COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE Alert Mechanism Report 2025 prepared in accordance with Article 3 of Regulation (EU) No 1176/2011 on the prevention and correction of macroeconomic imbalances
Date: 2024-12-17
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: economic disparity, economic growth, economic recovery, economic statistics, euro area, inflation, macroeconomics, multilateral surveillance, national accounts, public debt

EN 

  EN 

   EUROPEAN COMMISSION  Strasbourg, 17.12.2024  COM(2024) 702 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE Alert Mechanism Report 2025      prepared in accordance with Article 3 of Regulation (EU) No 1176/2011  on the prevention and correction of macroeconomic imbalances    {SWD(2024) 700 final} - {SWD(2024) 701 final} - {SWD(2024) 702 final}  
 
 
ALERT MECHANISM REPORT COMMUNICATION 

The  Alert  Mechanism  Report  (AMR)  identifies  Member  States  that  the  Commission 
considers may be affected by, or may be at risk of being affected by, imbalances, based 
on an economic reading of the Macroeconomic Imbalance Procedure (MIP) scoreboard (1). 
The economic reading of the scoreboard considers the outturn data for 2023, which are interpreted 
in  a  forward-looking manner.  This  considers  the  developments  of  possible  risks  based  on  in-year 
(2024)  economic  developments  and  forecasts  for  2025  and  2026  from  the  Commission  2024 
autumn  forecast,  where  relevant.  After  a  number  of  years,  changes  have  been  made  to  the 
scoreboard, and this AMR is the first one based on the revised scoreboard. The main changes are 
set out in Box 1, and more details are provided in a dedicated staff working document (2) on those 
scoreboard revisions, accompanying this Communication. Another staff working document contains 
the  full  economic  analysis  that  underlies  this  Communication  and  is  accompanied  by  an  annex 
containing the values of the scoreboard (3).  

The  high  inflationary  period  that  started  in  2021  is  easing,  as  inflation  comes  within 
sight of target, but services inflation remains elevated. By mid-2024, the strong inflationary 
period  that  started  in  2021  had  eased.  Overall  consumer  price  inflation  rates  are  gradually 
approaching the monetary authorities’ targets. Despite this overall reduction, inflationary pressures 
are  still  there.  Internally  generated  inflation  –  principally  from  services  –  remains  strong  overall, 
and  divergent,  with  some  countries’  inflation  rates  standing  out.  At  present,  its  contribution  to 
headline  inflation is  currently  offset by disinflation from imported sources, principally  energy and 
food prices, and from price reductions in consumer durables. This disinflationary process is due to 
both  base  effects  and  to  the  lower  energy  prices  working  their  way  out  of  the  manufacturing 
process. As the effect of these processes wanes, services inflation could drive overall rates up, if it 
has  not  been  curbed  in  the  meantime.  As  real  wages  have  only  just  reached  their  pre-pandemic 
level this year, wage demands may continue to be strong, and contribute to core inflation and the 
GDP deflator remaining elevated.  

Economic growth has restarted, but the macroeconomic environment is challenging. Real 
growth was weak in 2023, as both consumption and investment fell due to the combination of high 
interest  rates  and  high  price  and  cost  growth.  In  2024,  real  growth  is  restarting,  as  household 
purchasing  power  picks  up,  helped  by  higher  wages  and  lower  inflation.  This  should  result  in 
nominal  growth  remaining  relatively  buoyant,  despite  the  fall  in  inflation.  Although  they  remain 
substantially higher than over most of the last decade, interest rates have started to come down. 
This should start to ease the pressure felt by households, corporations and governments with debts 
to service. While financial conditions are loosening, fiscal policy is tightening in some countries, and 
may  have an impact on growth. With  the pandemic and energy price shocks well in the past and 
the return of growth, governments are starting to reduce their debt ratios, which increased in part 
due  to  policies  that  supported  demand  through  the  pandemic  and  the  energy  price  shocks.  The 

(1) Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and 

correction of macroeconomic imbalances.  

(2)  Commission  staff  working  document  on  the  changes  in  the  scoreboard  of  the  Macroeconomic  Imbalance  Procedure, 

SWD(2024) 702. 

(3) Commission staff working document, Alert Mechanism Report 2025, SWD(2024) 700; Commission staff working document, 

Statistical Annex accompanying the Alert Mechanism Report 2025, SWD(2024) 701. 

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Executive summary 

global  economic  landscape  remains  complex,  with  emerging  geopolitical  tensions  and  potential 
economic  disruptions  posing  significant  challenges  that  could  impact  government  debt  levels. 
Persistent risks remain tilted  to the downside and driven by the global context:  the conflict in the 
middle east, Russia’s continued war against Ukraine, and a generally changing geopolitical context, 
which may impinge on global trade and make external conditions difficult.  

