitability  is  under 
pressure. Following the solid GDP and export rowth since 2014, the labour market improved 
in 2015. On the back of recovered demand for labour in the private sector, the unemployment 
rate decreased further in 2015 as did the long-term and the youth unemployment rates.  

Non-performing 

40 

 
 
 
 
Overall,  the  economic  reading  highlights  issues  relating  to  high  corporate  and  public  debt 
and banking sector performance. Therefore, the Commission finds it useful, also taking into 
account the identification of an imbalance in March, to examine further the risks involved in 
the persistence of imbalances or their unwinding. 

Slovakia: In the previous round of the MIP, no macroeconomic imbalances were identified in 
Slovakia.  In  the  updated  scoreboard,  a  number  of  indicators  remain  beyond  the  indicative 
threshold, namely the net international investment position (NIIP) and unemployment. 

current 

inflow  of 

improving,  with 

The 
account  balance  has 
improved  significantly  in  recent  years 
with  the  three  year  average  showing  a 
small surplus in 2015. However, the NIIP 
the 
is  only  slowly 
ongoing 
foreign  direct 
investment  which  largely  relates  to  the 
expanding  automotive 
industry.  The 
recent  weakening  in  the  real  effective 
exchange  rate  including  only  moderate 
growth  in  nominal  unit  labour  costs 
underpinned  cost  competitiveness  while 
there  have  been  cumulative  gains  in 
export  market 
shares.  However,  a 
tightening  labour  market  and  increasing 
pressure  on  nominal  wage  growth  could 
put  cost  competitiveness  under  pressure 
in the coming years. Private sector credit 
flow  was 
recent  years, 
contributing  to  the  upward  path  of  the  private  sector  debt  ratio,  which  nevertheless  still 
remains well within the indicative threshold. Real house prices bottomed out in 2013, and in 
2015 there was significant positive growth although from a low level. Further acceleration in 
credit  for  house  purchases  in  a  low-rate  environment  could  imply  faster  growth  of  house 
prices  in  the  coming  years.  The  government  debt  ratio  decreased  marginally  in  2015.  The 
largely  foreign-owned  banking  sector  is  well-capitalised.  The  unemployment  rate  is 
improving.  Although  activity  rates  have  gradually  improved  since  2012,  structural 
unemployment represents a key challenge. 

strong 

in 

Overall,  the  economic  reading  points  to  issues  relating  to  external  aspects  but  with  limited 
risks while structural unemployment remains a challenge. Therefore, the Commission will at 
this stage not carry out further in-depth analysis in the context of the MIP. 

Finland:  In  March  2016,  the  Commission  concluded  that  Finland  was  experiencing 
macroeconomic 
to  competitiveness  and  external 
performance.  In  the  updated  scoreboard,  a  number  of  indicators  are  beyond  the  indicative 
threshold,  namely  the  loss  in  export  market  shares,  the  level  of  private  sector  debt  and 
government debt, as well as the increase in youth and in long-term unemployment.  

in  particular 

imbalances, 

related 

41 

 
 
 
 
 
 
crises 

remains 

The  current  account  deficit  narrowed 
further in 2015 and is expected to remain 
at similar levels in the coming years. The 
net-international  investment  position  has 
deteriorated over time but  remains close 
to balance. The cumulative loss of export 
market  shares  since  the  economic  and 
financial 
substantial 
despite  the  recent  improvement  in  cost 
competitiveness  indicators.  In  2015  the 
market  share  loss  accelerated  again  and 
was one of the weakest in the EU, related 
to  the  on-going  structural  change  in  the 
economy and the sensitivity of exports to 
the recession in Russia. In 2016 the social 
partners  agreed  on  a  Competitiveness 
Pact  which  is  expected  to  improve  cost-
competitiveness  as  of  2017.  After  being 
broadly stable since 2009, in 2015 private 
sector  debt  increased  substantially  while 
favourable  credit  conditions,  low  interest  rates  and  moderately  decreasing  real  house  prices 
supported the strong credit growth. The financial sector remains well capitalised limiting risks 
to  financial  stability.  Government  debt  is  now  beyond  the  60%  of  GDP  threshold. 
Unemployment continued to increase in 2015 but is expected to be reduced looking forward. 
The  growth  in  youth  unemployment  has  recently  begun  to  recede  but  long-term 
unemployment continues to increase. 

