COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2019 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011
Date: 2019-02-27
Institutions: European Commission, Secretariat-General
Subjects: EU Member State, economic situation, educational system, euro area, fiscal policy, investment, labour market, macroeconomics, social policy, structural adjustment

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 20.5.2019  COM(2019) 150 final/2  CORRIGENDUM This document corrects document COM(2019) 150 final of 27.2.2019. Concerns all language versions. Correction of footnote 7. The text shall read as follows: COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP  2019 European Semester: Assessment of progress on structural reforms,                prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011                {SWD(2019) 1000 à 1027 final}  
 
 
1.  INTRODUCTION 

The European Union enjoys its seventh year of economic growth. Such sustained growth 
has  helped  Europe’s  economy  in  providing  jobs  to  a  record  number  of  people.  240 
million Europeans are currently in employment, with 15 million new jobs created since 2013. 
The EU unemployment rate has fallen to record lows and now stands at 6.6%.  

In  addition,  public  finances  have  improved,  with  the  public  debt-to-GDP  ratio  being 
back on a downward path since 2015 and the deficit estimated below 1% of GDP as of 
2018. The implementation of structural reforms, investment and responsible fiscal policies in 
the  Member  States,  combined  with  decisive  action  at  European  level,  including  the 
Investment Plan for Europe, have contributed to the renewed stability and greater prosperity 
enjoyed today in the European economy.  

Growth  in  Europe  has  slowed  down,  partly  due  to  the  deterioration  of  the  global 
economic  environment.  The  EU  growth  rate  is  expected  to  slow  down  from  the  estimated 
1.9%  in  2018  to  1.5%  in  2019,  before  picking  up  to  1.7%  in  2020.  Global  trade  and 
geopolitical  tensions  are  on  the  rise,  and  the  EU  is  impacted  particularly,  due  to  the 
geographical and sector orientation of its exports. Still, the European Union is maximising the 
benefits of trade. For instance, the recently concluded EU-Japan free trade agreement has the 
potential to increase EU’s annual exports to Japan by EUR 13.5 billion. Given the uncertainty 
over  the  terms  of  the  UK’s  future  relations  with  the  EU,  this  Communication  does  not 
speculate on the possible economic implications of different scenarios. 

Growth drivers are shifting from external to domestic. Higher employment and growth is 
set  to  support  private  consumption,  while  investment  should  continue  to  benefit  from 
favourable  financing  conditions.  Eliminating  restrictions  to  the  functioning  of  the  Single 
Market and the improvement of the business environment  should continue  to  sustain higher 
levels of aggregate demand. Domestic factors behind the recent slowdown include production 
problems  in  the  car  manufacturing  industry  and  uncertainty  about  fiscal  and  economic 
policies  in  some  Member  States.  The  fiscal  stance  is  projected  to  turn  expansionary  in  the 
euro area in 2019, while public debt continues to decline. 

The degree and impact of the expected slowdown on the European economy will depend 
on our policy action. Promoting and protecting investment, in particular in people and skills, 
will simultaneously strengthen the growth potential of our economies and  support aggregate 
demand.  As  regards  public  finances,  governments  should  continue  to  improve  their 
sustainability,  in  particular  where  debt  ratios  are  high  and  Member  States  have  not  taken 
advantage of the favourable cyclical conditions and low interest rates to rebuild fiscal buffers. 
At the same time, fiscal space should be used where it exists, and specific attention should be 
paid  to  the  growth-friendliness  and  redistributive  effects  of  expenditure  and  the  tax  system. 
Finally, a more symmetric rebalancing across the euro area will contain the negative impact of 
deleveraging  on  growth  and  make  our  economic  performance  depend  less  on  external 
demand. 

In  line  with  President  Juncker’s  2018  State  of  the  Union  address,  the  2019  Annual 
Growth  Survey  called  for  more  targeted  investment  policies  coupled  with  a  well-
designed  set  of  structural  reforms  and  responsible  fiscal  policies.  In  addition,  the 
recommendation  for  the  economic  policy  of  the  euro  area  in  20191  stressed  the  need  to 
complement  national  efforts  with  continued  reforms  at  the  European  level,  such  as 
strengthening  the  Single  Market.  While  policy  action  has  been  taken  in  recent  years  to 
improve  the  resilience  of  our  economies,  challenges  remain.  Growth  in  Europe  is  not 

1 COM(2018) 759 final. 

1 

 
                                                            
benefiting  all  countries,  regions  and  citizens  in  the  same  manner.  Some  Member  States  are 
still experiencing high unemployment, real household income below pre-crisis levels and high 
poverty  rates.  Regional  differences  remain  large  and  are  increasing  within  some  Member 
States. In addition, total factor productivity growth is low and digital technologies continue to 
spread slowly. Combined with the impact of demographic ageing on our workforce, this will 
limit  our  growth  potential  in  the  future.  The  country  reports  published  together  with  this 
Communication pay particular attention to how Member States deliver on the dimensions of 
the  European  Pillar  of  Social  Rights.  The  implementation  of  the  Pillar  is  a  compass  for 
achieving inclusive, fair and sustainable growth. 

Going  forward,  in  this  Semester  package,  the  Commission  presents  a  more  effective 
policy link between the European Semester and EU funding for 2021-2027, following the 
Commission’s proposals for the next EU multiannual financial framework. The objective 
is to ensure greater coherence between the coordination of economic policies and the use of 
EU funds,  which  represent a significant part of public investment in  several  Member States 
(cohesion  policy  funds  alone  in  the  next  programming  period  correspond  to  0.5 %  of  EU 
GDP). To that end, country reports identify priority areas for policy action regarding public 
and  private  investment  in  Member  States,  and  therefore  provide  the  analytical  basis  for  a 
successful programming of cohesion policy funds and use of related EU funds in 2021-2027. 

2 

 
 
2.  PROGRESS WITH COUNTRY SPECIFIC RECOMMENDATIONS  

The country reports published today provide the analytical basis for the country-specific 
recommendations  in  the  European  Semester.  During  this  European  Semester  cycle  and 
continuing  from  last  year’s  efforts,  the  Commission  intends  to  deepen  the  dialogue  with 
Member  States,  social  partners  and  other  relevant  stakeholders,  to  further  encourage  the 
implementation of country-specific recommendations and increase their ownership at national 
level. This dialogue would include dedicated visits to Member States and both bilateral, and 
multilateral, discussions. 

All Member States have made progress with the implementation of the country-specific 
recommendations  albeit  to  varying  degrees.  Since  the  start  of  the  Semester  in  2011, 
Member States have made at least ‘some progress’ with the implementation of more than two 
thirds  of  all  the  country-specific  recommendations.  This  rate  of  progress  is  broadly  stable 
compared  to  the  Commission  assessment  in  May  20182.  As  was  the  case  in  previous 
assessments,  Member  States  have  made  most  progress  in  financial  services,  reflecting  the 
priority given to the stabilisation and soundness of the financial sector in the aftermath of the 
financial  crisis.  Also,  consistent  with  the  initially  large  impact  of  the  crisis  on  the  labour 
market, sound progress has been achieved with the implementation of the recommendations to 
promote job creation on permanent contracts and to address labour market segmentation. 

In  view  of  the  mounting  economic  risks,  stronger  reform  implementation  is  crucial  to 
strengthen the resilience of our economies. Member States need to make better use of the 
supportive  economic  conditions  by  further  progressing  with  the  implementation  of  the 
recommendations addressed to them by the Council in 2018. Most progress is achieved in the 
recommendations addressing challenges in the financial sector notably regarding the financial 
services, the reduction of private indebtedness, and the reform of insolvency procedures. At 
the same time, progress has been particularly weak in addressing competition and regulatory 
frameworks, as well as in addressing recommendations related to state-owned enterprises and 
in broadening tax bases. In some cases, there is some evidence of backtracking for instance in 
the area of long-term sustainability of public finances, including pensions. 

Reforms  and  investment  require  sufficient  administrative  and  technical  capacity  for 
Member  States  to  deliver  on  expected  results.  Sound  preparatory  work  by  an 
administration that is appropriately staffed with the necessary technical means maximises the 
impact  of  public  investments  and  reforms.  Reforms  of  public  administrations  have  limited 
short-term  costs  and  can  be  effective  at  any  point  of  the  cycle.  Achievable  and  measurable 
outcomes  of  reforms  need  to  be  specified,  monitored,  and  communicated.  The  Structural 
Reform Support Programme offers hands-on technical support to all Member States, at their 
request,  to  design  and  implement  reforms,  especially  for  following  up  on  the  European 
Semester recommendations3.  

2 Chapeau Communication of May 2018.  
3 The 2019 financing decision is adopted with this package. 

3 

 
 
 
                                                            
3.  ADDRESSING MACROECONOMIC IMBALANCES 

The  in-depth  reviews  in  the  country  reports  provide  a  comprehensive  analysis  of  the 
imbalances  experienced  by  the  Member  States.  They  identify  underlying  vulnerabilities 
and  relevant  cross-border  implications.  Macroeconomic  imbalances  can  adversely  affect  the 
economy  of  a  particular  Member  State,  the  euro  area,  or  the  Union  as  a  whole.  The 
macroeconomic imbalance procedure aims at detecting and preventing their emergence at an 
early  stage  to  ensure  that  the  Member  States  concerned  take  appropriate  action  to  correct 
them. 