The  inflationary  period  that  is  ending  leaves  behind  divergent  growth  paths  and 
different increases in the overall price levels, leading to potential cost competitiveness 
issues.  Overall  consumer  inflation  rates  fallen  strongly  across  the  board  rates  and  for  some 
countries  there  have  been  some  short-lived  instances  of  deflation  over  the  last  year.  Typically, 
these  are  countries  where  energy  and  other  commodities  played  a  significant  role  in  reducing 
prices,  in  part  due  to base  effects. However, in  some  countries,  core  inflation remains  stubbornly 
higher than in their peers, adding to the overall cumulated increase in price levels that has taken 
place in recent years. This raises the prospect of continued feedback effects, between wage growth 
and  price inflation;  for  countries  which  have  already  had  very  high  increases  in  their price  levels, 
such continued feedback effects could be concerning. GDP growth also displays divergent patterns. 
While the overall story of lower growth in 2023, followed by an increase in 2024 and 2025 holds – 
approximately – true for all countries, there are strong differences. There is no consistent pattern 
between  high  core  inflation  and  domestic  demand,  pointing  to  substantial  differences  in  the 
post-crisis  landscape.  Specifically,  while  high  core  inflation  accompanies  continued  high  real  GDP 
growth  in  some  cases,  in  others  it  persists  despite  negative  growth  last  year,  and  continued 
weakness in real GDP, relative both to other countries and to pre-pandemic growth rates.   

Sector-specific thematic reading 

•  In  2023,  current  accounts  improved  in  almost  all  Member  States,  as  energy  prices  fell 
and  demand  remained  weak,  partially  undoing  the  strong  reduction  in  trade  balances  from 
2022.  Despite  these  increases,  current  accounts  remain  below  their  pre-pandemic  levels  in 
many cases – and especially so for some large net debtors – and below the levels conducive for 
their swift correction. In a few notable cases, domestic demand has remained strong and large 
current account deficits appear to be persisting. In some other cases, a strong improvement – or 
a  stabilisation  at  a  modest  level  –  of  current  accounts  is the  result  of  a  cyclical  –  or  at least 
temporary  –  reduction  in  demand.  In  these  cases,  the  return  of  more  benign  conditions  may 
expose a more negative  underlying position. High surpluses  have persisted, with  some income 
balances  and  country-specific  particularities  playing  a  significant  role  in  some  cases.  In  2024 
overall, a gradual improvement in domestic demand is offsetting the continued improvement in 
terms  of  trade,  leading  to  broadly  stable  current  accounts  this  year  and  next,  although  on  an 
annual basis the improvements of recent quarters are still feeding through the data. Compared 
to prior to the pandemic, there has been a change in the lending and borrowing of the different 
sectors  of  the  economy  as  governments  have  increased  their  net  borrowing,  and  the  private 
sector has increased its net lending position. In 2024, this effect is not as marked as in 2023, as 
there has been a reduction in government borrowing and increase in private sector saving. 

•  The  large  negative  net  external  stock  positions  narrowed  strongly  in  2023,  with 
denominator effects playing a significant role, more than offsetting some substantial deficits. In 
some  cases,  strong  valuation  effects  led  to  further  reductions,  reflecting  exchange  rate 
movements.  Large  positive  net  external  positions  have  remained  broadly  stable,  as 
numerator and denominator effects balance out in the face of continued strong current account 
surpluses.  

•  The  euro  area  current  account  started  to  rise  from  its  trough  in  early  2023,  and  has 
continued its increase every quarter since. The improvement in the terms of trade has driven the 
sharp  improvement in  the  nominal  balance,  while  demand  has  overall  been muted,  which  has 

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also pushed up the current account balance. The euro area current account still remains below 
its pre-pandemic level, reflecting a lasting impact of higher energy prices which has affected the 
trade balance, and a gradual reduction in primary income balances. These reductions in primary 
income balances are concentrated in a small number of countries, and in some cases reflect the 
operations  of  special  purpose  entities,  with  strong  cross-border  financial  linkages  but  limited 
links to countries’ domestic economies. In parallel there has been a fall in the (small) services 
surplus,  although  the  contribution  of  tourism  is  broadly  at  its  longer-term  average.  The  euro 
area current account is forecast to continue improving this year and remain broadly stable next 
year, reflecting the long-standing shortfall  of domestic  investment relative to savings. Overall, 
the strong improvement in Net International Investment Positions (NIIPs) of net debtors has led 
to a one-sided rebalancing of external positions within the euro area despite the absence 
of correction on the side of large net-creditor countries.  