Overall,  the  economic  reading  highlights  challenges  related  to  both  price-  and  non-price 
competitiveness  in  a  context  of  sectoral  restructuring.  Therefore,  the  Commission  finds  it 
useful,  also  taking  into  account  the  identification  of  an  imbalance  in  March,  to  examine 
further the persistence of imbalances and their unwinding. 

2016, 

increasing 

In  March 

the 
Sweden: 
Commission  concluded  that  Sweden 
experienced 
macroeconomic 
imbalances,  particularly  involving  high 
and 
debt 
associated with high and growing house 
prices.  In  the  updated  scoreboard,  a 
number  of  indicators  are  beyond  the 
indicative  thresholds,  namely  loss  of 
export  market  shares,  private  sector 
debt and real house price growth.  

household 

The  current  account  surplus  remains 
high,  although  within  the  threshold, 
private 
reflecting 
international 
savings. 
has 
(NIIP) 
investment 

primarily 
net 
The 
position 

high 

42 

 
 
 
 
continued to improve gradually and has turned positive in 2015. Cumulative losses in export 
market shares are beyond the threshold and there were additional limited losses in 2015. Cost 
competitiveness  indicators  developed  favourably  in  2015,  with  contained  unit  labour  cost 
growth and a depreciation of the real effective exchange rate (REER). Overall losses in export 
market  shares  are  driven  by  weak  external  demand  rather  than  by  competitiveness  issues. 
Private sector debt is broadly stable at a level among the highest in the EU where risks relate 
mainly to high household debt. Credit growth increased in 2015 and real house price growth 
accelerated  further  from  already  high  levels.  House  prices  and  household  indebtedness  are 
pushed up by the favourable tax treatment of debt-financed home-ownership, specific aspects 
of  the  mortgage  market  and  low  mortgage  interest  rates.  On  the  supply  side,  constraints  on 
new  construction  remain  an  issue.  In  spite  of  the  high  level  of  household  debt,  bank  risks 
currently  appear  contained  as  asset  quality  and  profitability  remain  high  and  household 
finances  are  generally  strong.  Unemployment  edged  down  in  2015  and  is  on  a  slowly 
declining trend, aided by the improvement of growth conditions. 

Overall,  the  economic  reading  highlights  issues  related  to  high  private  debt  and  the 
developments in the housing sector. Therefore, the Commission finds it useful, also taking into 
account  the  identification  of  an  imbalance  in  March,  to  examine  further  the  persistence  of 
imbalances or their unwinding. 

United  Kingdom:  In  the  previous  round  of  the  MIP,  no  macroeconomic  imbalances  were 
identified  in  the  United  Kingdom.  In  the  updated  scoreboard,  a  number  of  indicators  are 
beyond  the  indicative  threshold,  namely  the  current  account  deficit,  real  effective  exchange 
rate, private sector debt and government debt. 

in 

net 

increase 

indicator 

export  market 

remains  beyond 

The  current  account  deficit  continued 
to 
in  2015,  driven  by  a 
widening  primary  income  deficit  and 
the 
the 
international 
threshold.  The 
investment  position  is  negative  but 
slightly.  The  cumulated 
improved 
share 
change 
improved  significantly  and  now  shows 
gains.  While  unit  labour  cost  growth 
has  been  moderate,  in  2015  the  real 
indicator 
effective 
appreciated  and  moved  marginally 
beyond the threshold. This reflected the 
strength  of  sterling  until  late  2015, 
since  which  sterling  has  weakened 
significantly.  Private  sector  debt-to-
GDP  continued  to  decrease  slightly 
overall,  even  though  it  remains  high 
and  household 
indebtedness  started 
increasing  again.  Real  house  prices  continue  to  rise  from  already  high  levels.  Although  the 
growth rate eased somewhat, this warrants close monitoring. Government debt was close to 
stable in 2015 but the high level remains a concern. Strong employment growth continued to 
be accompanied by falling long term and youth unemployment. 

change 

rate 

43 

 
 
 
 
Overall, the economic reading highlights some issues relating to the housing market and the 
external  side  of  the  economy  although  risks  to  stability  in  the  short  term  appear  limited. 
However  the  outcome  of  the  EU  referendum  has  raised  economic  and  political  uncertainty 
looking  forward.  Overall  the  Commission  will  at  this  stage  not  carry  out  further  in-depth 
analysis in the context of the MIP. 