The 2019 Alert Mechanism Report identified 13 Member States for an in-depth review 
to assess whether they are affected, or may be at risk of being affected, by imbalances4. 
Of  those  countries,  11  were  considered  to  be  experiencing  imbalances  or  excessive 
imbalances  already  in  2018.  In  addition,  after  having  exited  the  financial  assistance 
programme,  Greece  was  subject  to  an  in  depth  review  for  the  first  time.  The  2019  Alert 
Mechanism  Report  also  considered  that  an  in-depth  review  for  Romania  was  warranted,  in 
order  to  assess  the  implications  of  the  ongoing  deterioration  in  the  country’s  cost 
competitiveness and external balance. The selection of Member States was supported by the 
Council5. The analysis looks at the gravity of the imbalances, their evolution and the policy 
country-specific 
response 
recommendations. Relevant  spillovers and systemic cross-border implications of imbalances 
are also taken into account.  

imbalance  procedure 

the  macroeconomic 

related 

to 

3.1. Progress with correcting the macroeconomic imbalances in the EU and the euro area  

The  correction  of  macroeconomic  imbalances  in  the  EU  is  progressing  thanks  to 
resumed  growth  and  policy  efforts,  but  vulnerabilities  persist.  Private  and  government 
debt stocks remain at historically high levels in certain Member States and their correction is 
not  always  proceeding  fast  enough.  This  reduces  the  room  for  absorbing  future  negative 
economic shocks. In addition, in a number of Member States signs of possible overheating are 
present, mainly linked to dynamic house price growth and fast-growing unit labour costs.  

The rebalancing of external positions remains incomplete. Large current account deficits 
have  been  corrected  in  most  Member  States,  but  a  few  still  face  largely  negative  net 
international  investment  positions.  Large  stocks  of  external  debt  remain  a  vulnerability  in  a 
number  of  Member  States,  which  need  to  maintain  prudent  current  account  positions  and 
avoid  competiveness  losses.  Other  Member  States  exhibit  instead  large  current  account 
surpluses,  which  have  remained  rather  persistent.  Modest  signs  of  adjustment  have  become 
visible only recently. Addressing large surpluses in net-creditor countries through investment 
and  wage  policies  would  contribute  to  support  the  growth  potential.  At  aggregate  level,  the 
euro  area  current  account  surplus  surpassed  slightly  3%  of  GDP  in  2016  and  has  remained 
broadly  constant  afterwards.  This  large  surplus  reflects  a  context  where  aggregate  domestic 
demand in the euro area has been lagging behind economic activity and where the improved 
competitive position by the euro area economies has sustained exports.  

Debt reduction is continuing. Making effective progress in reducing private and government 
debt levels would be key to create room to absorb future negative economic shocks.  Private 
debt-to-GDP ratios are falling in an increasing number of Member States. This is mainly the 
result from higher nominal GDP growth. Debt reduction from positive net savings, as well as 

4 COM(2018) 758 final. 
5 https://data.consilium.europa.eu/doc/document/ST-5603-2019-INIT/en/pdf 

4 

 
                                                            
 
from  resuming  credit  growth,  is  becoming  less  intense  and  widespread.  Corporate  debt 
reduction  has  been  faster  than  in  the  household  sector,  partly  due  to  the  low  levels  of 
investment  these  past  several  years.  On  the  public  sector  side,  while  improved  budgetary 
positions  and  resumed  GDP  growth  are  currently  leading  to  reductions  in  government  debt 
ratios in most Member States, they are nonetheless falling only slowly.  

Conditions  in  the  EU  banking  sector  are  improving  especially  in  the  most  vulnerable 
countries,  but  further  efforts  are  needed.  Capital  ratios  have  further  improved  in  most 
Member  States.  Non-performing  loan  ratios  have  declined  notably  in  some  Member  States 
where their stock is the highest. The EU average non-performing loan ratio stood at 3.3% in 
the third quarter of 2018 compared to 4.4% one year earlier, but these ratios remain very high 
in some Member States where additional efforts are needed. Capital and liquidity ratios have 
further improved in a broad majority of banks. Despite recent improvements, low profitability 
linked  to  overbanked  markets  remains  a  concern.  Capital  markets  have  also  contributed 
further  to  broadening  and  diversifying  the  financing  of  the  European  economy.  There  is 
significant additional potential for their development at European, national and regional level.  

House  prices  are  accelerating  in  a  growing  number  of  Member  States,  with  more 
countries  exhibiting  possible  signs  of  overvaluation.  House  prices  have  risen  faster  in 
Member  States  that  have  shown  no  or  only  little  evidence  of  overvaluation  in  recent  years, 
and  in  some  cases  mortgage  credit  is  resuming  at  higher  pace.  On  the  positive  side,  house 
prices  have  recently  moderated  in  countries  where  the  evidence  of  overvaluation  is  the 
highest, including stemming from affordability constraints and recently implemented macro-
prudential policies. 

Labour markets continue to improve. Unemployment rates are further declining, including 
for  young  people  and  the  long-term  unemployed,  but  remain  high  in  some  Member  States. 
Wages in Member States are resuming at differentiated speeds that broadly reflect the extent 
to which some countries are experiencing labour shortages, while wage growth for the euro 
area as a whole remains below what would be expected at the current levels of unemployment 
on the basis of historical data. 

Since 2016, unit labour costs in most Member States have been growing at faster rates 
than  before.  Strong  accelerations  have  been  recorded,  especially  in  Member  States  with 
below-average  wage  levels,  partly  due  to  labour  shortages.  So  far  unit  labour  cost 
developments  have  not  been  matched  by  substantial  losses  in  export  market  shares  or 
deteriorations  in  current  account  balances  but  these  effects  could  become  visible  if  those 
trends persist. At the same time, within the euro area, the cost competitiveness advantage in 
countries  with  a  legacy  of  large  current  account  deficits  or  with  still  sizeable  stocks  of 
external debt has slowed-down, showing the need to keep the momentum for reforms aimed at 
increasing productivity growth and maintaining cost competitiveness. 

3.2. Implementing the macroeconomic imbalances procedure 

Imbalances or excessive imbalances have been identified in all Member States analysed 
in in-depth reviews, but the gravity of imbalances has narrowed in some cases. The 2019 
in-depth reviews have found that 10 Member States are experiencing imbalances and three are 
experiencing excessive imbalances. One country has reached clear progress up to the point of 
improving  its  macroeconomic  imbalance  procedure  categorisation  to  imbalances  from 
excessive imbalances one year ago. In other cases the correction of economic imbalances is 
ongoing, but not sufficiently to justify an exit from the macroeconomic imbalance procedure. 
Appendix 3 summarises the findings from the in-depth reviews by Member State.   

5 

 
Greece, that has been integrated into the European Semester after  exiting the stability 
support  programme,  has  been  identified  as  experiencing  excessive  imbalances.  Greece 
still faces major challenges related to high public debt, negative net international investment 
position,  a  high  share  of  non-performing  loans,  the  still  high  unemployment  rate  and  low 
growth  potential.  Deep  institutional  and  structural  reforms,  initiated  in  recent  years  to 
modernise the economy and the State, have started to bear fruit as reflected by the successful 
conclusion of the European Stability Mechanism programme, the recovery of growth as well 
as the reduction of unemployment. This reform process requires sustained implementation for 
their impact to fully unfold. Since the exit from the programme Greece is subject to enhanced 
surveillance,  which  provides  the  basis  for  assessing  the  implementation  of  commitments 
undertaken by Greece to ensure the continuity and completion of reforms adopted under the 
European Stability Mechanism stability support programme.  

Romania, identified with no imbalances in 2018, is found to be experiencing imbalances. 
Risks related to competitiveness losses and a widening current account deficit highlighted in 
the  Alert  Mechanism  Report  have been  confirmed  in  the in-depth  review.  Moreover, recent 
legislative initiatives appear to be inducing risks to the financial sector. That is happening in a 
context of weakening reform implementation, unpredictable policy-making environment, and 
an  expansionary  fiscal  policy.  If  not  addressed,  those  patterns  will  impinge  on  government 
and foreign debt prospects and harm investment and growth prospects. 

Croatia,  identified  with  excessive  imbalances  in  2018,  is  found  to  be  experiencing 
imbalances.  Economic  developments  have  been  contributing  to  a  gradual  correction  of 
existing imbalances, notably those related to high stocks of public, private and external debt, 
and  in  that  way  leading  to  a  reduction  of  risks.  Policy  action  and  commitments  that  would 
help  a  sustainable  correction  of  imbalances  have  been  stepped  up  recently,  and  their  full, 
swift and effective implementation will be crucial.  

In  other  countries,  economic  developments  have  been  generally  favourable  to  the 
correction of imbalances, but challenges remain on the economic and policy outlook: 

  Bulgaria, France, Germany, Ireland, the Netherlands, Portugal, Spain, and Sweden are 
identified, as in 2018, to be experiencing  imbalances. Bulgaria took further steps to 
ensure  the  stability  of  the  banking  sector  but  some  actions  are  yet  to  be  finalised  or 
implemented.  France  has  stepped  up  reform  commitments  but  correction  of 
imbalances  related to  high public debt  and weak competitiveness dynamics  crucially 
depends on policy progress. In the Netherlands, policy efforts have been stepped up 
but imbalances related to the high stock of private debt and the large current account 
surplus  remain.  In  Germany,  the  current  account  surplus  remains  high  and  is 
decreasing  only  slowly  while  more  efforts  are  needed  to  fill  the  investment  gaps 
particularly  as  regards  public  investment  in  infrastructure  and  education.  In  Ireland, 
strong  growth  and  policy  progress  have  continued  to  support  a  narrowing  of  stock 
imbalances  but  vulnerabilities  remain  in  a  context  of  increased  risks  from  the 
international environment. Remaining stock imbalances related to internal and external 
debt  are  receding  in  Portugal  and  Spain  helped  by  improved  economic  conditions, 
although  policy  and  adjustment  gaps  remain.  In  Sweden,  imbalances  persist  despite 
some recent adjustment in house prices and policies. 