•  Growth in unit labour costs (ULCs) picked up markedly overall in 2023 – but with substantial 
differences across countries – in most cases pushed by accelerating wage growth, and sluggish 
or even negative productivity growth. The very strong growth in ULCs marks the highest increase 
in recent years for most Member States. Wage increases were substantial, but in some Member 
States  real  wages  have  still  not  reached  their  2019  levels.  A  deceleration  in  wage  rises  is 
underway  in  2024,  but  forecast  increases  remain  historically  high  in  many  countries.  Labour 
markets remain tight overall, adding to the bargaining power of workers. While unemployment is 
edging up in some countries, it is doing so from a low level and remains limited. In a number of 
cases, increases in unemployment have occurred alongside much more substantial increases in 
employment,  as  migration  and/or  labour  market  participation  increased.  Large  net-debtor 
countries in the euro area have displayed ULC growth below the euro area average, with many 
net-creditor  countries  displaying  stronger  growth;  these  should  support  the  symmetric 
rebalancing of the external positions within the euro area.  

•  In  2023,  the  euro  appreciated  vis-à-vis  other  major  currencies,  as  the  ECB  continued  its 
tightening cycle. Outside the euro area, European currencies also appreciated, with the exception 
of the Swedish Krona. As a result, real effective exchange rates (REERs) increased overall, 
the only exceptions being in Sweden, and some euro area countries with much lower inflation, 
where they stayed broadly stable. In countries with  very high inflation, HICP-based REERs rose 
by over 5% in a year, and increased further in non-euro area countries marked by both strong 
national currency appreciation and high inflation. In 2024, the appreciation of the euro slowed 
considerably, resulting in broadly stable REERs across the euro area, with the now much smaller 
differences in inflation driving the relatively limited shifts in the REERs.  

•  Across the EU, corporate debt-to-GDP ratios displayed their third year of strong reductions in 
2023,  with  the  overall  debt  ratio  reaching  its  lowest  value  in  over  a  decade.  While  the  most 
substantial driver of the reduction was the impact of inflation on the denominator, limited or in 
some  cases  negative  net  credit  flows  also  contributed  to  an  overall  decline  of  corporate 
indebtedness. Overall, credit flows  fell to their lowest  levels in more than  a decade. Corporate 
deleveraging was primarily  associated  with a reduction in the loan stock,  while debt securities 
remained broadly stable. Tight financing conditions and high interest rates have increased firms’ 
interest  expenses  and  weighed  on  the  debt  repayment  capacity  of  the  corporate  sector. 
However,  despite  a  slight  rise  in  corporate  financial  vulnerabilities,  there  is  little  widespread 
indication of increases in loan defaults at present. Following a peak in mid-2022, profit shares 
fell back to their pre-pandemic levels over 2023 and into early 2024, possibly reflecting firms 
accommodating  higher  wages,  although  subdued  economic  activity  and  weak  productivity 
growth  arguably  have,  and  will  continue  to,  put  pressure  on  profits  in  some  countries  and 
industries. In 2024, deleveraging continues but at a slower pace, reflecting easing inflation and 
a small uptick in credit flows, which should also accompany a gradual – but slow – recovery in 

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corporate  investment.  This  recovery  should  gain  momentum,  as  demand  strengthens  and 
financing conditions and business confidence improve.   

•  House  price  growth  moderated  in  2023,  after  strong  growth  over  2020-22.  There  was 
considerable  variation  across  countries,  however,  with  prices  falling  in  some  countries,  but 
growing in a few others. The reduction – or slower increases – in prices reflects an adjustment 
to  higher  borrowing  costs,  as  households  are  able  to  service  a  lower  loan  stock.  The  small 
reduction in interest rates that has already occurred, along with the adjustment of the market to 
a lower price level, is leading to a resumption of demand in 2024, although muted price growth 
continues  in  some  countries.  Despite  the  moderation  that  has  taken  place,  house  prices  are 
estimated to remain overvalued in three quarters of EU countries, with over half displaying signs 
of overvaluations of over 10%. This is despite the fact  that the strongest  reductions in house 
prices have occurred in markets that were estimated to be the most overvalued. In parallel, in 
some  countries,  house  price  growth  continues  to  be  very  strong.  Overall,  there  has  been  a 
reduction in housing construction and in permit acquisition, particularly in countries where prices 
have  corrected more  significantly,  and  this  should  keep  supply  constrained  in the  near  future, 
leading  to  a  resumption  of  the underlying  dynamics  that  have  resulted  in strong  house  prices 
rises in recent years.  

•  Household debt ratios continued their reductions of recent years in 2023, reaching historical 
lows in most EU countries. While the 2023 reduction was strongly driven by the impact of high 
inflation on the denominator, a contraction of credit flows also served to reduce the impact of 
new  borrowing  on  the  debt.  The  increase  in  borrowing  costs  has  been  sharp  and  has 
immediately fed through to new loans, reducing demand for mortgages. Interest payments on 
existing loans were more immediately affected in countries where mortgages are more likely to 
have variable rates, or very short interest rate fixation periods, and where mortgage terms are 
long.  Household  savings  rebounded  somewhat  in  2023,  following  two  years  where  they  fell 
after the spike brought about by the pandemic. On average, the interest received by households 
has increased by slightly more than the interest paid. However, as assets and loans are owned 
by  different  households,  in  a  number  of  countries  some  households  may  face  considerable 
pressure from high interest rates. The very recent reduction in interest rates, and the expected 
wage  growth,  should  ease  that  somewhat  going  forward.  In  2024,  household  balance  sheets 
have continued to strengthen overall, although at a slower pace than in 2023.   

