COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK 2019 European Semester: country-specific recommendations
Date: 2019-06-05
Institutions: European Commission, Secretariat-General
Subjects: EU Member State, economic growth, economic policy, economic reform, employment policy, fiscal policy, investment policy, social policy, stability pact, stability programme

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 5.6.2019  COM(2019) 500 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK   2019 European Semester: country-specific recommendations  
 
 
1. 

INTRODUCTION 

The European economy is growing for the seventh consecutive year. During the Juncker 
Commission,  investment  has  gone  back  to  pre-crisis  levels;  the  number  of  people  in 
employment has reached the highest level ever recorded and public debt has declined overall. 

The European economy will continue its expansion this and next year, with all Member 
States  registering  positive  rates  of  growth,  despite  less  favourable  conditions.  The 
European  economy  was  affected  last  year  by  global  weaknesses  in  a  context  of  persistent 
trade  tensions,  elevated  uncertainty  and  a  significant  tightening  of  international  financial 
conditions at the turn of the year. Domestic demand should continue to be the main driver of 
economic growth this and next year, supported by further rises in employment and incomes, 
low financing costs and supportive fiscal measures in some Member States.  

Effective  structural  reforms,  accompanied  by  well-targeted  investment  strategies  and 
responsible fiscal policies, continue to provide a successful compass for modernising the 
European  economy.    The  country-specific  recommendations  adopted  in  the  context  of  the 
European  Semester  provide  guidance  to  Member  States  to  respond  adequately  to  persisting 
and  new  challenges  and  deliver  on  their  shared  key  policy  objectives.  It  is  crucial  in  the 
context of the European Semester to continue the push for the “virtuous triangle” of boosting 
investments,  pursuing  effective  reforms  that  foster  sustainable  and  inclusive  growth,  and 
include  guidance  on 
sound  fiscal  policies.  Country-specific  recommendations  also 
strengthening the performance and governance of our Economic and Monetary Union as well 
as  the  resilience  of  euro  area  economies  in  line  with  the  2019  recommendation  on  the 
economic  policy  of  the  euro  area1,  and  advancing  social  convergence  in  line  with  the 
European Pillar of Social Rights. 

The weaknesses in global growth reinforce the need to continuously tackle the structural 
challenges  of  the  EU  economies.  A  stronger  reform  implementation  and  prioritisation  of 
reforms are crucial to strengthen the resilience and growth potential of our economies in view 
of the mounting economic risks and uncertainty. This includes increasing the impact and scale 
of innovation and ensuring the quality and labour market relevance of skills. Fostering social 
inclusion, protecting and promoting investment, and raising the quality of public finances are 
key  to  smoothen  the  impact  of  slower  growth  on  employment  and  inequality.  The  slowing 
economic momentum also underscores the need for a more symmetric rebalancing across the 
euro area. Member States should continue to improve the sustainability of public finances in 
particular where debt ratios are high. At the same time, those Member States with available 
fiscal  space  and  low  levels  of  investments  should  use  it  to  support  growth  potential. 
Strengthening the single market and improving the complementarities between single market 
policies  and  national  structural  reforms  will  contribute  to  improving  the  productivity  and 
resilience  of  the  EU  economy.  On  the  global  level,  the  renewed  EU  strategy  on  China 
highlights major opportunities for job creation and growth in Europe2

. 

Investment  and  reforms  need  to  go  hand  in  hand.  With  this  package,  the  Commission 
particularly aims to ensure that investment and reforms are further aligned and provide a more 
coherent  policy  framework.  In  line  with  the  enhanced  Commission  analysis  on  investment 

1 https://data.consilium.europa.eu/doc/document/ST-5097-2019-INIT/en/pdf 
2 https://ec.europa.eu/commission/sites/beta-political/files/communication-eu-china-a-strategic-outlook.pdf    

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needs and bottlenecks faced by each Member State in the country reports, the 2019 country-
specific recommendations include a stronger focus on investment.  

While  not  all  investment  needs  can  be  addressed  by  EU  funds,  these  provide 
considerable opportunities to addressing the concrete investment gaps identified  in the 
country-specific  recommendations.  With  the  more  effective  policy  link  between  the 
European Semester and EU funding for 2021-2027 as set out in the Commission’s proposals 
for  the  next  EU  multiannual  financial  framework,  EU  financial  programmes  like  InvestEU, 
Connecting Europe Facility, Horizon Europe and Cohesion Policy Funds provide significant 
opportunities. In particular, the exercise of programming the next EU cohesion policy funds is 
crucial. The dialogue with national and regional authorities on how to better use the European 
Structural and Cohesion Funds3 at national level for the period 2021-2027 has just started and 
the  country-specific  recommendations,  together  with  the  Country  Reports,  provide  the 
analytical framework for a successful programming. 

2.  ECONOMIC OUTLOOK, OVERALL PROGRESS IN REFORMS AND CORRECTING 

IMBALANCES  

The  European  Union’s  economy  is  expected  to  continue  growing  this  and  next  year, 
albeit  at  a  slower  pace.  The  expected  slowdown  in  the  economic  growth  in  2019  is  partly 
due  to  the  sizeable  negative  impact  of  the  external  environment  on  export-oriented  sectors. 
Some  country-  and  sector-specific  factors  (e.g.  in  the  car  industry)  have  also  affected 
manufacturing  figures  in  some  large  European  economies.  Domestic  policy  uncertainty  and 
reform  reversal  has  weighted  on  confidence  and  growth  prospects  in  some  countries. 
Additional jobs, coupled with moderately rising wages for employees, are expected to support 
consumption  and  economic  activity  while  uncertainty  about  economic  prospects  keeps 
weighing on sentiment. Investment is set to continue expanding, but at a slower pace due to 
the less favourable external environment and the levels of uncertainty regarding trade policies. 
Overall,  favourable  financing  conditions  and  supportive  fiscal  measures  in  some  Member 
States should further sustain domestic demand growth. 