  Cyprus and Italy are identified, as in 2018, to be experiencing excessive imbalances. 
In  Cyprus,  despite  an  improved  economic  context  and  some  recent  stepping  up  of 
policy efforts, significant vulnerabilities persist related to a falling but still high level 

6 

 
of non-performing loans and external, private and government debts. In Italy, progress 
in some policy areas in earlier years has been overshadowed by worsening prospects 
largely coming from the planned budgetary deterioration and a broadly stalled reform 
agenda.  Recent  policy  measures  backtrack  on  elements  of  previous  reforms  and  will 
affect negatively the sustainability of public finances, productivity and potential GDP 
growth. Uncertainty related to the government stance contributed to increased market 
pressures and higher yields on sovereign debt in the course of 2018. The aggravation 
or  alleviation  of  macroeconomic  imbalances  will  crucially  depend  on  policies  to 
improve  the  quality  of  Italy’s  public  finances,  increase  the  efficiency  of  its  public 
administration and justice system, enhance its business environment, and strengthen its 
labour  market  and  the  financial  system.  The  Commission  will  therefore  closely 
monitor  developments  in  Italy  and  assess  policy  steps  and  commitments  to  address 
imbalances, in particular the level of ambition of the National Reform Programme, in 
the context of the forthcoming European Semester spring package. 

The Commission will continue reviewing developments and policy measures taken by 
all  Member  States  with  imbalances  or  excessive  imbalances  in  the  framework  of 
specific  monitoring.  The  Council  participates  in  those  reviews  and  has  supported  the 
conclusions of the specific monitoring reports.6  

Table 1: Outcomes of in-depth reviews in 2019 and situation in 2018 

Situation in 2018 

Outcome of 2019 IDRs 

Imbalances  

BG, DE, ES, FR, IE, NL, PT, SE 

BG, DE, ES, FR, HR, IE, NL, PT, RO, SE 

Excessive imbalances 

CY, HR, IT 

CY, EL7, IT 

6 https://data.consilium.europa.eu/doc/document/ST-5603-2019-INIT/en/pdf 
7 Like other countries that have exited a financial assistance programme in the past, Greece has been identified 
with excessive imbalances  

7 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                            
4.  MEMBER STATE POLICIES 

In  the  context  of  slowing  growth,  effective  reforms  and  well-targeted  investment 
priorities would help Member States be more resilient to future macroeconomic shocks. 
With  better  functioning  financial,  product  and  labour  markets  and  institutions  and  more 
efficient  state  administrations,  our  economies  can  adjust  more  smoothly  and  minimise 
economic  and  social  costs.  Whether  it  is  because  they  create  the  necessary  infrastructure, 
provide a better skilled labour force or support innovative entrepreneurial ideas, well-targeted 
investments  strengthen  potential  growth  in  the  longer  term,  contributing  to  competitiveness 
and  economic  resilience.  Adapting  to  ongoing  structural  change  would  help  economies 
converge by narrowing differences in productivity and would improve social outcomes.   

4.1 Ensuring responsible fiscal policies and financial stability 

Responsible fiscal policies, quality of public finances and growth-friendly tax systems 

Member States with high debt ratios are failing to build fiscal buffers. Robust economic 
growth and historically low interest rates continue to support a decline in public debt ratios. In 
2018,  favourable  cyclical  conditions  and  declining  interest  expenditure  resulted  in  a  further 
decline  of  the  overall  budget  deficit  in  the  EU,  which  now  stands  below  1%  of  GDP.  That 
downward trend is expected to end in 2019, when the overall deficit is projected to slightly 
increase for  the  first time since  2009. Public debt  remains close  to historical peaks in some 
Member States. The projected fiscal adjustment is relatively limited or even negative in some 
highly indebted Member States. Rebuilding fiscal buffers is especially important in Member 
States  with  still  high  levels  of  public  debt  with  the  view  to  reducing  their  vulnerability  to 
shocks and allowing automatic stabilisers to operate fully in the next downturn. Compliance 
with the Stability and Growth Pact, along with some fiscal expansion by Member States with 
fiscal  space  would  contribute  to  a  balanced  policy  mix,  given  the  continued  support  to  the 
economy  from  monetary  policy.  Furthermore,  it  would  reduce  the  risks  of  financial 
instability.  

There is ample room to enhance the quality of public finance, and spending reviews are 
a crucial tool in this regard. Many Member States engage in a scrutiny of public spending, 
aimed  at  increasing  its  efficiency  and  making  savings,  creating  room  for  growth  enhancing 
expenditure. Broad spending reviews are planned in Italy and France. More targeted reviews, 
covering specific spending areas are foreseen in many other Member States. They encompass 
areas,  like  healthcare,  education,  state-owned  enterprises,  real  estate,  public  investment, 
transport and environment. In 2019, efficiency gains should emerge in Portugal from a greater 
use of centralised procurement and more efficient use of public assets, and in Latvia from a 
more  cost-efficient  management  of  state-owned  enterprises  in  the  real  estate  sector  and 
consolidation of the information technology infrastructure. Going forward, spending reviews 
would  benefit  from  more  frequent  and  rigorous  interim  evaluations  as  well  as  a  tighter 
integration with the budgetary process. 

Member States are continuing to improve their domestic fiscal frameworks, a key factor 
of  fiscal  policy-making.  Fiscal  frameworks  have  been  considerably  reformed  over  the  past 
several  years:  the  positive  effects  on  government  spending  and  taxation  are  already  visible. 
Reforms in this direction continued recently in a number of Member States. In Germany, the 
Joint  Economic  Forecast  Project  Group  has  been  mandated  to  endorse  the  macroeconomic 
forecasts. Hungary and Lithuania have further improved the medium-term perspective of their 
framework.  Even  Member  States  where  fiscal  frameworks  usually  serve  as  best  practice 
continue  to  improve  them.  Notably,  Sweden  has  introduced  a  new  debt  anchor,  while  the 
Netherlands  has  improved  the  automatic  stabilisation  features  of  its  framework.  Ireland  is 

8 

 
implementing  its  plans  to  set  up  a  rainy-day  fund.  Nevertheless,  there  are  still  areas  where 
more efforts are necessary. This in particular concerns coordination arrangements across the 
levels of government in Member States with complex federal structures. 

An ageing population confronts many Member States with the challenge of ensuring the 
sustainability of their public finances. Over the past decade, significant progress has been 
made in addressing the projected increase in pension costs. However, rising longevity and the 
retirement of the baby boom generation still result in considerable projected increases in age-
related expenditure for 21 Member States that face medium or high fiscal sustainability risks. 
This  may  have  an  impact  on  the  future  adequacy  of  pensions.  In  2018,  Croatia  adopted  a 
pension  reform  that  is  set  to  improve  pension  adequacy  while  not  endangering  long-term 
sustainability  while  France  put  forward  comprehensive  reform  plans.  Cases  of  partial 
backtracking  risk  undoing  part  of  the  progress  made  over  the  past  decade  in  Italy  and 
Romania.  Measures  that  increase  pension  expenditure  have  been  introduced  or  are  being 
planned  also  in  Germany,  Spain  and  Portugal.  Progress  towards  ensuring  long-term  fiscal 
sustainability appears slow for health care and long-term care. Current reform efforts in some 
Member  States  tend  to  be  partial  and  should  better  combine  the  objectives  of  fiscal 
sustainability with accessibility and effectiveness of care.  

Health  system  reforms  are  targeting  greater  effectiveness,  accessibility  and  resilience. 
Many Member States are pursuing efforts to refocus health systems towards preventive care, 
whilst bolstering primary care and better coordination across care settings. Cyprus is putting 
in  place  a  new  system  of  health  contributions paving  the way  for  universal  health  coverage 
and  limiting  high  out-of-pocket  payments.  Poland  has  started  pilot  projects  to  reinforce 
primary and ambulatory care and improve coordination. 

Tax systems can help support  inclusive growth.  Growth-friendly tax systems can support 
private investment and improve the business environment, encourage employment and labour 
market  participation,  reduce  inequalities  and  contribute  to  an  environmentally  sustainable 
economy. In that light, several Member States are continuing to reform their tax system and in 
particular reduce labour taxation. Latvia and Lithuania are introducing a progressive personal 
income  tax  rate  schedule.  The  Netherlands  is  shifting  the  tax  burden  from  labour  to 
consumption  by  reducing  personal  income  taxes  and  increasing  value  added  tax  rates. 
Germany  and  Ireland  are  continuing  to  reduce  labour  taxation  for  low-  and  middle-income 
earners.  Denmark,  Greece  and  Slovenia  ensure  a  high  share  of  environmental  tax  revenues, 
which encourages more efficient use of resources and boosts investment and employment. 