•  Strong  nominal  GDP  growth  driven  by  high  inflation  continued  to  underpin  a  reduction  in 
government  debt  in  2023,  despite  still  sizeable  government  deficits.  In  2024  and  2025, 
government primary deficits are not set to tighten substantially in some high-debt countries and 
as  a  result  of  the  less  favourable  nominal  GDP  growth-interest  rates  differential,  the  strong 
reduction  in  government  debt-to-GDP  ratios  that  has  been  evident  since  2021  is  forecast  to 
either  moderate,  or  stall.  However,  in  some  –  particularly  high-debt  countries  –  sizeable  debt 
reductions are still  forecast  to continue  in 2024. These are countries with  surpluses or  limited 
deficits,  and  continued  strong  real  GDP  growth  that  should  assist  deleveraging.  For  some 
countries  outside  the  euro  area,  there  may  be  additional  risks  associated  with  government 
borrowing  where  relatively  large  shares  of  their  government  debt  is  denominated  in  foreign 
currencies, and can therefore be affected by variations in exchange rates. In the coming years, 
the  implementation  of  the  new  EU  fiscal  framework  will  support  the  deleveraging  of  the 
government sector. 

•  Overall, the financial sector in the EU displayed continued resilience in 2023, as banks have 
benefitted  from  higher  interest  income,  and  non-performing  loan  (NPL)  ratios  have  remained 
stable.  Higher  interest  rates  resulted  in  increased  interest  rate  margins,  as  banks  passed  the 
higher  rates  on  more  quickly  on  loans  than  deposits.  This  has  boosted  bank  profitability, 
particularly for banks that rely more heavily on deposit funding. The Common Equity Tier 1 ratio 

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has risen mildly. Overall, NPLs remain stable although in 2024 some increases have been noted, 
seemingly  associated  mainly  with  the  correction  in  commercial  real  estate  prices  that  is 
underway  in  a  number  of  countries  but  also  generally  weaker  cyclical  conditions.  Credit 
standards have tightened in 2023 and there has been a reduction in both supply and in demand 
for  loans  from  both  households  and  NFCs.  The  resilience  of  the  banking  sector  continues  into 
2024,  although  there  are  some  signs  of  asset  quality  deteriorations  as  some  borrowers  – 
including  firms  active  in  real  estate  –  are  affected  by  higher  interest  rates  and  liquidity 
mismatch.  Outside  the  banking  sector,  the  non-bank  financial  sector  is  arguably  subject  to 
additional  risks,  related  tightened  financial  conditions,  worsening  credit  quality  and  the 
possibility of disorderly asset price corrections. These include liquidity risks and risks related to 
interconnectedness  given  that  links  between  the  banking  and  non-banking  sectors  are 
particularly strong in the EU. Disruptions in investment fund sector or insurance sector can have 
spillover  effects  into  the  banking  sector  and  vice  versa.  The  downturn  of  the  commercial  real 
estate  sector  represents  a  risk  for  some  parts  of  financial  sector,  and  may  result  in  negative 
spillover effect on the whole financial sector and real economy.  

Outlook for economic imbalances 

The  outlook  for  imbalances  has  been  driven  by  the  unusually  strong  inflationary 
environment,  which delivered strong reductions  to debt ratios.  2023 marked a year when 
inflation rates fell strongly, coming within sight of the central banks’ targets by the end of the year. 
Throughout the year however, price and cost increases were the determining factor for the outlook 
for imbalances. High GDP deflators delivered strong denominator effects to the main debt ratios. In 
this way, legacy imbalances – principally high debt stocks – have continued to correct, and many 
aggregates, especially the debt of corporations and households, are now at their lowest levels for 
many years. An exception to this is government debt for some countries, where, despite the further 
reductions in 2023, debt ratios have not yet returned to their pre-2020 levels.  

The inflationary pressures of recent years leave behind a changed economic landscape. 
Despite the fact that the reduction of inflation means that its contribution to debt deleveraging is 
now  more  limited,  the  legacy  of  higher  inflation  continues  and  will  continue  to  be  a  factor  in 
shaping  imbalances.  In  many  countries,  unit  labour  costs  are  forecast  to  continue  rising 
substantially  as  wages  make  up  for  reductions  in  real  disposable  incomes.  Despite  the  fact  that 
central banks, including the European Central Bank, have started to loosen monetary policy, interest 
rates  remain  and  are  expected  to  remain  at  higher  levels  than  has  been  the  case  over  the  last 
decade. This affects the interest burden associated with indebtedness and has implications on the 
values  of  assets,  for  all  sectors  of  the  economy.  Since  the  increase  in  interest  rates,  there  has 
already been a reduction in investment, for both housing and business purposes.  