While the fundamentals have significantly improved in recent years, we need to continue 
improving the resilience and growth potential of the European economy. It is crucial to 
raise  potential  growth  and  reinforce  the  fiscal  space  to  counter  future  negative  economic 
shocks. Given the large and interrelated risks surrounding the economic outlook, efforts need 
to be stepped up to address structural challenges and weaknesses that the softening economic 
momentum may bring more to the fore. Promoting and protecting investment in education and 
skills,  quality  infrastructure  and  innovation  will  simultaneously  strengthen  the  growth 
potential  of  our  economies  and  support  aggregate  demand.  Fostering  respect  for  the  rule  of 
law, in  particular independent  justice systems  and robust anti-corruption  frameworks is  also 
crucial in this context. As regards public finances, high-debt countries should pursue policies 
that  increase  fiscal  buffers  and  put  debt  ratios  on  a  sustained  downward  path.  At  the  same 
time, it is important to use now the fiscal space where it exists. Specific attention should be 
paid to the growth-friendliness and redistributive effects of expenditures and the tax system in 
all  Member  States.  Finally,  a  more  symmetric  rebalancing  across  the  euro  area  will  contain 
the  negative  impact  of  debt  deleveraging  on  growth  and  make  our  economic  performance 
depend less on external demand.  

3 The EU Cohesion Policy Funds refer to the European Regional Development Fund, the European Social Fund+ 

and the Cohesion Fund  

2 

 
 
 
                                           
More  than  two  thirds  of  the  country-specific  recommendations  issued  until  2018  have 
been  implemented  with  at  least  ‘some  progress’  (see  Figure  1).  Implementation  of  the 
various recommendations agreed with Member States since 2011 continues on a stable path. 
In some cases there is evidence of backtracking on elements of major reforms adopted in the 
past.  Most  progress  has  been  achieved  in  financial  services,  followed  by  progress  with 
legislation  governing  labour  relations  and  employment  protection.  Progress  has  been 
particularly  slow  on  broadening  the  tax  base,  health  and  long-term  care,  as  well  as  on 
competition in services.  

Figure 1: Level of implementation today of 2011-2018 CSRs 

Note: The  multiannual  assessment  looks  at  implementation  from  the  time  the  recommendations  
were first  adopted  until publication of this Communication in May 2019. The overall assessment of 
the  country-specific  recommendations  related  to  fiscal  policy  includes  compliance  with  the  Stability 
and Growth Pact. 

Looking at reform progress  from an annual perspective, Member States have made at 
least  'some  progress'  in  4  out  of  10  of  the  recommendations  addressed  to  them  in  July 
2018 (see Figure 2). This performance is worse than in previous years. Since the assessment 
carried  out  in  the  context  of  the  country  reports  in  February,  no  significant  further  reform 
progress has been made from an aggregate perspective. This however hides differences across 
Member States and policy areas. Reform implementation continues to be strong in financial 
services,  even  if  progress  is  somewhat  smaller  compared  to  the  bold  steps  taken  in  the 
immediate aftermath of the crisis. Progress remains low in addressing recommendations about 
broadening the tax base and strengthening competition in services. In view of the remaining 
economic and social challenges and downside risks to the economic outlook, stronger reform 
implementation is crucial to strengthen the resilience of EU economies.  

3 

 
 
Figure  2:  Implementation  of  country-specific  recommendations:  annual  assessment  in  each 
consecutive year since 2011 versus implementation to date  

Note: The multiannual assessment looks at implementation from the time the recommendations were 
first adopted until publication of this Communication in May 2019. For the years 2011 and 2012 it is 
more difficult to compare the annual with the multiannual assessment due to different assessment of  
categories of the country–specific recommendations. 

The  progress  in  the  correction  of  macroeconomic  imbalances  continues  but  further 
policy action is needed. Some Member States continue to record private and public debts at 
historically high levels, which reduce the latitude for manoeuvre to address negative shocks. 
Some  other  Member  States  see  signs  of  possible  overheating  related  to  the  dynamic  house 
price  growth  and  raising  unit  labour  costs.  The  rebalancing  of  external  positions  remains 
incomplete. While large external deficits have been corrected, large current account surpluses 
despite  some  modest  signs  of  adjustment  persist  in  several  countries.  The  large  euro  area 
current  account  surplus  remains  broadly  unchanged,  reflecting  on  the  one  hand  aggregate 
domestic demand lagging behind economic activity, and improved competitive position with 
sustained exports on the other. Further rebalancing requires differentiated responses. Member 
States  with  current  account  deficits  or  high  external  debt  need  to  sustain  improvements  in 
competitiveness, while Member States with large current account surpluses should strengthen 
the  conditions  that  support  higher  wage  growth  and  investment.  For  all  Member  States, 
measures to enhance productivity and increase investment are key to promote higher potential 
growth.  

3.  KEY OBJECTIVES OF THE 2019-2020 RECOMMENDATIONS 

The  overall  objective  of  the  recommendations  is  to  encourage  the  Member  States  to 
increase their growth potential by modernising their economies and further strengthen 
their resilience. Given the expected slowdown, all Member States should prioritise reforms 
aiming  at  sustainable  and  inclusive  growth.  Moreover,  the  increasingly  digitalised  and 
globalised  economies  require  smarter  investments  in  relevant  infrastructure,  innovation, 
education  and  skills.  Furthermore,  digitalisation,  the  changing  labour  market  and  ageing 

4 

 
 
population and the greening of the economy require additional efforts to support the creation 
of quality jobs and ensure sustainable, adequate and inclusive social welfare systems. 