44 

 
 
 
 
 
 
Table 1.1: MIP Scoreboard 2015

Year
2015

Current 
account 
balance - % of 
GDP 
(3 year average)

Net 
international 
investment 
position 
(% of GDP)

External imbalances and competitiveness
Real effective 
exchange rate - 
42 trading 
partners, HICP 
deflator 
(3 year % change)

Export market 
share - % of 
w orld exports
(5 year % 
change)

Private sector 
credit flow , 
consolidated 
(% of GDP)

Internal imbalances
General 
government 
gross debt 
(% of GDP)

Private sector 
debt, 
consolidated 
(% of GDP)

Unemploym ent 
rate 
(3 year average)

Nominal unit 
labour cost 
index 
(2010=100)
(3 year % 
change)

House price 
index 
(2010=100), 
deflated 
(1 year % 
change) 

Total financial 
sector 
liabilities, 
non-
consolidated
(1 year % 
change)

Activity rate - % 
of total 
population aged 
15-64
(3 year change in 
pp)

Employment indicators¹
Long-term 
unemployment 
rate - % of active 
population aged 
15-74
(3 year change in 
pp)

Youth 
unemployment 
rate - % of active 
population aged 
15-24
(3 year change in 
pp)

Thresholds

-4/6%

-35%

±5% (EA)
±11% (Non-EA)

-6%

9% (EA) 
12% (Non-EA)