Nominal  growth  will  provide  more  limited  support  to  passive  deleveraging  in  coming 
years. Overall nominal growth is forecast to remain somewhat higher than prior to the pandemic, 
largely as a result of the GDP deflator remaining slightly elevated. However, in the coming years, 
further reductions on debt burdens will no longer be able to be delivered without limiting borrowing. 
For  households  with  large  debts  and  floating  rate  mortgages,  or  with  fixation  periods  that  have 
come or are coming to an end, the ability to pay their higher interest payments may come under 
pressure. For corporations, a reduction in credit flows is evident, and comes alongside a fall in unit 
profits – following strong increases – possibly to absorb some of the increases in unit labour costs 
as wages catch up with living costs.  

Substantial  underlying  current  account  deficits  are  evident  in  some  countries,  and  net 
external  debt  could  start  rising  again.  In  a  few  cases,  external  indebtedness  is  at  a  turning 
point, with sizeable current account deficits no longer being offset by nominal growth, resulting in 
an expected deterioration in the net external position over the coming years. While this is not the 

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case for the countries with the highest external indebtedness, it does include some countries where 
an  absence  of effective  policy  action  could  result in  worrying  increases  of  external  indebtedness. 
Taking  action  typically  requires  reining  in  fiscal  deficits  to  act  as  a  brake  to high  demand,  which 
would  at  the  same  time  help  stem  remaining  inflationary  pressures,  but  a  readjustment  on  the 
household or corporate sector might also be needed.  

Cost  competitiveness  challenges  have  been  building  up  in  recent  years,  and  some 
countries  are  now  facing  much  higher  price  and  cost  levels  as  a  result  of  cumulative 
increases,  which  in  some  cases  continue  to  worsen.  Although  inflation  differentials  have 
reduced  very  strongly  –  and  in  many  cases  disappeared  –  in  some  Member  States  they  leave 
behind them a legacy of much higher relative prices and costs. Although this applies principally in 
countries which still have some catching up potential, the increase appears much higher than what 
can  credibly  be  attributed  to  factors  such  as  Balassa-Samuelson  effects  and  is  not  driven  by 
increases in productivity. As a result, these countries have much higher price levels than previously, 
potentially  putting  pressure  on  their  competitiveness,  particularly  where  they  come  on  top  of 
already  weakened  competitiveness  positions  from  before  the  pandemic.  Correcting  these  effects 
will  take  time:  they  either  require  a  sharp  reduction  in  prices  and  costs  which  could  lead  to 
economic disruption, or a sustained period of price and cost moderation vis-à-vis trading partners 
lasting longer or being more marked than what would otherwise have been the case.  

Increased price and cost levels can put further pressure on the external side, and there 
can be difficulties  in stemming further price and cost increases in some cases. In some 
countries with a strong increase in price and cost levels, there are other damaging factors at play 
that pose particular risks. A loss of export markets – which may be linked to geopolitical reasons – 
may be more difficult to counteract by finding new opportunities given the higher prices and costs 
at  home. Where  external  balances  are  already  subject to pressure,  such  as  through  a permanent 
reduction in balances due to energy price effects, increased cost levels can put further pressure on 
the external side, until there is an adjustment to a lower level of demand. Where growth has also 
been muted, it may be difficult to rein in further inflationary pressures once demand recovers. As 
economic  conditions  normalise,  underlying  economic  weakness,  such  as  structurally  weaker 
external balances, may become visible.  

High house prices continue to be an important concern in several countries, despite some 
recent moderation. House prices have undergone a moderation following years of strong growth, 
which  in  most  cases  accelerated  under  the  pandemic.  These  corrections  are  not  in  themselves  a 
substantial  reduction  of  the  risk  associated  with  house  price  developments.  Instead,  they  are 
manifestation  of  the  vulnerabilities:  in  countries  where  house  prices  are  falling  strongly,  it  is 
because  there  were  underlying  dynamics  that  had  brought  them  to  unsustainable  levels.  On  the 
whole,  these underlying dynamics have not changed. Once housing demand has adjusted fully  to 
higher interest rate levels, it can be expected that strong house price growth will resume, given the 
long-standing  gap  between  buoyant  housing  demand  and  constrained  supply.  This  could  be 
exacerbated by the reduction in housing investment that  has recently taken place in a context of 
historically  high  net  migration  to  some  Member  States.  Housing  affordability,  which  has  become 
increasingly  strained  in  many  countries,  is  likely  to  deteriorate  further.  In  metropolitan  areas  of 
some  Member  States,  house  prices  have  attained  levels  that  may  be  acting  as  a  brake  on  their 
economies’ abilities to attract workers, which can become an increasingly significant constraint to 
their  growth  model.  In  some  countries,  house  prices  growth  is  still  very  strong,  and  accelerating 
again.  In  some  case, this  strong  growth  is  continuing  alongside  strong inflationary  dynamics  that 
may be hard to curb without strong economic impacts.  