National  socio-economic  trends  hide  regional  differences  that  are  significant  in  some 
countries.  Looking  backward,  the  benefits  of  economic  growth  have  not  spread  equally 
across regions. Looking forward, the socio-economic challenges of the future do not affect all 
parts of society in the same way. Thus, building upon the findings of the 2019 country reports, 
this  year’s  recommendations  have  references  to  regional  and  territorial  disparities  where 
relevant.  The  aim  is  to  better  identify  specific  investment  needs  and  promote  accelerated 
economic and social convergence with the help of those investments that will be co-financed 
by the EU cohesion policy funds in the period 2021-2027. 

Increasing uncertainties in global markets are underlining the importance of the single 
market. The good functioning of the single market is essential to facilitate high quality inputs 
to firms at a competitive price and to offer large and liquid markets to EU goods and services 
providers. The relatively lower level of integration in service markets has been the subject of 
attention  in  the  past,  but  the  pace  of  reforms  has  often  been  disappointing.  The  opportunity 
cost  of  insufficient  integration  in  service  markets  is  increasing  and  these  costs  spill  over 
across  Member  States.  In  addition,  improvements  are  also  possible  in  some  areas  of  goods 
markets, especially in the application of mutual recognition. Creating a genuine single market 
for  capital  in  Europe  through  the  Capital  Markets  Union  will  increase  the  ability  of  the 
financial  system  to  absorb  shocks,  by  diversifying  access  to  funding  for  businesses,  and 
promote  new  investment  opportunities.  The  consolidation  of  the  single  market  requires 
additional  reform  efforts  at  Member  State  level  to  make  progress  in  the  integration  of  its 
digital,  energy,  capital  and  transport  dimensions.  For  instance,  Italy  is  recommended  to 
improve the quality of its infrastructure, taking into account its regional disparities.  

In  February  2019,  the  Commission  identified  imbalances  in  13  Member  States.   
Country-specific  recommendations  need  appropriate  follow-up  to  address  these  imbalances. 
Based  on  in-depth  reviews,  the  Commission  concluded  that  10  Member  States  experience 
imbalances  for  the  purposes  of  the  macroeconomic  imbalance  procedure  (Bulgaria,  Croatia, 
France, Germany, Ireland, Portugal, the Netherlands, Romania Spain, and Sweden) and three 
Member States experience excessive imbalances (Cyprus, Greece, and Italy).4  

 

In the case of Croatia, it was concluded that the imbalances are no longer excessive in 
view of improvements in the economic situation and policy progress.  

  Greece  was  subject  to  an  in-depth  review  for  the  first  time  after  having  exited  the 
financial  assistance  programme  and  policies  to  address  imbalances  are  monitored 
under an enhanced surveillance framework for post-programme surveillance.  
In  Cyprus,  significant  vulnerabilities  persist  despite  an  improved  economic  context 
and some recent stepping up of policy commitments. 

 

  In  Italy,  prospects  for  growth  and  public  finances  have  worsened,  and  recent  policy 
measures enacted backtrack on elements of previous reforms, including relating to the 
pension system. The Commission announced in February that since the aggravation or 
alleviation  of  macroeconomic  imbalances  for  Italy  will  crucially  depend  on  future 

4 Communication from the Commission to the European Parliament, 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, 
COM(2019) 150 final. 

5 

 
                                           
policy  action,  it  will  monitor  closely  the  commitments  taken  by  Italy  to  address  its 
imbalances.  In  this  respect,  Italy’s  2019  National  Reform  Programme  only  partly 
addresses the structural  issues raised by the 2018 country-specific recommendations, 
and  details  on  the  few  new  commitments  it  contains,  as  well  as  on  the  timeline  for 
their implementation, are often missing. However, its reform strategy builds on major 
reforms already in the pipeline in different areas, showing broad continuity compared 
to past National Reform Programmes. 

As in previous years, specific monitoring under the macroeconomic imbalance procedure will 
also take place for all countries with identified imbalances or excessive imbalances. 

Public finances and taxation 

Government debt is declining, but progress is uneven among Member States. Some have 
insufficiently taken advantage of the favourable cyclical conditions and low interest rates in 
recent  years  to  rebuild  fiscal  buffers.  Others  have  reached  sound  budgetary  positions, 
providing  them  with  fiscal  space  to  support  investment.  On  aggregate,  the  euro  area  fiscal 
stance remained broadly neutral over 2015–2018 and, based on the Commission forecast, it is 
projected to become slightly expansionary in 2019. 

Government  debt  remains  high  in  several  Member  States.  The  impact  of  an  ageing 
population  poses  additional  challenges  and  calls  for  continued  reforms  of  the  pension, 
healthcare and long-term care systems to increase their efficiency, effectiveness and adequacy 
and  preserve  their  long-term  fiscal  sustainability.  Pension  reforms  aimed  at  adapting  the 
balance  between  working  life  and  retirement  and  supporting  complementary  retirement 
savings  remain  essential.  Where  necessary,  welfare  system  reforms  need  to  be  agreed 
promptly taking into account their impact on the affected groups. Experience has proven that 
those areas are among the most challenging to reform, which is why the reform process need 
to  be  set  in  motion  without  delay.  At  the  same  time,  it  needs  to  entail  an  enhanced 
consultation with stakeholders from the start. Reform reversals should be clearly avoided and 
corrected  as  this  could  jeopardise  fiscal  sustainability,  reduce  growth  potential  and 
intergenerational fairness. 

The  strengthening  of  fiscal  sustainability  of  the  euro  area  and  its  Member  States 
requires differentiated national fiscal policies. Available fiscal space and spillovers across 
countries need to  be taken into account.  Member States with  still high levels  of public debt 
should continue to rebuild fiscal buffers. Doing so would reduce their vulnerability to shocks 
and allow for the full functioning of automatic stabilisers in the next downturn. The country-
specific recommendations set a required fiscal adjustment effort consistent with the Stability 
and Growth Pact for Member States that have not  yet reached their medium-term budgetary 
objective.  Member  States  with  adequate  scope  are  also  recommended  to  use  fiscal  and 
structural  policies  within  the  rules  of  the  Stability  and  Growth  Pact  to  increase  public 
investment to support growth and facilitate economic rebalancing. 