BE

BG

CZ

DK

DE

EE

IE

EL

ES

FR

HR

IT

CY

LV

LT

LU

HU

MT

NL

AT

PL

PT

RO

SI

SK

FI

SE

UK

-0.2
 0.6
 0.2
 8.8
 7.5
 0.9

4.7*

-1.2
 1.3

-0.7
 2.7
 1.5

-4.1

-1.8
 0.9
 5.3
 3.0
 4.3
 9.1
 2.1

-1.3
 0.7

-1.0
 5.4
 1.1

-1.0
 5.0

-4.8

61.3

-60.0

-30.7

39.0

48.7

-40.9

-208.0*

-134.6

-89.9

-16.4

-77.7

-23.6

-130.3

-62.5

-44.7

35.8

-60.8

48.5

63.9
 2.9

-62.8

-109.3

-51.9

-38.7

-61.0
 0.6
 4.1

-14.4

-1.2

-4.1

-8.0

-1.5

-1.4

6.4

-5.9

-5.5

-2.9

-2.7

0.1

-2.2

-6.2

3.1

4.0

-0.5

-6.9

-0.2

-0.6

1.8

-1.0

-2.8

2.7

0.6

-0.7

2.3

-7.9

11.3

-11.3

12.8
 0.1

-8.8

-2.8
 8.5

38.3*

-20.6

-3.5

-5.4

-3.5

-8.9

-16.8

10.5

15.5

22.9

-8.0

-8.8

-8.3

-9.6
 9.7
 2.8

21.1

-3.6
 6.7

-20.5

-9.3
 1.0

1.5

14.9p

0.5

4.9

5.7

14.4

-18.1

-11.1p

-0.7p

2.5p

-5.0

1.5

-10.5p

16.0

11.6

0.6

3.9

3.9

0.2p

6.1

-0.4p

0.0e

0.5p

-0.6

2.2

3.6

3.6

1.7

6%

1.3p

1.6bp

3.9p
 6.3
 4.1
 6.8
 8.3

-3.5e
 3.8

-1.3

-2.4

-2.6p

2.9bp

-2.7
 4.6
 6.1

11.6

2.8p
 3.6
 3.5
 2.8
 2.3
 1.7
 1.5
 5.5

-0.4

12.0
 5.7

14%

4.5

-0.3

0.9

-3.3

3.0

3.3

-6.7

-3.1

-2.7

4.4

-1.3

-1.7

4.4

0.7

2.2

24.2

-3.1

5.4

-1.6p

2.1

3.2

-2.3

0.2

-5.1

8.2

9.5

6.5

2.5

133%

60%

166.3

110.5

68.6

212.8

98.9

116.6

303.4

126.4

154.0

144.3

115.0

117.0

353.7

88.8

55.0

343.1

83.9

139.1

228.8p

126.4

79.0

181.5

59.1

87.3

81.4

155.7

188.6

157.8

105.8

26.0

40.3

40.4

71.2

10.1

78.6

177.4

99.8

96.2

86.7

132.3

107.5

36.3

42.7

22.1

74.7

64.0

65.1

85.5

51.1

129.0

37.9

83.1

52.5

63.6

43.9

89.1

10%

8.5

11.2

6.1

6.6

4.9

7.4

11.3

26.3

24.2

10.3

17.0

12.2

15.7

10.9

10.5

6.1

8.2

5.9

7.2

5.6

8.9

14.4

6.9

9.6

13.0

8.8

7.8

6.3

16.5%

-0.2 pp

0.5 pp

-1.0
 7.0
 7.7

-2.0
 2.8
 8.1
 9.5

15.7

-2.1
 1.8
 2.1
 1.7
 2.8

12.2
 6.7

15.5
 0.4
 1.3

3.2p
 0.6
 2.4

-1.6
 4.1

-3.4
 4.5
 1.5
 2.3

-7.8

 0.7
 2.2
 2.4

-0.1
 0.4
 1.9
 0.8
 0.3
 0.0
 0.8
 2.9
 0.5
 0.4
 1.3
 2.3

1.5b
 4.9
 4.5
 0.6
 0.4
 1.6
 0.0
 1.3
 1.4
 1.5
 0.6
 1.4
 0.8

1.0

-1.2

-0.6

-0.4

-0.4

-3.1

-3.7

3.7

0.4

0.6

0.1

1.3

3.2

-3.3

-2.7

0.3

-1.9

-0.7

1.1

0.5

-1.1

-0.5

0.0

0.4

-1.8

0.7

0.0

-1.1

2 pp

2.3

-6.5

-6.9

-3.3

-0.8

-7.8

-9.5

-5.5

-4.6

0.3

0.9

5.0

5.1

-12.2

-10.4

-1.4

-10.9

-2.3

-0.4

1.2

-5.7

-6.0

-0.9

-4.3

-7.5

3.4

-3.3

-6.6

Flags: b: break in time series. e: estimated. p: pro visio nal. 

No te: * The level shift is due to relocation to Ireland o f balance sheets of large multi-national enterprises and inclusion o f co rrespo nding transactions in the Irish B oP and IIP statistics. 1) See page 2 o f the AM R 2016. 2) Ho use price index e = so urce NCB o f EL. 3) The level of TFSL in Greece is higher than would
o therwise have been reco rded, due to the impro ved treatment o f banks' holdings o f sho rt-term debt securities issued by banks.
So urce: Euro pean Commissio n, Euro stat and Directorate General for Economic and Financial Affairs (fo r Real Effective Exchange Rate), and Internatio nal M o netary Fund

45 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
t
c
e
r
i
d
n
g
i
e
r
o
F

e
h
t
n

i

t
n
e
m
t
s
e
v
n

i

-
y
m
o
n
o
c
e
g
n

i
t
r
o
p
e
r

s
w
o

l
f

t
c
e
r
i
d
n
g
i
e
r
o
F

e
h
t
n

i

t
n
e
m
t
s
e
v
n

i

-
y
m
o
n
o
c
e
g
n

i
t
r
o
p
e
r

s
k
c
o
t
s

f
o
e
c
n
a
l
a
b
e
d
a
r
t

t
e
N

s
t
c
u
d
o
r
p
y
g
r
e
n
e

)