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Executive summary 

Country-specific conclusions and follow-up surveillance 

In  2025,  In-depth  Reviews  (IDRs)  will  be  prepared  for  the  nine  countries  that  were 
identified  as  experiencing  imbalances  or  excessive  imbalances  in  2024  (4).  The  Alert 
Mechanism  Report  presents  an  overview  of  the  evolution  of  key  data  that  underlie  these 
imbalances.  An  economic  assessment  of  whether  these  imbalances  are  aggravating,  under 
correction,  or  corrected,  with  the  view  to  update  existing  assessments  and  assessing  possible 
remaining policy needs will be undertaken in the 2025 In-Depth Reviews that will be published over 
the  first  half  of  2025.  That  will  be  case  for  Cyprus,  Germany,  Greece,  Italy,  Hungary,  the 
Netherlands, Romania, Slovakia, and Sweden.  

In addition, the economic reading of the scoreboard leads to the conclusion that an In-
Depth  Review  should  be  undertaken  for  Estonia,  as  this  Member  State  presents 
particular  risks  of  newly  emerging  imbalances.  This  is  consistent  with  the  forward-looking 
perspective that has been pursued in recent years. Under this approach, IDRs should be pursued as 
worrying developments are building up, without waiting to be sure that imbalances are present. In 
Estonia,  there  have  been  strong  cost  pressures  in  recent  years,  while  house  prices  have  grown 
markedly and households borrowing edged up too. Estonia stands out in terms of the persistence 
of  these  developments,  and  the  fact  that  there  are  other  worrying  factors  that  pose  additional 
risks. 

In  Estonia,  cost  competitiveness  losses  are  still  accumulating  and  the  current  account 
has  worsened;  at  the  same  time,  house  prices  continue  growing  markedly.  Estonia  had 
been subject to an IDR in spring 2023, but no imbalances were found at that time: vulnerabilities 
relating to competitiveness, external balances and house prices were already present but found to 
be limited and expected to narrow quickly. The current scoreboard for Estonia shows that in 2023 
two indicators were beyond their indicative thresholds, namely the real effective exchange rate and 
unit  labour  costs.  The  economic  reading  of  the  scoreboard  based  on  recent  developments  and 
prospects is not sufficiently reassuring. Cost pressures have moderated but are among the highest 
in  the  euro  area.  The  country  continues  to  record  high  inflation,  with  core  inflation  increasing 
recently, and clearly in excess of the euro area average. Estonia’s strong price and cost growth has 
occurred  despite the  weak  growth performance  of  the  economy.  The  economy  has  not  recovered 
from  the  crisis  triggered  by  Russia’s  war  on  Ukraine  and  has  undergone  a  marked  recession  in 
2023  and  2024;  in  real  terms,  GDP  is  just  around  pre-pandemic  levels,  which  is  the  worst 
performance in the EU. Exports fell markedly recently, and so did export market shares. The current 
account  deficit  has  moderated  from  its  2022  level,  but  no  further  improvement  is  expected. 
Moreover,  that  deficit  is  occurring  at  a  time  of  sluggish  activity,  which  suggests  a  weaker 
underlying external  position and an improvement in economic activity  resulting in higher demand 
would reduce the current account. At the same time, house prices have grown significantly in recent 
years and nominal prices grew by over 7% in the first half of 2024. This has compounded risks of 
house  prices  overvaluation.  Household  borrowing  moderated  in  2023  but  remained  significant  in 
spite of the highest borrowing costs in the euro area.  

For the remaining Member States, there is no need to carry out IDRs at this juncture.  

(4) Communication from the Commission, 2024 European Semester – Spring Package, COM(2024) 600 final. 

7 

 
 
Box: Outcome of the 2024 review of the MIP scoreboard  

Executive summary 

In  line  with  the  MIP  Regulation,  the  Commission  regularly  assesses  the  appropriateness  of  the  MIP 
Scoreboard  and  updates  it  where  necessary  (Art.  4(7)  of  Regulation  (EU)  No  1176/2011).  This  AMR 
introduces  a  number  of  changes  to  the  scoreboard,  to  both  the  headline  and  auxiliary  indicators.  As  in 
previous  reviews  of  the  scoreboard,  the  intended  revisions  have  been  communicated  to  the  European 
Parliament, the Council (including its committees of experts) and the ESRB ahead of their final adoption.   
The adopted revisions account for the latest developments in statistical indicators and aim at making the 
scoreboard more compact, better balanced between different thematic blocks, and more forward-looking. 
They  were  guided  by  the following  principles:  (i)  stability  (avoiding excessively  frequent  revisions);  (ii)  no 
variable  proliferation  (the  number  of  variables  as  a  rule  should  not  increase,  to  respect  the  Regulation 
requirement regarding parsimony of the scoreboard); (iii) relevance and salience for MIP surveillance; and 
(iv)  the  need  to  account  for  ongoing  statistical  quality  improvements.  The  main  changes  to  the  headline 
indicators are set out below; more details are provided in the accompanying staff working document (5). 
• 