Improving the quality of public spending could enhance the ability of public finances to 
support growth and social cohesion. Moving towards a structure of public expenditure and 
revenue that favours education, employment and investment is a means to increase the growth 
potential.  Alongside  efforts  to  keep  expenditure  in  check  and  improve  efficiency,  steps 
towards  a  growth-enhancing  composition  of  public  spending  should  therefore  continue. 
Provided  they  are  well  designed  and  rigorously  implemented,  spending  reviews  are  an 
effective tool to improve the composition of public expenditure, including by expanding the 

6 

 
room for productive  and well-targeted public investment.  While a large number of Member 
States  has  already  embarked  on  various  types  of  spending  reviews  (e.g.  Cyprus,  Estonia, 
Luxembourg, Slovakia and Spain), there is still scope to increase the use of such processes, 
expand their scope, improve the underpinning methodology and better link the reviews with 
the  budgetary  cycle.  Finally,  as  in  some  Member  States  reviews  have  been  successful  in 
identifying areas for improving spending efficiency, it is necessary to translate those findings 
into policy action. 

Over the years, Member States have significantly improved their fiscal frameworks and 
in many countries they support the conduct of sound fiscal policies. There is however a 
number of Member States where reforms have to continue with a view to establishing a well-
designed  and  effective  fiscal  framework.  Croatia  and  Spain  are  recommended  to  reinforce 
their budgetary frameworks, Austria and Belgium require further improvements of their fiscal 
coordination  arrangements,  whereas  further  strengthening  of  budgetary  procedures  is 
warranted  in  Poland.  At the  same  time,  in  other  Member  States,  reforms  have  stalled  and  a 
new  impetus  is  necessary  to  revive  the  reform  efforts.  In  addition,  continuous  focus  on 
implementation is key everywhere to ensure that fiscal frameworks deliver on their objective 
of achieving or maintaining sound fiscal policy. 

Tax and benefit systems can help support inclusive growth. Well-designed tax and benefit 
systems  can  support  private  investment  and  improve  the  business  environment,  encourage 
labour market participation and employment, reduce inequalities and contribute to a socially 
and  environmentally  resilient  economy.  In  this  light,  several  Member  States  received  a 
recommendation  to  shift  the  tax  burden  away  from  labour  to  encourage  more  sustainable 
economic growth. 

As the fight against aggressive tax planning is a priority, the Commission has presented 
legislative  proposals  to  make  the  tax  system  more  transparent,  effective  and  coherent. 
The  transposition  of  EU  legislation  and  of  internationally  agreed  initiatives  will  help 
curtailing  aggressive  tax  planning  practices.  Certain  features  of  some  Member  States’  tax 
systems,  i.e.  Cyprus,  Hungary,  Ireland,  Luxembourg,  Malta  and  the  Netherlands  however, 
may be used by companies that engage in aggressive tax planning. 

Box 1. Update on surveillance under the Stability and Growth Pact  

Based on the assessment of the 2019 Stability and Converge Programmes, the Commission has also 
taken a number of steps under the Stability and Growth Pact.  

The Commission recommends that the excessive deficit procedure is closed for Spain. There would be 
no more Member States under the corrective arm of the Pact.  

The  Commission  has  adopted  reports  for  France,  Belgium,  Cyprus  and  Italy  under  Article  126(3) 
TFEU, in which it reviews their compliance with the deficit and debt criteria of the Treaty. For France, 
the deficit and debt criteria should be considered as currently complied with. For Belgium, the current 
analysis is not fully conclusive as to whether the debt criterion is or is not complied with. Regarding 
Cyprus,  the  Commission  considers  that  further  steps  leading  to  a  decision  on  the  existence  of  an 
excessive deficit should not be taken. In the case of Italy, the analysis suggests that the debt criterion 
should be considered as not complied with and that a debt-based Excessive Deficit Procedure is thus 
warranted.  

The Commission also recommends the Council to decide that Hungary and Romania have not taken 
effective action in response to the Council Recommendation of December 2018 under the significant 
deviation  procedure.  For  Romania,  the  latter  was  opened  in  June  2017  following  the  observed 
significant  deviation  in  2016.  For  Hungary,  the  significant  deviation  procedure  was  opened  in  June 

7 

 
2018 following the observed significant deviation in 2017. Furthermore, the Commission is addressing 
warnings to Hungary and Romania on the existence of a significant deviation from the adjustment path 
toward the medium-term budgetary objective in 2018. This is the third warning addressed to Romania 
and  the  second  one  for  Hungary.  The  Commission  recommends  the  Council  to  adopt  a 
recommendation  for  Hungary  and  Romania  to  respond  appropriately  with  a  view  to  correcting  this 
significant deviation.  

Labour market, education and social policies 

Labour market conditions keep improving. EU employment rate figures are at record high 
levels,  and  unemployment  is  at  a  record  low  this  century.  At  the  same  time  there  are  still 
considerable  divergences  between  countries,  regions  and  population  groups.  In  order  to 
improve  the  functioning  of  the  labour  market,  targeted  interventions  to  strengthen  the 
effectiveness of active labour market policies and/or to reinforce the capacity of employment 
services are recommended to Belgium, Bulgaria, Cyprus, Finland, Greece, Hungary, Ireland, 
Slovenia  and  Spain.  Poland,  Portugal  and  Spain  should  tackle  the  high  share  of  workers  on 
temporary contracts, while promoting transitions towards open-ended jobs. 

Participation of women in the labour market continues to grow, but gender inequalities 
in  terms  of  employment  and  pay  persist.  This  is  often  caused  by  disincentives  to  work, 
insufficient  work-life  balance  arrangements  or  a  lack  of  affordable  childcare  and  long-term 
care facilities. Recommendations  on these issues have been addressed to  Austria, the Czech 
Republic, Estonia, Germany, Ireland, Italy, Poland, and Slovakia.  