The  fight  against  aggressive  tax  planning  is  a  priority  to  ensure  the  Single  Market 
operates  properly.  The  Commission  has  presented  legislative  proposals  to  make  the  tax 
system  more  transparent,  effective  and  coherent  and  less  prone  to  aggressive  tax  planning 
practices.  Aggressive  tax  planning  can  have  a  budgetary  impact  on  other  Member  States, 
distort the playing field among companies, and unfairly divert resources from governments’ 
spending objectives. Member States whose tax base is eroded either must raise revenue from 
other taxes or have less revenue for growth-enhancing reforms and for redistribution purposes 
to  fight  inequalities.  The  transposition  of  EU  legislation  and  of  internationally  agreed 
initiatives will help to curtail aggressive tax planning practices8. Aggressive tax planning can 
be  further  addressed  by  strengthening  national  tax  legislation,  increasing  transparency  and 
administrative cooperation. 

8For example, by the end of 2018, all Member States had to transpose the provisions of the Anti-Tax Avoidance 
Directive ((EU) 2016/1164) into their national law. 

9 

 
 
                                                            
Banking sector, low profitability and non-performing loans 

On  aggregate,  bank  capital  and  liquidity  positions  have  continued  to  improve  in  2018, 
supported by the economic environment as well as legislative and supervisory action. At 
the same time, bank leverage has decreased while loss-absorbing capacity has increased. Non-
performing loans on bank balance sheets have continued to decline. The latest figures show 
that  the  gross  non-performing  loans  ratio  for  all  EU  banks  further  declined  to  3.3 %  (Q3-
2018),  down  by  more  than  one  percentage  point  year-on-year.  Fourteen  Member  States  had 
low non-performing loans ratios of below 3 %. There was in particular a significant reduction 
in Cyprus, Ireland, Italy, Spain, Portugal, Hungary, Slovenia, Romania, Austria and Germany, 
where the pace of non-performing loans disposals has picked up significantly since 2017 amid 
persistent  supervisory  pressure  and/or  a  further  development  of  secondary  non-performing 
loans markets. 

In  addition,  the  legislative  processes  for  several  risk  reduction  measures  at  EU  and 
national level continued to  move forward resulting in tangible progress. The agreement 
of  December  2018  between  Council  and  Parliament  with  respect  to  the  Risk  Reduction 
package  should  continue  to  strengthen  bank  capital  and  liquidity  positions,  particularly  in 
potential resolution scenarios, as well as to facilitate more risk reduction and risk sharing in 
the EU banking sector. This includes ensuring full implementation of EU rules against money 
laundering and adequate risk prevention and management by banks. 

The  European  Banking  Authority  2018  stress  test  confirmed  that  EU  banks  are 
becoming  more  resilient.  Yet,  investors  perception  of  the  tests  may  not  lead  to  material 
changes in  the  way the market sees capital resilience of EU banks,  whose  share prices  may 
continue  to  be  more  driven  by  macroeconomic  fundamentals  in  2019.  Bank  profitability 
remains  subdued  and  affected  by  high  non-performing  loans  ratios,  inadequate  business 
models in several cases, overbanked markets and financial market volatility (re-emerged since 
the first half of 2018).  

Cross-border  banking  in  the  EU  may  accelerate  again  taking  advantage  of  the 
announced  restructuring  needs  of  some  large  European  groups.  Some  leading  banking 
groups in key Member States are switching their strategies to reduce profitability risks. This 
might provide banks with opportunities to accommodate some of their profitability risks. 

10 

 
 
 
 
4.2 Labour market, education and social policies 

The employment situation continues to improve. The number of people in employment hit 
a record 240 million in the  fourth quarter of 2018. At 6.6% the unemployment rate is  more 
than back to pre-crisis levels: it is at the lowest level ever recorded since the corresponding 
data started to be collected in 2000. Following years of economic growth and job creation, the 
social situation continues to improve. In 2017 alone, more than five million people were lifted 
out of poverty and social exclusion.  

Yet,  the  situation  points  to  significant  differences  across  Member  States.  In  some 
Member  States  unemployment  rates  have  not  fully  recovered  and  are  still  above  10%.  The 
situation of young people remains a challenge in some of the latter countries: high shares of 
young  people  neither  in  employment,  nor  in  education  or  training  raise  concerns  for  their 
present  and  future  employability.  In  others,  there  are  increasing  labour  shortages  creating  a 
bottleneck  for  further  growth.  Overall,  despite  increasing  employment  rates  among  women, 
gender gaps in  employment rates persist  and  lead to  gaps  in  pay. Low  qualified  people  and 
people  with  a  migrant  background  in  particular,  face  difficulties  to  find  jobs.  People  with 
disabilities  also  remain  at  a  disadvantage.  Moreover,  large  regional  disparities  in  labour 
market outcomes exist in many Member States. 

Demographic  changes  and  technological  developments  are  reshaping  European  job 
markets.  As  the  population  ages  and  the  number  of  young  people  declines, it is  crucial  for 
Member States to increase the number of people active on the labour market, to ensure strong 
growth  potential  as  well  as  to  ensure  that  social  security  systems  are  sufficiently  and 
sustainably  funded.  Some  Member  States  are  taking  action  in  this  area.  For  instance,  in 
Croatia,  a  pension  reform  entered  into  force  in  January  2019,  aimed  at  promoting  longer 
working 
the 
transformations  that  digitalisation  and  the  spread  of  platforms  are  bringing  to  the  future  of 
work,  it  is  crucial  that  Member  States  modernise  labour  markets  and  social  protection 
systems, including by ensuring adequate social protection coverage to non-standard workers 
and self-employed, to keep pace with these developments. 

lives  and  addressing  structural 

the  system.  Given 

inconsistencies 

in 

Promoting adequate skills is crucial. Equal access to high-quality education is essential if 
all citizens are to fully participate in our societies and make the most of their working lives. 
Adequate  skills  can  increase  productivity  and  potential  growth,  which  are  key  to  allow  for 
wage growth and improve social and living conditions. In a context of rising skills shortages 
and mismatches, education and training systems need to be strengthened and modernised. At 
the same time, re-skilling and upskilling policies are important to increase the resilience and 
adaptability  of  the  workforce,  to  prevent  that  low-skilled  people  and  people  with  a  migrant 
background  are  faced  with  deteriorating  chances  of  employment.  France  is  implementing 
reforms  to  better  link  the  education  and  training  system  to  labour  market  needs.  Latvia  is 
taking  action  to  improve  the  quality,  attractiveness  and  labour  market  relevance  of  the 
vocational education and training. In Portugal, the Qualifica programme aimed at tackling the 
challenge  of  a  low-qualified  labour  force,  has  been  recently  reinforced  through  a 
reprogramming  of  the  European  Social  Fund  allocations.  A  number  of  Member  States 
(Germany,  Austria,  Sweden,  Finland,  Belgium)  took  measures  to  validate,  recognise  or 
improve existing skills of migrants in order to facilitate their labour market integration. 

Labour  market  segmentation  remains  a  challenge.  Although  the  share  of  temporary 
employees, on average, has not increased substantially in recent years, some Member States 
are experiencing rates persistently above 15 %. In countries such as Spain, Slovenia, Poland, 
Portugal, Italy and Croatia over 60 % of temporary employees are young people. More than 
half of the employees on a temporary contract cannot find a permanent position and while the 

11 

 
total  number  of  hours  worked  has  only  recently  returned  to  pre-crisis  levels,  the  share  of 
involuntary part-timers still exceeds 50 % in some Member States. Several Member States are 
taking action to promote open-ended hiring by reforming labour law enforcement, including 
increasing  the  staffing  of  labour  inspectorates  to  tackle  the  misuse  of  temporary  work  and 
promoting a better design of hiring subsidies. In Spain, the capacity of labour inspectorates to 
fight the abuse of temporary contracts and undeclared work was further strengthened in 2018. 
Cyprus is taking significant actions to support regular employment, with the establishment of 
a Single Inspections Service. In Ireland, a new bill requires employers, among other things, to 
provide better information on the nature of employment. 

Wages  are  growing  at  a  moderate  pace  but  faster  than  in  previous  years.  Nominal 
compensation  per  employee  grew  by  2.7 %  in  2018.  Wage  growth  has  caught  up  with 
productivity developments, after having trailed behind for some years.  

Poverty and income inequality declined in 2017, but in-work poverty remains a source 
of concern. The share of people at risk of poverty or social exclusion  declined to 22.4% in 
2017  and  is  now  below  pre-crisis  levels,  however  some  groups  are  characterised  by  a 
persistently  higher  risk  of  poverty.  Moreover,  in-work  poverty  remains  a  source  of  concern 
being particularly high for self-employed, temporary and part-time workers and for workers 
who  are  not  born  in  the  EU.  The  tax  and  benefits  system  plays  an  important  redistributive 
role.  It  is  important  to  target  carefully  poverty  support  to  those  most  in  need,  e.g.  by 
reinforcing the accuracy of means testing instruments. In Luxembourg, a new social inclusion 
income scheme replaced the previous guaranteed minimum income with the aim to promote 
social  inclusion  and  activation,  and to  tackle  poverty  of  children  and  single-parent  families. 
Italy adopted a new minimum income scheme (Reddito di Cittadinanza) that will replace the 
previous one, with the aim to develop an active inclusion model. Its success largely relies on 
the effectiveness of its governance.   