The  indicator  on  ‘export  performance  against  advanced  economies’  is  upgraded  from  auxiliary  to 
headline indicator, measured as the change over three years. A threshold is newly established for this 
indicator at -3%. In turn, the indicator on ‘export market share’ is downgraded to auxiliary indicator. 
The  indicators  on  private  sector  debt  stocks  and  credit  flows  are  split  into  separate  indicators  for 
households and non-financial corporations. The credit flows will be measured as a percentage of the 
previous  year’s  stocks,  and  the  credit  flow  to  non-financial  corporations  will  exclude  foreign  direct 
investment in its numerator as well as its denominator. The newly established thresholds amount to 
55% and 85% of GDP for the debt stocks of households and non-financial corporations respectively, 
and to 14% and 13% of the previous year’s debt stock for credit flows. 
The  headline  indicator  on  financial  sector  liabilities  is  dropped  in  recognition  of  the  absence  of  a 
comprehensive  financial  sector  indicator  for  which  a  threshold  could  sensibly  be  determined,  and  of 
the  existence  of  several  other  independent  European  level  financial  sector  surveillance  mechanisms 
that have been set up after the inception of the MIP. The banking sector will be more closely monitored 
through three auxiliary indicators: gross non-performing loans (% gross loans), the tier-1 capital ratio 
of  the  banking  sector  (%  risk-weighted  assets),  and  the  return  on  equity  of  the  banking  sector  (%). 
While  these  indicators  convey  important  information,  meaningful  macroeconomic  thresholds  are 
difficult to determine. The lack of a headline indicator in the scoreboard by no means implies a reduced 
importance given to the financial sector in the Commission’s macroeconomic surveillance.   
The long-term and youth unemployment rate will become auxiliary indicators. 
The  threshold  of  the  real  effective  exchange  rate indicator  will be  narrowed  down  from  ±5%  for  EA 
and ±11% for non-EA countries to ±3% for EA and ±10% for non-EA countries to take into account the 
distributional characteristics of more recent data. 
Some adjustments are made to the definitions and transformations of some of the headline indicators, 
notably: 
- 

The  nominal  unit  labour  cost  index  will  be  measured  on  a  per-hour  instead  of  on  a  per-person 
employed basis. 
The house price index will be measured in nominal rather than real terms, also leading to a change 
of the threshold to +9%. 
The unemployment rate will be presented in annual data, rather than its 3-year average. 

- 

- 

• 

• 

• 
• 

• 

Several changes are also implemented for the auxiliary indicators, including a significant reduction in their 
number,  as  detailed  in  the  accompanying  staff  working  document.  The  revised  scoreboard  will  have  1 
headline indicator and 5(+5) auxiliary indicators less than the version in use so far. 

(5)  Commission  staff  working  document  on  the  changes  in  the  scoreboard  of  the  Macroeconomic  Imbalance  Procedure, 

SWD(2024) 702. 

8 

 
 
 
Graph 1:  Number of Member States recording scoreboard variables beyond threshold 

Executive summary 

The number of Member States recording scoreboard variables beyond relevant thresholds in a  certain year 
reflects data as of the 2025 AMR cut-off date (31 October 2024). Possible ex-post data revisions may imply 
a difference in the number of values beyond thresholds computed using previous vintages for the scoreboard 
variables, as published in previous AMR editions. * Data not available for aggregates over the forecast period. 

Source: Eurostat and European Commission forecasts.  

9 

9911910109201920202021202220232024f2025fCurrent account balance (% of GDP, 3y avg )1111108877201920202021202220232024f2025fNIIP (% of GDP)**731416440201920202021202220232024f2025fHouse price index, nominal (1y % change)1121111201920202021202220232024f2025fHousehold (+NPISH) credit flow -cons. (% of debt stock in t-1)**2324200201920202021202220232024f2025fNFC credit flow -consolidated, excl. FDI (% of debt stock excl FDI in t-1)2222221201920202021202220232024f2025fUnemployment rate (% labour force Y15-74)1742101EA20201920202021202220232024f2025fParticipation rate (% pop Y15-64, 3y change in pp)ExternalimbalancesInternal Imbalances Employment indicators363117124EA20EA20EA20EA20201920202021202220232024f2025fREER -42 trading partners, HICP def (3y % change)16410796EA20EA20EU27201920202021202220232024f2025fExport perf against advanced eco (3y % change)*10181216212522EA20EA20EA20EU27EU27201920202021202220232024f2025fNominal ULC, per hour (3y % change)Competitivness1113119988EA20EA20EA20EA20EU27EU27EU27201920202021202220232024f2025fHousehold (+NPISH) debt, cons. (% of GDP)**81098888EA20EA20EU27201920202021202220232024f2025fNFC debt -consolidated (% of GDP)12131413131212EA20EA20EA20EA20EA20EA20EA20EU27EU27EU27EU27EU27EU27EU27201920202021202220232024f2025fGeneral government gross debt (% of GDP)Internal Imbalances * 
 