Access to quality education and training is key to provide skills and competences to all 
citizens, in a life-long learning perspective that takes into account future needs. Investing 
in human capital is key to boosting knowledge-intensive, sustainable and inclusive growth, in 
a  context  of  rising  skills  shortages  and  mismatches  and  a  changing  world  of  work. 
Nevertheless,  skills  levels  remain  low  for  several  population  groups.  A  large  number  of 
Member States are therefore recommended to  strengthen and modernise their education and 
training systems. A future-oriented acquisition of skills, including measures to promote adult 
learning, should be considered for instance in Bulgaria, Croatia, the Czech Republic, Estonia, 
France,  Greece,  Ireland,  Italy,  Latvia,  Lithuania,  Poland,  Portugal,  Slovakia  and  Slovenia. 
Recommendations  have  been  addressed  to  Belgium,  Bulgaria,  Cyprus,  Croatia,  Greece, 
Lithuania,  Portugal,  Romania  and  Spain  to  improve  labour  market  relevance  of  their 
education and training systems. Spain is also recommended to reduce early school leaving and 
Cyprus,  Greece  and  Latvia  to  increase  the  capacity  of  vocational  education  and  training. 
Additional  efforts  to  improve  quality  and  inclusiveness  of  education  and  training  systems, 
with particular attention to disadvantaged groups are needed in several Member States, while 
the Czech Republic and Italy should strengthen the attractiveness of the teaching profession. 

The  social  situation  continues  to  improve,  but  gaps  in  coverage  of  social  protection 
systems  and  access  to  services  persist.  Poverty  is  declining,  but  it  remains  high  in  some 
Member  States.  In-work  poverty  is  also  a  challenge  in  several  Member  States.  Moreover, 
some  disadvantaged  groups,  such  as  people  with  disabilities  and  people  with  a  migrant 
background, face persistent challenges. Ensuring adequate access to social protection for non-
standard  workers  and  self-employed  is  crucial  for  the  wellbeing  of  the  workforce  and  well-
functioning labour markets. Measures to improve the coverage, adequacy or effectiveness of 
the  social  safety  net,  including  minimum  income  schemes,  are  recommended  to  Bulgaria, 
Estonia,  Hungary,  Latvia,  Portugal,  Romania  and  Spain,  while  the  completion  of  more 

8 

 
 
to  quality  social  services 

comprehensive reforms of welfare benefits are recommended to Croatia and Greece. A better 
access 
in  Bulgaria,  Estonia  and  Finland.  A 
recommendation to  the Netherlands aims to  promote adequate social  protection for the self-
employed.  Specific  recommendations  to  promote  support  to  people  with  disabilities  are 
addressed to the Czech Republic and Latvia. 

is  needed 

Reforms of the health systems are ongoing in several countries to ensure the accessibility 
of healthcare for all, while enhancing their cost-effectiveness and sustainability. Member 
States  should  continue  their  efforts,  giving  priority  to  the  careful  design  of  comprehensive 
measures  and  to  stepping  up  the  adoption  and  implementation  of  health  service  delivery 
reforms. Further investment is often necessary to support and implement reforms of the health 
systems.  In  that  light,  recommendations  to  improve  effectiveness,  accessibility  and 
sustainability of health care are addressed to Austria, Bulgaria, Cyprus, the Czech Republic, 
Greece,  Finland,  Hungary,  Italy,  Latvia,  Lithuania,  Malta,  Poland,  Romania,  Slovakia  and 
Slovenia. 

Social dialogue is a key factor for a successful design and implementation of policies. The 
involvement  of  social  partners  and  other  stakeholders  improves  ownership  of  policies  and 
leads to better and more sustainable policy outcomes. Following up on past country-specific 
recommendations, some Member States have increased opportunities for structured dialogue 
and the participation of  employers’ organisations and trade  unions. While there is  no single 
model that serves as a reference, there is room for a better functioning social dialogue and a 
greater involvement of social partners in policy design in several other Member States such as 
Hungary, Poland and Romania whilst important challenges also remain in Croatia and Greece.  

Investment,  competitiveness  policies,  and  improved  business  environment  to  deliver  higher 
productivity 

In  line  with  the  progress  of  the  Investment  Plan  for  Europe,  i.e.  the  “Juncker  Plan”, 
developing  a  comprehensive  EU  investment  policy  agenda  remains  crucial  to  address 
current and future growth. Since the launch of the Investment Plan for Europe, substantial 
private  and  public  funds  have  been  and  continue  to  be  mobilised  for  investments  across 
strategic  sectors  of  the  EU  economy,  which  gave  a  substantial  boost  to  growth  and  job 
creation.  As  of  May  2019,  the  Juncker  Plan  is  set  to  trigger  close  to  EUR  400  billion  in 
investments and create 750.000 jobs with the figure set to rise to 1.4 million jobs by 2020. In 
addition  to  unlocking  investments,  the  Juncker  Plan  created  relevant  project  pipelines  and 
focused on measures making the business environment more conducive to investment. 

The  EU  Cohesion  Policy  Funds  should  be  utilised  in  an  optimal  way  to  enhance 
investments in the relevant policy areas. This should also help decrease persistent regional 
disparities  across  the  EU.  Against  this  background,  this  year’s  country  reports  and  country-
specific recommendations provide specific guidance to inform the programming of EU funds 
under the next multiannual financial framework.  

This year’s focus on investment in the analysis of the European Semester has helped to 
single  out  those  investment  priorities  in  the  Member  States  with  the  highest  macro-
economic return and to point towards those regulatory and structural bottlenecks that 
are  hindering  long-term  growth  potential.  The  pick-up  in  investment  in  recent  years  has 
been  uneven  across  sectors,  countries  and  types  of  assets.  Differences  persist  between 
investment  in  the  public  and  in  the  private  sector:  private  investment  has  been  increasing 
steadily  since  2013  and  it  is  now  reaching  its  pre-crisis  average,  whereas  public  investment 
only started to pick up in 2017. Furthermore, whilst the increase in investment occurred in all 

9 

 
Member States, in  some of them investment  rates are still substantially  below the pre-crisis 
long-term average.  