P
D
G

f
o
%

(

e
g
n
a
h
c
x
e
e
v
i
t
c
e
f
f
e
l
a
e
R

i

g
n
d
a
r
t
a
e
r
A
o
r
u
E

-
e
t
a
r

s
r
e
n
t
r
a
p

)
e
g
n
a
h
c
%
s
r
a
e
y
3
(

e
c
n
a
m
r
o
f
r
e
p
t
r
o
p
x
E

d
e
c
n
a
v
d
a

t
s
n
i
a
g
a

s
e
i
m
o
n
o
c
e

)
e
g
n
a
h
c
%
s
r
a
e
y
5
(

Table 2.1: Auxiliary indicators, 2015

P
D
G

l
a
e
R

)
e
g
n
a
h
c
%

r
a
e
y
1
(

1.5

3.6

4.5

1.0

1.7

1.4

26.3

-0.2p

3.2p

1.3p

1.6

0.7

l
a
t
i
p
a
c
d
e
x
i
f
s
s
o
r

G

)

P
D
G

f
o
%

(

n
o

i
t
a
m
r
o
f

23.0

21.0

26.3

19.0

19.9

23.7

21.2

11.5p

19.7p

21.5p

19.5

16.6

1.7p

13.3p

2.7

1.8

3.5

3.1

6.2

22.6

19.3

19.0

21.7

25.4

2.0p

19.4p

1.0

3.9

1.6e

3.7p

2.3

3.8

0.2

4.1

2.2

22.6

20.1

15.3e

24.7p

19.5

23.0

20.4

23.7

16.9

c
i
t
s
e
m
o
d
s
s
o
r

G

f
o
%

(

D
&
R
n
o
e
r
u
t
i
d
n
e
p
x
e

)

P
D
G

 na

1.0p
 na
 na

2.9ep

1.5p
 na

1.0p
 na
 na

0.85
 na
 na

0.6p

1.0p
 na

1.38

0.8p
 na

3.1ep

1.01
 na
 na
 na

1.18

2.9p
 na
 na

l
a
t
i
p
a
c
s
u
p
t
n
e
r
r
u
C

l

i

-
g
n
d
n
e
l

t
e
N

(

t
n
u
o
c
c
a

)

P
D
G

f
o
%

(

i

)
g
n
w
o
r
r
o
b

 0.5
 3.5
 3.2
 9.0
 8.4
 4.3

9.7*
 1.2
 2.0

-0.1
 5.6
 1.8

-2.6
 2.0
 0.7
 4.1
 7.8
 4.9
 3.6
 1.4
 1.7
 1.7
 1.2
 6.1
 3.8

-0.3
 5.0

-5.4

Year 
2015

BE

BG

CZ

DK

DE

EE

IE

EL

ES

FR

HR

IT

CY

LV

LT

LU

HU

MT

NL

AT

PL

PT

RO

SI

SK

FI

SE

UK

)