 
Graph 2:  AMR scoreboard indicators in 2023, by country 

Executive summary 

Source: Eurostat 

10 

Current accountNIIPREERExport performance-0.1%51.5%0.0%-6.0%-0.9%-6.8%8.5%15.4%-2.1%-13.4%24.2%0.8%Nominal ULCScoreboardHouse prices15.8%Belgium2.3%26.9%Bulgaria9.9%17.2%Czechia-1.7%HH debtHH credit flowNFC debt57.1%2.3%96.4%23.5%16.3%48.3%31.0%4.9%41.8%NFC credit flowGovern-ment debtUnempl.Activity rate3.2%103.1%5.5%2.1%8.5%22.9%4.3%1.3%0.6%42.4%2.6%0.7%10.1%51.3%-1.0%2.5%5.8%70.8%1.9%-7.8%-3.1%-21.1%15.7%7.7%9.7%-101.4%-1.2%-9.2%5.7%Denmark-4.2%11.0%Germany-8.5%32.5%Estonia5.9%11.9%Ireland3.1%88.3%0.4%108.6%51.0%0.7%59.6%36.8%6.3%54.5%28.9%3.7%109.7%4.7%33.6%5.1%1.8%2.7%62.9%3.1%2.4%3.8%20.2%6.4%2.0%39.5%43.3%4.3%6.7%-7.7%-139.3%-1.2%32.1%1.3%-51.7%-0.8%14.0%-0.6%-28.1%-1.8%2.1%-0.6%-26.0%4.3%36.6%-1.8%Greece13.8%10.0%Spain4.0%9.5%France-0.4%17.1%Croatia11.9%40.9%-1.0%52.4%46.1%-1.9%65.9%62.6%1.3%91.9%30.1%9.5%42.8%4.6%163.9%11.1%4.2%-3.1%105.1%12.2%2.3%3.1%109.9%7.3%1.9%7.7%61.8%6.1%2.9%0.1%7.4%0.7%3.1%-6.7%-92.7%0.3%17.4%-4.5%-26.0%10.8%-1.7%-1.2%-4.6%12.8%6.6%5.0%Italy1.3%3.7%Cyprus2.9%25.8%Latvia3.7%37.3%Lithuania9.8%37.2%-0.5%58.1%64.3%1.0%130.2%18.6%5.2%35.8%21.2%6.6%29.9%-1.9%134.8%7.7%3.2%0.4%73.6%5.8%4.2%1.8%45.0%6.5%-1.4%12.1%37.3%6.9%0.3%7.9%33.1%-1.5%-14.4%-3.9%-36.8%10.2%1.2%5.0%92.9%-0.5%-10.7%8.8%52.9%2.4%-2.0%20.9%Luxembourg-9.1%35.4%Hungary7.1%0.4%Malta6.2%9.2%The Netherlands-1.9%67.9%1.0%273.1%16.9%3.4%55.5%49.1%6.8%69.6%94.5%1.1%114.3%-25.7%25.5%5.2%1.9%8.0%73.4%4.1%2.9%18.1%47.4%3.5%4.7%-1.4%45.1%3.6%2.1%0.7%16.6%1.8%-1.4%-0.6%-32.6%9.2%7.7%-0.7%-72.3%-1.4%16.2%-7.8%-39.5%6.7%6.8%10.3%Austria-2.9%23.9%Poland8.8%11.0%Portugal8.2%27.5%Romania3.3%45.0%-1.6%71.4%23.7%-0.2%32.2%55.0%0.1%70.8%12.5%2.8%28.2%1.3%78.6%5.1%1.8%4.0%49.7%2.8%4.3%-0.6%97.9%6.5%4.0%9.6%48.9%5.6%2.7%2.4%2.3%1.1%0.2%-5.4%-54.9%7.5%-3.1%-0.8%12.6%-1.9%-6.0%6.1%36.1%-7.5%-2.9%15.2%Slovenia7.2%17.8%Slovakia-0.2%14.0%Finland-5.7%11.3%Sweden-5.3%23.9%3.9%34.7%44.0%4.6%41.4%63.9%-0.4%76.3%84.6%0.6%117.2%-2.1%68.4%3.7%1.4%2.5%56.1%5.8%2.0%2.6%77.1%7.2%2.6%0.8%31.5%7.7%1.9%