10 

 
 
 
Box: Investment-relevant country-specific recommendations and EU Cohesion Policy in 
2021-2027 

The European Commission has been emphasising the prominent role of investment within a 
“virtuous” policy triangle including prudent fiscal policies and structural reforms.  

The  2019  European  Semester  deepens  the  focus  on  investment.  The  investment  advice 
provided  to  the  Member  States  in  this  Semester  package  operationalises  the  Commission’s 
commitment  to  establish  a  stronger  link  to  the  EU  budget  and  more  specifically  to  the  EU 
cohesion policy funds for 2021-2027, taking regional specificities into account5.  

The stronger link between the European Semester and the EU cohesion policy funds will lead 
to  better  and  more  effective  programming  exercise  and  thus  to  better  and  more  focused 
investments resulting in higher productivity and growth in the long-term. This operational link 
streamlines  existing  processes  and  ensures  greater  coherence  between  the  coordination  of 
economic policies and the use of EU funds without adding additional red tape. 

The analytical underpinnings of the European Semester can effectively guide Member States 
and  the  Commission  in  the  dialogue  leading  to  the  programming  of  the  funds.  This  Box 
explains  how  the  investment-related  guidance  in  the  European  Semester  should  inform  the 
programming process.  

The starting point of the Semester, the 2019 Annual Growth Survey, called for more targeted 
investment  policies  across  Member  States.  This  year’s  winter  package  country  reports 
analysed  each  country’s  investment  needs  based  on  an  expert  reading  of  the  latest  socio-
economic  trends,  with  a  focus  on  sectoral  competitiveness  and  particular  attention  for  the 
need to foster inclusive and sustainable growth. Regional and territorial disparities within the 
Member States have been taken into account, where relevant. This analysis substantiated the 
Commission view on the best use of EU cohesion policy funds for 2021-20276, as laid down 
in an annex to the country reports (annex D) that offers guidance on investment priorities for 
these funds. These annexes have been designed as a solid input to the programming dialogue 
with  Member  States.  The  investment  priorities  identified  in  annex  D  have  been  ranked  in 
three  categories  (needs,  priority  needs  and  high  priority  needs)  based  on  their  relevance  for 
socio-economic  and 
thematic 
concentration requirements set out in the Commission proposals for the EU cohesion policy 
funds  2021-2027.  Together  with  the  other  analytical  findings  of  the  country  reports,  the 
annexes  have  already  been  presented  to  Member  States  to  initiate  the  dialogue  on 
programming  the  next  generation  of  EU  cohesion  policy  funds,  aimed  at  adopting 
programming documents as early as possible. 

territorial  development  and 

into  account 

taking 

the 

In  this  spring  package,  the  Commission  presents  its  proposal  for  country-specific 
recommendations. The country-specific recommendations are of much broader nature than the 
investment  guidance  contained  in  the  annexes  to  the  country  reports.  The  recommendations 
refer to the reform and investment needs of the whole economy. They can be addressed both 
through  financing  and  regulatory  measures.  It  is  worth  highlighting  that  not  all  Member 
States’  investment  needs  can  be  financed  with  EU  funds  but  those  funds  can  make  a 

5  Commission  Communication  “A  Modern  Budget  for  a  Union  that  Protects,  Empowers  and  Defends,”   
COM(2018) 321 final. 
6 The European Regional Development Fund, the European Social Fund Plus and the Cohesion Fund. 

11 

 
                                           
significant  contribution  to  address  the  challenges  identified  in  the  Semester,  taking  into 
account their specificities (like thematic concentrations). 

The country-specific recommendations, while differing in scope and detail, are coherent with 
the investment guidance provided in the country reports’ annexes that focused exclusively on 
those  investment  needs  that  the  EU  cohesion  policy  funds  are  suggested  to  provide  co-
financing.  

the 

implementing 

investment-related  aspects  of  all  country-specific 
Progress  with 
recommendations  will  be  monitored  as  part  of  the  future  European  Semester  cycles.  The 
monitoring  of  the  contribution  of  the  2021-2027  EU  cohesion  policy  funds  to  the  country-
specific recommendations will be based on the information  gathered in  established fora and 
processes (annual review meetings and reports, monitoring committees). 

Barriers  to  investment  persist  throughout  the  EU.  In  general,  regulatory  bottlenecks, 
institutional shortcomings and barriers to entry, activity and exit reduce the incentive of firms 
to  invest  and hamper the reallocation of resources. The Commission  has addressed and will 
continue  to  address  regulatory  and  administrative  barriers,  at  national  and  at  EU  level. 
Initiatives at EU level and structural reforms in Member States are complementary. Although 
progress  in  addressing  investment  barriers  has  been  made  both  at  national  and  at  EU  level, 
important barriers remain across countries and policy areas. For instance, in Italy, difficulties 
in  access  to  finance  constrains  investment  by  small  and  medium-sized  enterprises  and 
innovative  firms,  while  administrative  capacity  and  uncertainty  on  the  implementation 
procurement  rules  limits  investment  by  public  authorities.  Skills  shortages,  institutional 
shortcomings  and  regulatory  uncertainty  remain  among  the  main  obstacles  to  investment  in 
Bulgaria. Unstable regulatory environment and insufficient availability of adequately skilled 
labour in some sectors remain the barriers in Poland. Weak business environment and access 
to finance are the main barriers in Cyprus. 