P
D
G

f
o
%

(

t
b
e
d

l
a
n
r
e
t
x
e

t
e
N

-67.7
 3.4

-9.8
 3.6

-10.2

-10.3

-289.0*

138.1

93.1

37.3

52.7

59.7

133.4

28.6

26.4

-4.7
 3.7
 1.3
 0.7
 1.4

-2.9

72.3*
 0.6
 2.1
 1.5
 0.4
 0.7

41.0
 2.8
 2.3

213.6

88.9

74.2

49.8

41.0

99.9

495.9*

14.5

59.8

43.3

55.0

25.6

-2.8

-3.8

-2.5

0.1

-2.0

-1.4

-1.6

-2.2p

-2.1p

-1.8p

-3.5

-2.0

911.2

-4.2p

60.1

40.0

-2220.9

766.4

8616.9

23.0

-262.7

40.0

20.1

35.7

100.8

24.5

31.2

27.3

43.9

46.3

na

-2.2

25.8

13.4
 1.1
 3.0
 0.3
 2.4
 3.9
 1.3
 7.3
 3.4
 1.8

222.1

1867.3

580.5

80.9

48.6

71.7

42.6

34.5

60.5

58.0

78.0

74.3

-2.9

-3.5

-3.1

-4.2

-9.8

-1.0p

-2.3

-1.6

-2.3e

-0.9p

-2.9

-3.5

-1.5

-0.9

-0.6

)
e
g
n
a
h
c
%
s
r
a
e
y
5
(

e
d
a
r
t

f
o
s
m
r
e
T

0.1

3.5

0.7

0.7

2.0

2.8

3.6

5.8p

-4.7p

2.1p

0.6

2.1

-9.4

15.2
 2.3

-6.8

-0.7

10.8

41.2*

-18.9

-1.5

-3.4

-1.5

-7.0

-15.0

-0.8p

12.8

17.9

25.5

-6.0

-6.8

-6.4

-7.7

12.1
 5.0

23.7

-1.5
 8.9

-18.8

-7.4
 3.1

0.2

2.2

0.0

-0.2

0.8

-0.9p

-0.2

2.8

4.8e

6.1p

0.7

-3.2

2.7

0.6

3.5

e
m
u
o
v

l

)
e
g
n
a
h
c
%

r
a
e
y
1
(

n

i
e
r
a
h
s

t
e
k
r
a
m

t
r
o
p
x
E

1.6

3.0

5.0

-2.4

2.5

-3.3

31.7

0.7p

2.2p

3.4p

7.3

1.6

-2.7

-0.1

-3.1

10.1

5.0

-0.6

2.3p

0.9

5.0

3.4e

2.8p

2.9

4.3

-2.9

2.9

1.8

y
t
i
v
i
t
c
u
d
o
r
p
r
u
o
b
a
L

)
e
g
n
a
h
c
%

r
a
e
y
1
(

 0.6

3.3p
 3.1

-0.1
 0.8

-1.4

23.2

-0.7p

0.7p

0.8p
 0.1
 0.2

0.9p
 1.4
 0.5
 0.9
 0.5
 2.7

1.0p
 0.3

2.5p

0.2e

4.6p
 1.2
 1.8
 0.6
 2.6
 0.5

0.2

-3.9

-8.0

-1.3

0.5

1.6

-1.3

-5.2

-1.3

-0.4

-1.1

-0.5

-2.4

-2.0

-1.4

0.3

-7.1

1.0

1.0

2.3

-1.9

-1.0

2.4

-0.7

-1.2

1.1

-7.8

14.0

t
s
o
c
r
u
o
b
a
l

t
i
n
u

i

l
a
n
m
o
N

)
0
0
1
=
0
1
0
2
(
x
e
d
n

i

)
e
g
n
a
h
c
%
s
r
a
e
y
0
1
(

t
s
o
c
r
u
o
b
a
l

t
i
n
U

o
t
e
v
i
t
a
l
e
r
e
c
n
a
m
r
o
f
r
e
p

A
E

)
e
g
n
a
h
c
%
s
r
a
e
y
0
1
(

x
e
d
n

i
e
c
i
r
p
e
s
u
o
H

i

l
a
n
m
o
n
-

)
0
0
1
=
0
1
0
2
(

)
e
g
n
a
h
c
%
s
r
a
e
y
3
(

2.30p

2.00bp

6.60p

15.3

11.4

34.5

30.7

-21.70e

-5.6

-4.9

-8.2

4.0

51.2

-2.8

7.4

-1.6

42.1

-22.7

-12.6

-6.2

1.9

-4.1

3.0

-12.20p

-4.1

39.1

10.0

11.1

8.8

10.7

1.5

5.7

2.5

-12.4

23.6

1.1

-1.2

8.8

6.8

3.6

-4.60bp

9.5

11.7

15.5

13.0

6.20p

-1.9

14.2

-2.0

5.4

0.5

-10.8

7.8

0.8

30.5

17.4

)