Well-functioning  social  dialogue is  key to  improving  the  design  and  implementation  of 
reforms, to increase ownership. Over the last year, social partners in a number of Member 
States  reported  positive  developments  regarding  the  meaningful  and  timely  engagement  of 
their  government  on  economic  and  social  reforms.  For  instance,  based  on  a  tripartite 
agreement,  Portugal  put  forward  a  set  of  measures  to  address  labour  market  segmentation, 
which now has to be legislated. Positive development in some Member States contrasts with 
steps back in others. In many of them, there is scope for improving social partners’ capacity 
and  timely  consultation  at  key  stages  of  designing  reform  measures,  including  at  important 
milestones of the European Semester.  

4.3 Competitiveness and productivity  

Addressing the productivity gap 

Against  the  backdrop  of  demographic  trends,  productivity  growth  is  key  to  ensuring 
future sustainable growth in all Member States. Productivity has been growing slowly in 
the  EU.  The  causes  are  varied,  including  inter  alia  low  investments  in  research,  technology 
and  innovation  and  the  structural  shift  from  manufacturing  to  services.  Addressing  sluggish 
labour  productivity  is  essential  to  address  EU’s  short  and  long-term  economic  challenges. 
Growth in labour productivity is likely to remain low at around or below 1% in the coming 
years,  and  there  are  notable  differences  in  productivity  across  Member  States.  In  particular, 
mature  economies  with  already  high  productivity  levels  are  finding  it  difficult  to  raise  their 
growth  potential.  Investment  that  enhances  environmental  sustainability  has  the  potential  to 
boost  productivity  across  the  economy  through  enhanced  resource  efficiency  and  reduced 
input costs, whilst reducing external costs and impacts.  

12 

 
Productivity  in  the  services  sector  (which  accounts  for  the  largest  part  of  economic 
activity)  remains  relatively  low  despite  the  overall  improved  economic  performance. 
While  the  productivity  slowdown  has  been  common  to  other  advanced  economies,  the 
productivity  gap  in  services  remains  large  and  growing,  especially  with  the  USA.  This 
represent  a  disadvantage  to  EU  companies  for  trade  in  general  and  for  their  integration  in 
global  value  chains.  To  analyse  the  drivers  of  productivity  and  support  an  adequate  policy 
response,  the  Council  has  recommended  euro  area  Member  States  to  set  up  national 
productivity boards.9 

Higher  labour  productivity  will  make  higher  wages  and  potential  output  possible  but 
this is not sufficient in itself to achieve those objectives. While there is evidence of higher 
productivity  being  passed  on  to  wages  in  the  mid  and  long  run,  there  are  also  examples  of 
labour  earnings  not  keeping  up  with  changes  in  productivity  over  time.  Member  States  are 
thus  taking  additional  measures  to  translate  higher  labour  productivity  into  higher  labour 
earnings. 

Quality investment and a more effective use of EU funds 

Well-targeted  investment  remains  essential  to  address  the  challenge  of  productivity 
growth  in  the  EU.  It  is  one  of  the  three  essential  elements  of  the  “virtuous  triangle”  put 
forward  by  this  Commission.  Addressing  investment  needs  has  thus  been  a  longstanding 
priority of the European Semester. In the current phase of the business cycle, the focus should 
be on public and private investment that increases productivity and growth potential while it 
will be important to protect investment in case economic risks were to materialise. Also long-
term  investment  measures,  including  in  skills  and  education,  can  help  ensure  that  the  EU 
economy  enjoys  sustainable  growth  and  stays  resilient,  and  it  can  also  meet  urgent  social 
needs. 

Investment in research, development and innovation is needed in most Member States to 
enhance  their  productivity  growth  and  competitiveness.  In  many  Member  States  and 
regions there is a significant scope to strengthen links between businesses, academia, research 
and  public  sector  actors  trough  cooperation  in  value  chains,  including  through  smart 
specialisation.  This  is  the  case  for  instance  in  Belgium,  Bulgaria,  France,  Cyprus,  Poland, 
Latvia  and  Estonia.  Moreover,  digitalisation  of  companies  and  digital  public  services  need 
further  investment  in  Belgium,  Cyprus,  Austria,  Slovenia,  Spain,  Slovakia,  Poland,  Estonia, 
Germany, and Bulgaria. Member States with higher productivity levels, such as Germany and 
the  Netherlands,  and  others  that  have  undergone  significant  structural  changes  with  high 
investment rates before the crisis and during the recovery, such as Hungary, Poland and the 
Czech  Republic,  can  make  further  progress  by  investing  in  intangibles  and  innovation.  In 
catching-up  Member  States,  investments  in  machinery  and  equipment  can  contribute  to 
capital deepening and higher labour productivity. In order to respond to challenges linked to 
the  circular  economy  and  climate  adaptation,  investment  related  to  resource  efficiency  and 
climate risk  prevention is  needed  in  Estonia,  Luxembourg,  Slovakia, Portugal, Bulgaria, the 
Netherlands, Italy, Cyprus, and France. 

Better  aligning  EU  funds  with  the  European  Semester  analysis  and  recommendations 
should improve outcomes and strengthen the impact of cohesion policy funding. Aligning 
EU  funds  with  the  European  Semester  is  a  key  component  of  the  proposals  for  the 
multiannual  financial  framework  for  2021-2027.  For  some  Member  States,  EU  funds  even 
represent  a  critical  part  of  their  public  investment.  In  particular,  as  put  forward  in  the 

9Council  Recommendation of  20  September  2016 on  the establishment  of National  Productivity Boards.  OJ  C 
349, 24.9.2016, p. 1.  

13 

 
                                                            
financial 

framework  proposal, 

the  European  Regional 
Commission’s  multiannual 
Development Fund, the European Social Fund Plus and the Cohesion Fund would amount to 
around  EUR 600  billion  over  the  next  programming  period,  if  national  co-financing  is 
included  —  this  corresponds  to  0.5 %  of  EU  GDP,  and  significantly  more  in  the  main 
recipient  Member  States.  Moreover,  the  Commission’s  multiannual  financial  framework 
proposals allow combining these funds with other sources of EU funding, such as the future 
EUR  650  billion  InvestEU  Programme,  the  successor  to  the  Juncker  Plan.  They  have  the 
potential to crowd-in other public and private investors and increase the investment impact in 
strategic areas of the EU economy even further.   

Based on the analysis in the country reports, a new annex identifies how those EU funds 
could  better  help  to  address  specific  needs  in  Member  States.  In  addition  to  a  stronger 
focus on investment priorities, this year’s country reports also have a more granular analysis 
of  the  regional  disparities  and  bottlenecks  to  investment.  The  dedicated  annex  helps  in  the 
dialogue  with  individual  Member  States  on  defining  the  funding  priorities  of  the  future 
programmes  implementing  these  funds.  What  is  presented  in  the  country  reports  constitutes 
the views of the Commission, based on the underpinning Semester analysis. It is the starting 
point  for  negotiations  with  the  Member  States  on  the  programmes.  It  leaves  space  for 
flexibility in the discussions with Member States. That identification of investment needs is 
based  on  the  shared  understanding  that  investments  should  have  as  high  an  impact  on 
economic, social and territorial cohesion as possible. 

Private investment, sourced from well-functioning and integrated capital markets, needs 
to be more fully exploited. As the EU finalises the delivery on its action plan on building a 
Capital Markets Union, Europe's full diversity of capital markets ranging from global hubs to 
regionally  integrated  networks  and  local  initiatives  should  be  further  developed  to  finance 
businesses, and promote decarbonisation and the transition to a more sustainable economy. At 
the national level, for example Estonia, Latvia and Lithuania are creating a pan-Baltic market 
for  covered  bonds  and  securitisation.  This  will  contribute  towards  well-functioning  and 
deeper capital markets in the region. It will also open up long-term funding options for banks, 
so they can free up their balance sheets to enable increased lending. 

Institutional quality as a key factor for reform  

Satisfying  investment  needs  requires  a  favourable  investment  environment.  Policy 
makers  need  to  devote  particular  attention  to  creating  an  investment-friendly  environment, 
avoiding  unnecessary  market  and  regulatory  barriers  and  improving  the  way  in  which  their 
public  institutions  and  administrations  operate.  Aspects  related  to  the  effectiveness  of  the 
public administration, the degree of digitisation of public services, the quality and stability of 
the regulatory environment and the respect for the rule of law, including the independence of 
justice  systems  and  the  fight  against  corruption,  have  a  critical  impact  on  investment 
decisions.  In  2019,  about  half  of  the  top  25  performers  in  the  world  as  regards  corruption 
perception  levels  are  EU  Member  States,  but  large  discrepancies  remain10  and  efforts  to 
improve  prevention  of  corruption,  protect  whistle-blowers  to  enhance  detection  and  remove 
obstacles  to  effective  prosecution  and  sanctions  need  to  be  stepped  up.  To  address  some  of 
these  challenges,  Italy,  Slovakia  and  Latvia  have  revised  their  whistle-blower  protection 
regime,  while  Lithuania,  Spain,  Cyprus  and  Greece  are  currently  envisaging  reforms  in  this 
area.  

10All  Member  States  are  subject  to  ongoing  assessment  of  their  anti-corruption  efforts.  As  last  year,  the 
Commission has analysed the key challenges in the country reports in relevant Member States. 

