Debate: European Semester: annual sustainable growth strategy  – European Semester: employment and social aspects in the annual sustainable growth strategy
Date: WEDNESDAY, 10 MARCH 2021
Speaker: Valdis Dombrovskis
Language: EN

It demonstrates the broad alignment of positive views for our coordinated policy response to the pandemic. These have been exceptional measures to deal with an exceptional situation. We acted with great speed so that Member States could do everything possible to mitigate the socio—economic impact of the pandemic. The unprecedented circumstances required us to adjust normal procedures – and temporarily adjust the European Semester too. It remains our primary tool for coordinating economic, fiscal and employment policies. Our joint policy response has been successful. We estimate that fiscal and liquidity measures cushioned the GDP contraction in 2020 by around 4.5 percentage points. This was facilitated by the activation of the general escape clause early on in the crisis, as well as by applying the full flexibility of state aid rules. As we prepare for the post—crisis phase, the EU’s massive recovery package, Next Generation EU, and its principal funding instrument, the recovery and resilience facility (RRF), will take centre stage. It is thanks in no small part to the European Parliament that these were put in place in record time. With the RRF, the watchword for the coming months will be ‘implementation’. What is important now is to get high—quality national recovery and resilience plans prepared and rolled out quickly. These must be ambitious and contain an appropriate balance of reforms and investments. They need to address all, or a significant subset of, the challenges identified in the country—specific recommendations, and they should have a strong focus on the green and digital transitions. As the report says, the 2021 Semester exercise offers a good opportunity to improve national ownership, since Member States are developing tailor—made plans to respond to their different needs. Here, the European Parliament will play a major role and I will be addressing the House on this issue tomorrow. We know that we still have difficult months ahead, but there are grounds for cautious optimism. It’s still, of course, subject to high uncertainty, but growth should resume in the spring and gather pace in the second half of the year. But we should also look further ahead still in terms of our coordinated fiscal policy response. This was the aim of the updated fiscal approach that the Commission presented last week. What is paramount is that fiscal support measures remain in place as long as needed. For this year and next, the overall fiscal stance should remain positive. Here, we can expect a substantial impulse from RRF funding – and this without adding to national debts and deficits. Regarding the general escape clause, the decision on whether to continue or deactivate it should depend on an overall assessment of the economy. The key criterion should be whether economic output has reached its pre—crisis level of 2019. According to our current forecast, GDP should reach its 2019 level towards the middle of 2022. Based on this, the general escape clause would remain active in 2022, and no longer in 2023. Then, at the appropriate moment, Member States should resume fiscal policies aimed at achieving prudent medium—term fiscal positions. They will find it easier to do this if their current support measures are temporary and targeted, thereby avoiding a permanent burden on public finances. Since the crisis has widened divergences and increased inequalities, we also need to improve convergence, resilience and ensure inclusive growth. Our labour market and social policies will play an important role in this respect, and Commissioner Schmit will now address these points.