P
D
G

f
o
%

(

n
o

i
t
c
u
r
t
s
n
o
c
l
a
i
t
n
e
d
i
s
e
R

5.8

1.4

3.4

4.0

5.9

4.4

1.9

0.7p

4.4p

5.8p

na

4.4

4.3p

1.8

2.8

3.9

1.9

3.4

,
t
b
e
d
r
o
t
c
e
s
e
t
a
v
i
r
P

d
e
t
a
d

i
l

o
s
n
o
c
-
n
o
n

)

P
D
G

f
o
%

(

,
e
g
a
r
e
v
e
l

r
o
t
c
e
s
l
a
i
c
n
a
n
F

i

d
e
t
a
d

i
l

o
s
n
o
c
-
n
o
n

)
y
t
i
u
q
e
-
o
t
-
t
b
e
d
%

(

218.8

121.5

77.0

218.9

106.1

130.9

323.6

126.4

173.1

183.3

140.2

120.1

354.9

97.6

57.5

425.1

99.1

204.7

176.5

494.3

516.4

159.9

368.0

366.1

80.6

1359.6

468.4

356.6

427.0

657.3

85.0

625.4

467.9

53.9

114.1

37.1

3.7p

236.3p

129.7p

4.3

3.1

2.5e

na

2.3

2.3

5.5

4.5

3.7

145.1

83.4

195.9

61.2

96.0

83.7

182.8

234.9

161.1

186.7

305.9

372.0

391.5

402.6

831.7

299.4

184.5

628.3

20.5

78.4p

14.1

26.0

15.1

72.0

-14.9

-0.2p

8.9p

17.9p

23.3

17.6

5.4p

71.7

35.3

29.8

24.4

29.8

15.3p

23.3

17.0p

0.6e

43.9p

19.9

16.1

28.1

25.1

21.9

Flags: b: break in time series. e: estimated. p: pro visio nal. na: no t available. 

No te: * The level shift is due to relo catio n to Ireland o f balance sheets o f large multi-natio nal enterprises and inclusio n o f co rrespo nding transactio ns in the Irish B o P and IIP statistics. 1) Ho use price index e = so urce NCB fo r EL. 2) Official transmissio n deadline fo r 2015 data o n Gro ss do mestic
expenditure o n R&D is 31 Octo ber 2016; data as transmitted to  Euro stat by the 24 Octo ber 2016 were used fo r this do cument.
So urce: Euro stat, Directo rate General fo r Eco no mic and Financial A ffairs (fo r Real Effective Exchange Rate) and Internatio nal M o netary Fund data, WEO (fo r wo rld expo rts series)

46 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 2.1 (continued): Auxiliary indicators, 2015

Year
2015

Em ploym ent 
rate
(1 year % 
change)

Activity rate - % 
of total 
population 
aged 15-64
(%)

Long-term  
unem ploym ent 
rate - % of 
active 
population 
aged 15-74
(%) 

Youth 
unem ploym ent 
rate - % of 
active 
population 
aged 15-24
(%)

BE

BG

CZ

DK

DE

EE

IE

EL

ES

FR

HR

IT

CY

LV

LT

LU

HU

MT

NL

AT

PL

PT

RO

SI

SK

FI

SE

 0.9

0.4p
 1.4
 1.1
 0.9
 2.9
 2.5

0.5p

2.5p

0.5p
 1.5
 0.6
0.8p
 1.3
 1.3
 2.6
 2.6
 3.4

0.9p
 0.6

1.4p

1.4e

-0.9p
 1.1
 2.0
-0.4
 1.5
 1.8

67.6

69.3

74.0

78.5

77.6

76.7

70.0

67.8

74.3

71.5

66.8

64.0

73.9

75.7

74.1

70.9b

68.6

67.6

79.6

75.5

68.1

73.4

66.1

71.8

70.9

75.8

81.7

4.4

5.6

2.4

1.7

2.0

2.4

5.3

18.2

11.4

4.3

10.3

6.9

6.8

4.5

3.9

1.9

3.1

2.4

3.0

1.7

3.0

7.2

3.0

4.7

7.6

2.3

1.5

Young people neither in 
em ploym ent nor in 
education and training - 
% of total population 
aged 15-24