14 

 
                                                            
As  reported  in  the  2019  country  reports,  all  Member  States  experienced  barriers  to 
investment  in  different  policy  areas  (see  Appendix  4).  Overall,  weaknesses  in  public 
administration  and  the  business  environment  account  for  the  highest  share  of  investment 
barriers.  Examples  include  high  regulatory  and  administrative  burden,  the  lack  of 
predictability  in  regulatory  frameworks,  the  effectiveness  of  justice  systems  and  inefficient 
public  administration.  Many  barriers  are  also  related  to  cumbersome  and  lengthy  approval 
procedures  as  well  as  skill  shortages  due  to  weaknesses  in  education  and  training  systems. 
Establishment  barriers  in  retail  have  delayed  cross-border  investments  in  this  sector.  Skills 
shortages  are  mentioned  in  several  country  reports  as  barriers  hampering  and  delaying 
investments  in  sectors  that  are  driven  by  digitalisation  and  new  technologies  (e.g. 
telecommunications,  connectivity  or  circular  economy)  but  also  in  more  traditional  sectors 
facing growing demand (e.g. construction).  

Reforms  to  improve  the  quality  of  governance,  institutions,  the  effectiveness  of  justice 
systems and public administration are the basis on which advanced democratic societies 
operate and are of considerable economic importance. Such reforms can help to improve 
the  environment  in  which  firms  and  stakeholders  operate  and  encourage  business  activity, 
reduce corruption and strengthen the respect for the rule of law. Among the most frequently 
cited  impediments  to  investment  in  the  EU  are  inefficiencies  in  public  administration, 
unfavourable conditions for doing business, and high administrative and regulatory burden for 
specific  sectors.  In  some  Member  States,  investment  is  also  held  back  by  a  lack  of 
transparency  in  the  public  sector,  complex  tax  systems,  distorted  product  or  labour  markets 
and weaknesses in research and innovation frameworks and in institutions. To address issues 
like these, Poland has adopted a ‘Constitution for Business’, a comprehensive set of five laws 
to  improve  the  business  environment.  France  is  implementing  a  broad  agenda  reform  to 
improve the business environment and the competitiveness of French firms. Several Member 
States,  such  as  Finland  and  Estonia,  are  making  efforts  to  reduce  administrative  burden. 
Bulgaria, Slovakia, the Czech Republic, Slovenia, and Romania are currently reforming their 
public procurement systems. In 2018 the German federal government announced that it will 
create an agency for the promotion of disruptive innovation. 

Withdrawal Agreement between the EU and UK 

This  package  does  not  speculate  on  the  economic  risks  associated  with  different  Brexit 
scenarios.  

Given the ongoing ratification process of the Withdrawal Agreement in the EU and the UK, 
projections for  2019  and  2020  are based  on  a purely  technical  assumption  of  status  quo  in 
terms  of  trading  relations  between  the  EU  27  and  the  UK.  In  the  case  of  a  “hard  Brexit” 
which  the  Commission  considers  undesirable,  but  for  which  the  EU  27  is  well  prepared11, 
these assumptions would have to be revised downwards. 

11COM(2018) 556 final/2 (corrigendum adopted on 27 August 2018); COM(2018) 880 final; COM(2018) 890 
final.  

15 

 
 
 
 
                                                            
 
5.  NEXT STEPS 

In  recent  years  the  European  Union  has  moved  from  economic  recovery  to  solid 
expansion and for 2019 Europe’s economy is set to continue expanding notwithstanding 
the  more  uncertain  outlook  projected.  To  ensure  such  a  continued  economic  expansion, 
Member  States  will  need  to  implement  effective  structural  reforms,  engage  in  responsible 
fiscal policies and lay out targeted investment strategies. The more effective link between the 
European  Semester  and  EU  funding  for  2021-2027  as  presented  in  this  year’s  Semester 
package  will  provide  the  necessary  structure  to  ensure  the  effective  delivery  of  the  most 
targeted investment priorities.  

The  European  Semester  offers  the  Commission,  Member  States,  social  partners  and 
stakeholders  at  all  levels  the  opportunity  to  engage  in  a  permanent  dialogue  with  one 
another throughout the year. The country reports published with this Communication draw 
on  in-depth  exchanges  with  governments,  national  authorities  and  stakeholders  at  both 
technical  and  political  level,  including  bilateral  meetings  held  in  December  2018.  Their 
findings  will  be  presented  in  the  Commission’s  representation  offices  in  the  capitals  of  the 
Member States, and will be followed up in further bilateral and multilateral meetings.  

The Commission will soon engage in the dialogue with Member States on the 2021-2027 
programmes for the cohesion policy funds, informed by the investment-related findings 
and  conclusions  of  the  country  reports.  Commission  Vice-Presidents  and  Commissioners 
will visit Member States to seek the views of parliaments, governments, social partners and 
other  stakeholders  on  the  analysis  and  conclusions  of  the  country  reports.  The  Commission 
will also discuss the summary findings of the country reports with the European Parliament. 

In the light of the challenges identified, the Member States will present their economic 
and social  priorities in their  national  reform programmes  by mid-April. They will also 
present their multiannual strategies for sound public finances, in the form of stability (for euro 
area  Member  States)  and  convergence  (for  non-euro  area)  programmes.  To  provide  an 
appropriate  and  sustainable  response  to  the  challenges,  the  Commission  recommends  that 
those programmes would  be  prepared  with  the involvement of all key stakeholders, such as 
social partners, regional and local authorities, and civil society organisations as appropriate.   

16 

 
 
APPENDIX 1 - INTEGRATED SURVEILLANCE OF MACROECONOMIC AND FISCAL IMBALANCES  

Comments 

Distance from MTO in 2018 less than 
allowance granted for unusual events 

Since Greece was exempt from submitting 
Stability Programmes while it was under 
the programme, it has not yet nominated 
its medium-term objective.   

Subject to transitional debt rule in 2019 
conditional on the abrogation of the EDP 
based on validated outturn budgetary 
data for 2018. 

Macroeconomic Imbalances 
Procedure (MIP12) 

Imbalances 

Excessive imbalances  

Imbalances 

Stability and Growth Pact13 

(MTO: medium term objective / EDP: 
excessive deficit procedure) 

Preventive arm 

Not at MTO; subject to debt rule14 

Preventive arm 
Not at MTO; subject to debt rule 
Preventive arm  
Achieving MTO 
Preventive arm  
Achieving MTO; subject to transitional debt 
rule15 
Preventive arm  
Achieving MTO 
Preventive arm  

Achieving MTO; subject to debt rule 

Preventive arm  
Achieving MTO 
Preventive arm 
Not at MTO 

Excessive imbalances 

Preventive arm 
Subject to transitional debt rule 

Imbalances 

Imbalances 

Imbalances 

Imbalances 

Excessive imbalances 

Imbalances 

Preventive arm  
Achieving MTO; subject to transitional debt rule 
Corrective arm  
Excessive deficit, deadline for correction 
2018  
Preventive arm  
Not at MTO; subject to transitional debt rule 
Preventive arm  
Achieving MTO; subject to debt rule 
Preventive arm  
Subject to significant deviation procedure; 
subject to debt rule  
Preventive arm 
Not at MTO; subject to debt rule 
Preventive arm  
Achieving MTO 
Preventive arm  
Achieving MTO 
Preventive arm 
Not at MTO 
Preventive arm  
Achieving MTO 
Preventive arm  
Achieving MTO 

AT 

BE 

BG 

CY 

CZ 

DE 

DK 

EE 

EL 

IE 

ES 

FR 

HR 

HU 

IT 

LT 

LU 

LV 

MT 

NL 

12  Both  the  ‘imbalances’  and  ‘excessive  imbalances’  categories  entail  specific  monitoring,  to  be  modulated 
depending on the severity of the challenges. 
13 The achievement of the MTO and the applicability of the (transitional) debt rule refer to 2018 based on the 
Commission 2018 autumn forecast.   
14 Debt rule: If the 60% reference for the debt-to-GDP ratio is not respected, the Member State concerned will be 
put  in  the  Excessive  Deficit  Procedure,  after  taking  into  account  all  relevant  factors  and  the  impact  of  the 
economic cycle, if the gap between its debt ratio and the 60% reference is not reduced by 1/20th annually (on 
average over three years).  
15 Transitional debt rule: each Member State  in the Excessive Deficit Procedure is granted a three-year period 
following the correction of the excessive deficit for meeting the debt rule. This does not mean that the debt rule 
does not apply during this period as Member States should make sufficient progress towards compliance during 
this transitional period. A negative assessment of progress made towards compliance with the debt benchmark 
during the transition period could lead to the opening of an Excessive Deficit Procedure.   

17 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                            
PL 

PT 

SI 

SE 

SK 

RO 

FI 

UK 

Imbalances 

Imbalances 

Imbalances 

Preventive arm 
Not at MTO 
Preventive arm  
Not at MTO; subject to transitional debt rule 
Preventive arm  
Not at MTO; subject to transitional debt rule 
Preventive arm  
Achieving MTO 
Preventive arm  
Not at MTO 
Preventive arm  
Subject to significant deviation procedure 
Preventive arm  
Not at MTO; subject to debt rule 
Preventive arm  
Not at MTO; subject to transitional debt rule 

Distance from MTO in 2018 less than 
allowance  granted for unusual events 
and structural reforms  

(*) The Recommendations under the '2-pack' (Reg. No 473/2013) regarding measures to be taken in order to ensure a timely correction of its excessive 
government deficit only concern euro area Member States. 