Investment requires a climate of business confidence, predictability and legal certainty 
and full respect for the rule of law. There have been considerable regulatory improvements 
in some Member States, such as Austria, Slovakia and Slovenia though there remains scope 
for further improvements. Global competitors are improving their business environments too 
and  reforms  must  be  permanently  updated  to  maintain  a  competitiveness  lead.  Regulatory 
stability,  predictability  and  high  quality  institutions  based  on  respect  for  the  rule  of  law, 
including effective and independent justice systems are critical to preserving an investment-
friendly  environment.  The  rule  of  law,  effective  justice  systems  and  the  fight  against 
corruption  will  improve  the  business  environment  bringing  long  run  benefits  in  the  form  of 
investments  and  jobs.  Some  Member  States  have  continued  anti-corruption  efforts,  but  the 
issue  remains  acute  in  several  Member  States,  with  negative  impacts  on  the  business 
environment and investment. Strengthening the effectiveness of investigation and prosecution 
of corruption and improving its prevention remain  key objectives. Czech Republic, Croatia, 
Hungary,  Italy,  Malta,  Cyprus  and  Slovakia  have  received  recommendations  focusing  on 
these aspects. 

Efficient  public  administrations  and  continued  efforts  to  lower  administrative  burden 
support the competitiveness of European firms. Administrative burden remains a drag on 
investment,  innovation  and  company  growth.  In  particular  smaller  and  highly  innovative 
inefficiencies  of  public  administration. 
companies  struggle  most  with  burden  and 
Recommendations  for  burden  reduction  and  improving  various  aspects  of  efficiency  and 
quality of public administration, notably to improve the efficiency of public procurement, are 
issued  this  year  for  example  to  Belgium,  Cyprus,  Croatia,  the  Czech  Republic,  Hungary, 

12 

 
Latvia,  Poland,  Portugal,  Romania,  Slovakia,  Slovenia,  and  Spain.  Increasing  the  pace  of 
digitisation of public services will ensure high-level public services for an ageing population 
and public budgets that are under strain. Ensuring sound economic governance by addressing 
weaknesses  in  anti-corruption  and  anti-money  laundering  frameworks  is  a  pre-condition  for 
long-term sustainable growth. 

Skills  shortages  and mismatches can be  major  investment obstacles.  In this perspective, 
investment  in  people  is  a  key  complement  to  investment  in  innovation,  research  and 
infrastructure, offering positive returns in terms of human capital, a more employable labour 
force  and  stronger  social  cohesion.  They,  in  turn,  translate  into  better  and  more  resilient 
economic  outcomes.  In  particular,  improving  skills  levels  and  their  matching  with  labour 
market needs is key to raise productivity and adaptability of the workforce. Well-functioning 
and  inclusive  education  and  training  systems  can  help  prevent  or  reduce  the  risks  of  skills 
shortages and mismatches that are costly to society, both economically and socially, in terms 
of  foregone  growth  opportunities  and  shrinking  job  opportunities  for  certain  population 
groups.  

Strengthening research and innovation activities are key for Europe’s growth. In many 
Member States and regions there is significant scope to reinforce the cooperation ties between 
businesses  (notably  small  and  medium-sized  enterprises),  academia,  research  and  public 
sector  actors,  e.g.  in  Bulgaria,  ,  Estonia,  Latvia,  Lithuania  and  Romania.  Public  support  to 
breakthrough  innovations  and  to  the  creation  and  scale  up  of  high  growth  firms,  alongside 
sound  framework  conditions  for  business  research  and  development  creates  market 
opportunities and raises the innovation capacity of the economy. 

Digitalisation is a political priority in the European Union but additional timely efforts 
are  needed  in  many  Member  States.  Digitalisation  is  a  key  lever  of  productivity, 
competitiveness and growth. Traditional sectors and small and medium-sized enterprises s are 
particularly lagging behind in their digital transformation. The EU as a whole must speed up 
the  process.  Adequate  support  is  necessary.  This  mandates  a  better  alignment  of  Union, 
Member States and regional policies, and pooling of public and private resources to increase 
investment and develop stronger synergies in the digital economy and society. 

Environmental  and  energy  infrastructure  gaps  have  a  negative  impact  on  growth  and 
job  creation.  Transition  to  a  carbon  neutral,  resource-efficient,  circular  economy  and  the 
process  of  decarbonisation  that  it  entails,  require  considerable  investments.  In  a  number  of 
Member States, notably in Austria, Cyprus, France, Germany, Malta, the Netherlands, Poland, 
additional efforts are needed towards meeting their greenhouse gas emission targets. Further 
investments in water and waste infrastructure are required in many Member States. The joint 
effort  of  public  investments  and  the  introduction  of  incentives  for  additional  private 
investments  will  bring  EU  targets  in  those  areas  within  reach.  The  rise  of  the  circular 
economy will also demand regional and local public investments to enable the transformation 
of some production processes.  

Capital  investment  needs  vary  across  Member  States.  Fixed  capital  investments  are 
needed  in  sectors,  regions  and  countries  for  the  upgrading  of  production  capacities.  This 
applies  in  particular  to  laggard  regions  to  continue  their  catching  up  process.  In  addition, 
advanced  regions  and  sectors  such  as  the  automobile  sector  need  investments  to  speed  up 
technological  changes  to  face  new  challenges.  Investments  in  intangible  capital  are 
particularly necessary across the board to facilitate the adoption of new technologies.  

Several  Member  States  have  further  progressed  in  strengthening  financial  stability. 
Action  has  been  taken  to  reduce  non-performing  loans,  strengthen  the  supervisory 
frameworks, and improve the insolvency frameworks. Despite their significant reduction over 

13 

 
the last year, a number of Member States are still marked by high levels of non-performing 
loans. Bank profitability remains subdued and affected by high non-performing loans ratios, 
inadequate  business  models  in  several  cases,  overbanked  markets  and  financial  market 
volatility (which has re-emerged since the first half of 2018). Supervision and enforcement of 
anti-money  laundering  frameworks  remains  an  issue  in  several  Member  States;  country-
specific  recommendations  are  addressed  to  Bulgaria,  Denmark,  Estonia,  Latvia,  Malta  and 
Sweden. Country-specific recommendations are addressed to Bulgaria, Cyprus, Ireland, Italy, 
and Portugal to further reduce non-performing loans. Further actions are also recommended to 
Bulgaria and Cyprus to strengthen the supervision of the non-banking financial sectors.  