People at risk of poverty 
or social exclusion -
% of total population

People at risk of poverty 
after social transfers -
% of total population

Severely m aterially 
deprived people -
% of total population

People living in 
households w ith very 
low  w ork intensity -
% of total population 
aged 0-59

%

3 years 
change in p.p

%

3 years 
change in p.p

%

3 years 
change in p.p

22.1

21.6

12.6

10.8

7.2

13.1

20.9

49.8

48.3

24.7

43.0

40.3

32.8

16.3

16.3

16.6

17.3

11.8

11.3

10.6

20.8

32.0

21.7

16.3

26.5

22.4

20.4

14.6

12.2

19.3

7.5

6.2

6.2

10.8

14.3

17.2

15.6

12.0

18.5

21.4

15.3

10.5

9.2

6.2b

11.6b

10.4

4.7

7.5

11.0

11.3

18.1

9.5

13.7

10.6

6.7

11.1

-0.1

-2.2

-1.4

-0.4

-0.9

-1.4

-4.4

-3.0

-3.0

-0.5

1.9

0.4

-0.7

-4.4

-2.0

0.3b

-3.2b

-0.2

-0.2

0.7

-0.8

-2.6

1.3

0.2

-0.1

2.0

-1.1

-2.8

21.1

41.3

14.0

17.7

20.0

24.2

na

35.7

28.6

17.7

29.1

28.7

28.9

30.9

29.3

18.5

28.2

22.4

-0.5

-8.0

-1.4

0.2

0.4

0.8

na

1.1

1.4

-1.4

-3.5

-1.2

1.8

-5.3

-3.2

0.1

-5.3

-0.7

14.9

22.0

9.7

12.2

16.7

21.6

na

21.4

22.1

13.6

20.0

19.9

16.2

22.5

22.2

15.3

14.9

16.3

16.8p

1.8p

12.1p

18.3

23.4

26.6

37.3

19.2

18.4

16.8

16.0

23.5

-0.2

-3.3

1.3

-5.9

-0.4

-2.1

-0.4

0.4

-0.6

13.9

17.6

19.5

25.4

14.3

12.3

12.4

14.5

16.7

-0.4

0.8

0.1

0.2

0.6

4.1

na

-1.7

1.3

-0.5

-0.4

0.4

1.5

3.3

3.6

0.2

0.6

1.2

2.0p

-0.5

0.5

1.6

2.5

0.8

-0.9

-0.8

0.4

0.7

%

5.8p

34.2
 5.6
 3.7
 4.4
 4.5
 na

22.2p

6.4p
 4.5
13.7

11.5

15.4

16.4

13.9
 2.0

19.4
 8.1

2.5p
 3.6
 8.1
9.6p

22.7
 5.8
 9.0
2.2p
 0.7
 6.1

3 years 
change in p.p

%

3 years 
change in p.p

-0.5p

-9.9

-1.0
 1.0
-0.5

-4.9
 na

2.7p

0.6p

-0.8

-2.2

-3.0
 0.4

-9.2

-5.9
 0.7

-6.9

-1.1

0.2p

-0.4

-5.4

1.0p

-8.4

-0.8

-1.5

-0.7p

-0.6

-1.7

14.9

11.6

6.8

11.6

9.8

6.6

na

16.8

15.4

8.6

14.4

11.7

10.9

7.8

9.2

5.7

9.4

9.2

10.2

8.2

6.9

10.9

7.9

7.4

7.1

10.8

5.8

11.9

1.0

-0.9

0.0

1.4

-0.1

-2.5

na

2.6

1.1

0.2

-2.3

1.1

4.4

-3.9

-2.2

-0.4

-4.1

0.2

1.3

0.5

0.0

0.8

0.0

-0.1

-0.1

1.5

0.1

-1.1

UK

1.6
Flags: b: break in time series. e: estimated. p: pro visio nal. na: no t available. 

76.9

No te: 1) IE: Official transmissio n deadline fo r 2015 data o n P eo ple at risk o f po verty o r so cial exclusio n is 30 No vember 2016, while data were extracted o n 24 Octo ber 2016.
So urce: Euro pean Co mmissio n, Euro stat

47