18 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
APPENDIX 2: PROGRESS TOWARDS EUROPE 2020 TARGETS 

targets  

2020 

Europe 
for the EU 
1.  Increasing  the  employment 
rate  of  the  population  aged  20-
64 to at least 75 % 
2.  Increasing  combined  public 
and private investment in R&D 
to 3 % of GDP 
3a.  Reducing  greenhouse  gas 
emissions  by  at 
least  20 % 
compared to 1990 levels 
3b.  Increasing 
renewable 
energy consumption to 20 % 
3c.Moving 
target in energy efficiency 

the  share  of 
final 
in 

towards  a  20 % 

energy 

4a.  Reducing  the  rate  of  early 
leavers 
from  education  and 
training  (ages  18-24)    to  less 
than 10 % 
4b.  Increasing  the  share  of  the 
population  aged  30-34  having 
completed  tertiary  education  to 
at least 40 % 
5.  Lifting  at  least  20  million 
people out of the risk of poverty 
and social exclusion 

2010 data 

Latest available data 

68.6 % 

73.5 % (Q3 2018) 

In 2020, based on recent 
trends 
Target likely to be met 

1.93 % 

2.07 % (2017) 

Target unlikely to be met 

14.2 % reduction 

22 % reduction 

Target likely to be met 

12.5 % 

17.5 % (2017) 

Target likely to be met 

11.8 % (distance 
to 2020 target for 
primary energy 
consumption) 
13.9 % 

5.26 % (2017) 

Target likely to be met 

10.6 % (2017) 

Target likely to be met 

33.8 % 

39.9 % (2017) 

Target likely to be met 

1.4 million 
increase 
(compared to the 
2008 base year) 

5.2 million decrease 
(compared to the 2008 
base year) in 2017

Target unlikely to be met 

19 

 
 
 
 
 
 
 
 
 
 
APPENDIX 3 — FINDINGS FROM IN-DEPTH-REVIEWS BY MEMBER STATE 

Bulgaria is experiencing imbalances. Vulnerabilities in the financial sector are coupled with 
high indebtedness and non-performing loans in the corporate sector. The net external position 
has  improved  on  the  back  of  robust  growth  and  large  current  account  surpluses.  Steps  have 
been  taken  to  strengthen  the  stability  of  the  financial  sector.  Banks  and  other  financial 
corporations  have  made  further  progress  in  implementing  the  recommendations  addressed 
after  the  asset  quality  and  balance  sheet  reviews  and  supervision  has  been  strengthened. 
However, fragilities linked to weak governance, asset quality and supervision remain, while 
new  challenges  are  emerging  in  the  insurance  sector.  The  robust  growth  has  supported 
continuous  private  deleveraging  and  further  decreases  in  non-performing  loan  ratios,  but 
stocks  of  non-performing  loans  in  the  corporate  sector  are  still  elevated.  While  there  is 
progress  in  addressing  sources  of  imbalances,  the  full  implementation  and  monitoring  of 
recent reforms to supervision and governance in the bank and non-bank financial sectors will 
be  crucial.  More  action  is  also  needed  to  reduce  the  stock  of  non-performing  loans  and  to 
complete the reform of the insolvency framework.  

Cyprus  is  experiencing  excessive  imbalances.  A  very  high  share  of  non-performing  loans 
burdens the financial sector and high stock of private, public, and external debt hangs on the 
economy, in a context of still relatively high, even though declining, unemployment and weak 
potential  growth.  The  current  account  deficit  is  significantly  negative,  even  taking  into 
account the presence of special purpose entities, reflecting strong domestic demand as well as 
the  negative  saving  among  households,  and  is  not  adequate  to  guarantee  a  sustainable 
adjustment of the large stock of net external liabilities. Deleveraging of private sector debt is 
ongoing but only slowly. New lending to the private sector remains limited. The transfer of a 
significant portfolio of non-performing loans from the Cyprus Cooperative Bank to the public 
sector in the context of the bank's sale and wind-down reduced significantly the share of non-
performing loans in the banking system. However, non-performing loans remain high for both 
households and corporations. The government support in the sale of the Cyprus Cooperative 
Bank  had  a  one-off  increasing  impact  on  public  debt  in  2018.  Looking  forward,  the  high 
public  debt  is  expected  to  be  on  a  declining  path  on  the  back  of  a  continued  strong  fiscal 
performance. Compared to last year, the reform momentum has been stepped up especially on 
the  front  of  measures  to  address  the  vulnerabilities  from  non-performing  loans,  but  more 
progress is needed on structural reforms to increase the growth potential.  

Germany is experiencing imbalances. The high and slowly declining current account surplus 
reflects  a  subdued  level  of  investment  relative  to  saving  in  both  the  private  and  the  public 
sector  and  has  cross-border  relevance.  This  is  in  spite  of  an  increasing  need  for  investment 
and innovation to make the German economy more resilient and to ensure a sustainable and 
inclusive growth model. The surplus slightly narrowed in 2018 in the context of a pick-up in 
domestic demand and is expected to continue to decline gradually in the coming years while 
remaining at a historically high level. Private and public investment have increased noticeably 
and  there  is  a  shift  towards  more  domestic  demand-driven  growth.  Yet  investment  but  also 
consumption remain muted as a share of GDP despite the favourable financing conditions, the 
persistent infrastructure and education investment needs, especially at municipal level and the 
available  fiscal  space.  The  budget  surplus  grew  in  2018  and  the  debt  ratio  declined  further. 
Wage  growth  increased  somewhat  with  the  tightening  labour  market,  yet  real  wage  growth 
remains  modest.  While  a  number  of  measures  have  been  taken  to  strengthen  private  and 
public  investment,  more  efforts  are  needed  to  clear  the  large  investment  gap  particularly  as 

20 

 
 
 
regards  public  investment  in  infrastructure  and  education.  There  has  been  less  progress  in 
other policy areas. 

Greece is experiencing excessive imbalances. Vulnerabilities are linked to high government 
indebtedness,  the  negative  external  position,  the  high  share  of  non-performing  loans, 
incomplete external rebalancing, in a context of high although declining unemployment and 
low potential growth. Greece managed to successfully exit the European Stability Mechanism 
support  programme  in  August  2018  after  making  substantial  improvements  in  recent  years. 
Nonetheless,  large  stock  imbalances  remain,  including  a  deeply  negative  net  international 
investment  position  that  is  still  deteriorating  amid  moderate  nominal  GDP  growth  and  a 
current account balance that remains negative. There have been considerable improvements in 
cost  competitiveness  in  past  years  which  stalled  recently  in  light  of  subdued  productivity 
growth.  While  the  level  of  public  debt  remains  high,  it  is  mostly  held  by  the  official-sector 
creditors  and  financing  needs  will  be  relatively  low  for  at  least  a  decade.  The  pace  of  debt 
reduction  crucially  depends  on  the  continued  achievement  of  the  agreed  fiscal  targets  and 
implementation  of  reforms  to  generate  a  sustainable  increase  in  the  growth  potential.  The 
financial  sector  is  vulnerable  due  to  a  very  large  stock  of  non-performing  loans  and  a  low 
profitability,  hampering  credit  growth  and  the  recovery  of  investment.  Private  debt  is 
decreasing  while  active  deleveraging  is  still  ongoing.  Wide-ranging  measures  were  taken 
during the financial assistance programmes to address many of the structural weaknesses of 
the  Greek  economy.  On  top  of  consolidating  earlier  reforms  and  adjustment  efforts,  the 
authorities  have  committed  to  ensure  continuity  and  completion  of  reforms,  which  are 
monitored in the framework of enhanced surveillance. 

Ireland is experiencing imbalances. Large stocks of private and public debt and net external 
liabilities  constitute  vulnerabilities.  However,  stock  imbalances  are  under  substantial 
correction.  The  activities  of  multinational  firms  with  little  connection  to  the  domestic 
economy heavily influence net foreign liabilities which are falling on the back of large current 
account surpluses. The stock of private debt remains high but economic growth continues to 
support private deleveraging. The activities of multinational enterprises continue to influence 
corporate debt. Household debt appears broadly in line with fundamentals although it is high 
compared  with  disposable  income.  Government  debt  is  projected  to  remain  on  a  downward 
trajectory, while the deficit is moving closer to a balanced position. House  prices have been 
growing at a rapid pace for a number of years but have slowed down recently. House prices 
are largely driven by supply constraints and there is no clear evidence of overvaluation. The 
stock  of  non-performing  loans,  although  still  high,  has  decreased  further  even  if  long-term 
arrears  are  falling  at  a  slower  pace.  Policy  action  addressing  these  vulnerabilities  has  been 
taken, notably in the field of housing supply and macroprudential policy, but some measures 
will take time to generate the expected effects. 

Spain is experiencing imbalances. Though economic growth remains robust, large stocks of 
external and internal debt, both public and private, continue to constitute vulnerabilities in a 
context of, still high unemployment and have cross-border relevance. The rebalancing in the 
external sector has continued even if the current account surplus weakened in 2018, reflecting 
factors  linked  to  the  global  environment.  Sustained  current  account  surpluses  over  an 
extended period of time will be needed to bring net external liabilities down to prudent levels. 
Debt reduction for the private sector also progressed, on the back of robust nominal growth. 
The non-performing loans ratio has decreased further. Public debt has decreased slightly, with 
narrowing deficits forecast to support its further gradual reduction. Still, further efforts will be 

21 

 
 
 
 
needed to bring public finances onto a more sustainable path.  Unemployment has continued 
its  decline,  but  remains  high.  Implementation  of  policy  action  to  raise  potential  growth  has 
been slow. Challenges remain, in particular concerning labour market segmentation, research 
and innovation, and business regulation, notably for services.  