Developments  in  the  housing  market  can  affect  financial  stability  and  thereby  require 
action in some Member States. Housing is often the main asset held by households, and, at 
the  same  time,  housing-related  lending  accounts  for  a  large  share  of  total  lending  in  the 
economy.  Moreover,  scarcity  of  adequate  and  affordable  housing  is  a  growing  problem  in 
several Member States. On that account, Ireland, Luxembourg, the Netherlands, Sweden, and 
the United Kingdom  are recommended to  reduce bottlenecks to  housing supply  and remove 
distortions in  their housing markets.  As large private debt  levels  can amplify movements  in 
the housing market,  reducing the high indebtedness  of households is  important  for financial 
stability.  Therefore,  the  Netherlands  and  Sweden  are  recommended  to  reduce  the  debt  bias 
created notably by the tax system, such as mortgage interest deductibility. 

14 

 
 
 
4.  THE EUROPEAN SEMESTER: A JOINT EFFORT BETWEEN EU INSTITUTIONS 

AND MEMBER STATES 

Member States created the European Semester during the economic crisis to coordinate 
their  economic  policies  throughout  the  year  and  address  their  economic  and  social 
challenges.  Today  the  European  Semester  is  a  unique  platform  for  the  economic  policy 
dialogue with and between EU Member States. It allows the Commission and Member States 
to  have  a  continuous  coordination  of  economic  policy  priorities.  As  part  of  the  economic 
governance  framework,  the  European  Semester  monitors,  prevents,  and  corrects  economic 
trends that could weaken national economies or the EU as a whole. The Commission is in a 
continuous contact with Member States multilaterally and bilaterally, including in the capitals 
with the European Semester Officers.    

This  dialogue  results  in  a  shared  analysis  between  the  Commission  and  EU  Member 
States. Every year the Commission recommendations are endorsed by the European Council 
and  formally  adopted  by  the  ECOFIN  Council,  after  discussion  with  other  relevant  Council 
formations.  

The Commission has developed tools to help Member States with the implementation of 
the  Country-Specific  Recommendations.  For  instance,  the  Structural  Reform  Support 
Service helps EU countries to design and carry out structural reforms as part of their efforts to 
support job creation and sustainable growth. It coordinates and provides tailor-made technical 
support to EU countries, in cooperation with the relevant Commission services. The support is 
notably provided through the Structural Reform Support Programme. The objective is to help 
EU countries build more effective institutions, stronger governance frameworks and efficient 
public  administrations.  Such  support  reinforces  the  capacity  of  EU  countries  to  design  and 
implement policies to support job creation and sustainable growth. The Budgetary Instrument 
on  Convergence  and  Competitiveness  currently  under  discussion  in  the  Eurogroup  could 
provide  further  incentives  for  reforms  and  builds  on  the  Commission  proposal  for  the  new 
Reform  Support  Programme  in  the  multi-annual  financial  framework  for  the  period  2021-
2027. 

The  ultimate  responsibility  on 
recommendations lies with the Member States.  

the 

implementation  of 

the  country-specific 

15 

 
 
 
5.  NEXT STEPS 

The  Commission  calls  on  the  Council  to  endorse  the  proposed  approach  for  the  2019-
2020  country-specific  recommendations  and  related  decisions  under  the  Stability  and 
Growth Pact.  

The Commission also  calls on Member States  to implement them fully and in a timely 
manner,  in  a  dialogue  with  social  partners,  civil  society  organisations  and  other 
stakeholders at all levels. The Commission will continue to engage with Member States and 
national  stakeholders  throughout  the  Semester  process  to  ensure  broad  ownership  and 
effective  follow-up  and  implementation.  The  Commission  is  also  available  to  provide  on-
request reform support to the Member States through the Structural Reform Support Service 
and help the authorities make the best use of the EU funds.  

The European Semester country-specific recommendations and the underlying analysis 
in  the  country  reports  serve  as  a  relevant  analytical  basis  for  the  programming  of  the 
EU  Cohesion  Policy  Funds in  2021-2027.  Discussions  between  the  European  Commission 
and  Member  States  should  continue  for  a  successful  programming  of  the  EU  funds  in  line 
with the Semester analysis and recommendations. 

16 

 
 
TABLE 1 - OVERVIEW OF ISSUES COVERED IN 2019 CSRS  

17 

Broad CategoryPolicy areasATBEBGCYCZDEDKEEEL*ESFIFRHRHUIEITLTLULVMTNLPLPTROSESISKUKFiscal policy & fiscal governanceLong-term sustainability of public finances, inc. pensionsReduce the tax burden on labourBroaden tax basesReduce the debt biasFight against tax evasion, improve tax administration & tackle tax avoidanceFinancial servicesHousing marketAccess to financePrivate indebtednessEmployment protection legislation & framework for labour contractsUnemployment benefitsActive labour market policiesIncentives to work, job creation, labour market participationWages & wage settingChildcareHealth & long-term carePoverty reduction & social inclusionEducationSkills & life-long learningResearch & innovationCompetition & regulatory frameworkCompetition in servicesTelecom, postal services & local public servicesEnergy, resources & climate changeTransportBusiness environmentInsolvency frameworkPublic administrationState-owned enterprisesCivil justiceShadow economy & corruption* This coverage excludes the recommendation on continuing and completing reforms in line with the post-programme commitments given at the Eurogroup of 22 June 2018.Policies covered in the 2019 CSRsPublic finances & taxationFinancial sectorLabour market, education & social policiesStructural policiesPublic administration & business environment