France  is  experiencing  imbalances.  Vulnerabilities  stem  from  high  public  debt  and  weak 
competitiveness dynamics in a context of low productivity growth, which carry cross-border 
relevance.  Government  debt  was  broadly  stable  in  2018,  although  at  an  elevated  level.  It  is 
forecast  to  recede  only  marginally.  The  high  level  of  public  debt  reduces  the  fiscal  space 
available  to  respond  to  future  shocks  and  weighs  on  growth  prospects.  Unit  labour  cost 
increases continue to be moderate in a context of low productivity growth. Some elements of 
the business environment still weigh on non-cost competitiveness. Reforms have been taken 
in  recent  years,  with  progress  on  several  fronts  including  labour  markets,  taxation  and 
business  environment.  However,  the  effects  of  these  reforms  still  have  to  fully  materialise 
while  further  action  is  warranted  in  other  fields,  such  as  the  reform  of  the  unemployment 
benefit  system,  the  reform  of  the  pension  system,  and  the  spending  review  to  ensure  the 
sustainability of public finances and to enhance the growth potential. 

Croatia  is  experiencing  imbalances.  Remaining  vulnerabilities  are  linked  to  high  levels  of 
public,  private  and  external  debt  in  a  context  of  low  potential  growth.  However,  they  have 
been  narrowing  over  the  past  years.  This  was  supported  by  robust  nominal  growth,  above 
estimated  potential,  and  a  prudent  fiscal  policy.  The  negative  net  external  position  remains 
large,  but  has  been  improving  due  to  continued  current  account  surpluses.  Private  sector 
deleveraging  is  ongoing,  though  its  pace  is  set  to  abate  as  credit  growth  and  investment 
recover.  The  budget  balance  has  been  in  surplus  since  2017  and  public  debt  has  declined 
notably since its 2014 peak. The financial sector is well-capitalised and profitable while non-
performing  loans,  although  declining,  remain  elevated.  The  foreign  currency  exposure  of 
corporations and households has reduced, but remains a vulnerability. Policy action has been 
stepped  up  with  the  adoption  of  a  pension  reform  and  new  legislation to  improve  the  fiscal 
framework.  Other  relevant  policy  measures  are  in  the  pipeline  and  their  thorough 
implementation remains crucial for strengthening the resilience of the economy. 

Italy  is  experiencing  excessive  imbalances.  High  government  debt  and  protracted  weak 
productivity dynamics imply risks with cross-border relevance, in a context of still high level 
of non-performing loans and high unemployment. The government debt ratio is not expected 
to  decline  in  the  coming  years,  as  the  weak  macroeconomic  outlook  and  the  government's 
current  fiscal  plans,  though  less  expansionary  than  its  initial  plans  for  2019,  will  entail  a 
deterioration  of  the  primary  surplus.  Cost  competitiveness  is  stable,  but  weak  productivity 
growth persists. This is rooted in long-standing issues with the functioning of labour, capital 
and  product  markets,  compounded  by  weaknesses  in  the  public  administration  and  justice 
system,  which  drags  down  potential  GDP  growth.  The  stock  of  non-performing  loans  has 
continued  to  decline  significantly,  but  maintaining  the  pace  of  reduction  of  non-performing 
loan could prove challenging given market conditions.  Higher sovereign yields compared to 
the  levels  of  early  2018  are  affecting  banks'  funding  costs  and  capital  buffers  weighing  on 
lending  to  the  rest  of  the  economy  and  on  GDP  growth.  Despite  some  progress  in  banks’ 
balance  sheet  repair,  insolvency  reforms  and  active  labour  market  policies,  the  reform 
momentum  broadly  stalled  in  2018.  The  2019  budget  includes  policy  measures  that  reverse 
elements  of  previous  important  reforms,  in  particular  in  the  area  of  pensions,  and  does  not 
include effective measures to increase potential growth.  

22 

 
 
 
 
The  Netherlands  is  experiencing  imbalances.  The  high  stock  of  private  debt  and  the  large 
current  account  surplus  constitute  sources  of  imbalances,  with  cross-border  relevance.  The 
surplus peaked in 2017 at a very high level, and it is expected to decline gradually although 
remaining  very  elevated.  Part  of  the  external  surplus  can  be  attributed  to  statistical  features 
linked  to  the  role  of  multinational  companies  and  is  not  expected  to  attenuate  in  the  near 
future.  Supported  by  economic  growth,  the  private  debt-to-GDP  ratio  has  continued  its 
trend  both  for  corporate  and  households,  although  remaining  elevated. 
downward 
Nevertheless,  nominal  household  debt  is  slowly  increasing  on  the  back  of  dynamic  house 
price  growth.  Wage  growth  has  so  far  been  moderate  despite  the  tightening  labour  market. 
Recent reforms, such  as  the speeding-up of the reduction of mortgage  interest deductibility, 
are  expected  to  reduce  the  debt  bias  for  households,  while  fiscal  stimulus  is  expected  to 
contribute to support aggregate demand. 

Portugal is experiencing imbalances. The large stocks of net external liabilities, private and 
public debt, and a high share of non-performing loans constitute vulnerabilities in a context of 
low  productivity  growth.  The  current  account  is  broadly  balanced  but  a  continued  prudent 
position and the maintenance of competitiveness gains are required to ensure the adjustment 
of net external liabilities to prudent levels. Private debt ratios continue to decline from high 
levels on the back of nominal growth with a reduced role of active deleveraging. Government 
debt  started  declining  as  from  2017  backed  by  primary  surpluses  while  remaining  elevated. 
Risks  in  the  banking  sector  have  diminished  including  in  light  of  recapitalisations  of  major 
banks in 2017 and a recent improvement in profitability. The large stock of non-performing 
loans has decreased but remains comparatively high. Ensuring higher productivity growth is 
key for improved prospects in competitiveness, deleveraging and potential growth. The labour 
market adjustment has progressed further and unemployment has been decreasing at a strong 
pace  for  several  years.  There  has  been  policy  action  to  address  the  level  of  non-performing 
loans  but  policy  gaps  remain  in  other  areas,  such  as  product  and  service  markets.  The 
adoption  and  implementation  of  several  reform  plans,  including  fiscal-structural  reforms  to 
improve the sustainability of public finances, will need to be monitored. 

Sweden is experiencing imbalances. Overvalued house price levels coupled with a continued 
rise  in  household  debt  poses  risks  of  a  disorderly  correction.  The  high  household  debt  has 
continued  to  grow  as  a  share  of  GDP.  There  has  been  a  correction  of  house  prices  in  the 
second  half  of  2017  which  have  since  then  gradually  stabilised.  Nevertheless,  valuation 
indicators  suggest  that  house  prices  remain  high  relative  to  fundamentals.  Although  the 
banking sector appears adequately capitalised, a disorderly correction would negatively affect 
the  financial  sector  given  the  large  exposure  to  household  mortgages.  In  such  a  case,  there 
could  also  be  negative  spill-overs  to  neighbouring  countries  given  the  systemic  financial 
interlinkages.  Structural  bottlenecks  for  housing  supply  persist  and  construction  output  has 
weakened. Although measures have been taken in recent years in the macro prudential field to 
address  mortgage  debt  growth,  the  impact  appears  so  far  limited.  Key  policy  gaps  remain, 
particularly in relation to tax incentives for home ownership and the functioning of housing 
supply and the rental market. 

Romania  is  experiencing  imbalances.  Vulnerabilities  are  linked  to  cost  competitiveness 
losses and a widening current account deficit in a context of an expansionary fiscal policy and 
an  unpredictable  business  environment.  Recent  legislative  initiatives  create  risks  for  the 
functioning  of  the  financial  sector  and  may  harm  private  investment.  The  current  account 

23 

 
 
 
 
 
deficit has been growing on the back of buoyant imports, mainly for consumption purposes, 
and  is  forecast  to  widen  further.  The  strong  nominal  GDP  growth  has  nevertheless  implied 
that the negative Net International Investment Position has been improving for some years but 
this  may  stall  with  the  persistency  of  the  current  account  deficits  and  lower  GDP  growth 
looking forward. Demand is fuelled by strong wage growth, inter alia linked to hikes in public 
wages  and  the  minimum  wage,  which  has  translated  into  very  substantial  increases  in  unit 
labour  costs.  Despite  cost  competitiveness  losses,  so  far  export  market  shares  have  been 
growing.  The  expansionary  fiscal  stance,  in  a  context  of  strong  GDP  growth,  is  forecast  to 
continue  thus  contributing  to  buoyant  private  consumption  dynamics.  After  declining  for 
some  years,  the  government  debt  ratio  is  projected  to  increase.  Frequent  and  unpredictable 
legislative changes contribute to a weaker and uncertain business environment, with negative 
repercussions on business decisions and investment. Recent legislative initiatives with impact 
on  banks’  risk  threaten  the  functioning  of  the  financial  sector  and  may  hinder  investment 
through both a tighter credit market and a shallower capital market with weaker institutional 
investors. In other areas, progress with reforms has slowed down or reversed. 

24 

 
 
 
APPENDIX 4 — INVESTMENT BARRIERS IN MEMBER STATES 

25