Ce rapport présenté le 1er mars aux dirigeants européens par le président du Conseil, Herman Van Rompuy, et le président de la Commission, José Manuel Barroso, dans le cadre d'une coordination plus stricte de la politique économique et budgétaire européenne indique que les coûts salariaux totaux ont crû en Belgique plus vite que dans la plupart des pays européens cette dernière décennie.

1. 29 February 2012
Issues Paper
In the context of the European semester, the March European Council gives, on the basis of the
Commission's Annual Growth Survey, guidance to Member States for the Stability or
Convergence Programmes and National Reform Programmes to be submitted by each Member
State in April. As described in the Presidency's synthesis report on the European Semester,
progress is lagging in a number of key areas where reform is essential to promote growth and
jobs. Furthermore, the recent Alert Mechanism Report by the European Commission points to
possible challenges and risks raised by macroeconomic developments in some Member States.
The stagnation of economic activity in 2012, as projected by the latest Commission interim
forecast, also highlights the necessity of serious action to revive growth across Europe.
The objective of the discussion in the European Council is thus to identify the priorities
Member States should focus on in the preparation of their National Reform Programme
and Stability or Convergence Programme. The Commission's Annual Growth Survey has
identified a number of key priorities for 2012. Some of them, such as restoring normal lending
to the economy, requires action at the EU level and are being addressed. Others require action
at Member State level. This paper aims to highlight these through a number of illustrative,
though non-exhaustive charts and figures. Of course, by definition, these illustrations are
partial in nature. Moreover, they will not capture some of the more recent reform measures and
actions taken in some Member States. But given the scale of the economic challenge Europe
faces, their underlying message remains pertinent.

2. 1. Fiscal consolidation
Progress has been made, but, given structurally weak fiscal positions in several Member
States, fiscal consolidation needs to be pursued in earnest. Member States benefiting from
financial assistance programmes have been leading fiscal efforts, with Greece, Portugal and
Ireland recording changes in the structural balance above 5 percent of GDP since 2009.
Looking ahead, as previously agreed, differentiated strategies should be pursued and
implemented within the common framework, taking account of country-specific fiscal and
macro-financial risks. Countries under an assistance programme or market scrutiny should stick
to agreed targets, whilst those with more fiscal space should let automatic stabilisers operate
fully. The following graph, based on the Autumn 2011 Commission forecast, highlights the
challenge, as showing the distance between the then projected 2011 fiscal deficit, Member
States' 2012 targets and the three percent deficit limit.
Percent of GDP Government fiscal balances
6 2011 General government balance in 2011 autumn
forecast
2012 Government target (SCP or more recent up to
4 Nov 2011)
2
0
BE BG CZ DK DE EE IE EL ES FR IT CY LV LT LU HU MT NL AT PL PT RO SI SK FI SE UK
(fy)
-2
3%
3%
-4
-6
-8
-10
-12
Source: Commission Services
To ensure growth-friendly consolidation, Member States should pay particular attention
to the following elements:

3. Prioritizing growth-friendly expenditure, such as education, research and innovation,
which are an investment in future growth, and ensuring the efficiency of such spending.
Nordic countries, for example, seem well positioned as regards the level of public
investment on R&D. For many Member States, however, prioritization on R&D remains a
challenge.
R&D expenditure in the public sector
Growth rate percent of GDP
25% 1,2
5-year growth rate (lhs)
Level 2010 (rhs)
20% 1
15% 0,8
EU 27 level average
10% 0,6
EU 27 growth
average
5% 0,4
0% 0,2
EU27BE BG CZ DK DE EE IE GR ES FR IT CY LV LT LU HUM T NL AT PL PT RO SI SK FI SE UK
-5% 0
Source: Innometrics. Innovation Union Scoreboard 2011
Pursuing the reform and
Public Pension Spending relative to GDP
modernization of pension
systems, respecting national IT
FR
traditions of social dialogue, to AT
EL
PL
ensure financial sustainability PT
HU
and adequacy of pensions. After DE
EU 27
reforms over many years, a FI 2060
BE 2007
number of Member States SI
SE
anticipate only moderate DK
LU
increases of public pension ES
BG
CZ
expenditures, but for some, MT
SK
without further reform, the LT
UK
projected change could be RO
NL
substantial or the level could CY
EE
remain elevated. (For example, LV
IE
Percent of GDP
the chart suggests that in 0 5 10 15 20 25
Source: Interim EPC-SPC Joint Report on Pensions, 2010. Hungary's 2009 pension reform is not included in the projections.
Luxembourg, Cyprus, Greece,
Romania, Slovenia, or Spain public pension expenditure could rise by more than 6
percentage points as a share of GDP over the next fifty years. Latest reforms in Greece,

4. Romania, Spain are likely, however, to have lowered these estimates.) The modernisation of
pension systems should be coupled with a reform of health systems aiming at cost-
efficiency, sustainability and a more healthy labour force to lift labour participation.
Growth-friendly national tax policies. This can be achieved via:
− Reducing distortive high tax rates, including by a broadening of the tax base.
− Reducing the tax burden on labour, especially on low income earners. This seems
to be a challenge for most Member States, with only Ireland, Malta, Luxembourg or the
UK reporting a tax burden below 30 percent, which is close to the average of OECD
countries. While in some parts of Europe, developments have been encouraging, in
others, budgetary pressures during the crisis drove up the tax-related cost of labour.
Tax burden on Labour Percent
60
2006 50
2010
40
30
20
10
0
Fr m
p 7
y
Sp k
er e
St r g
th i c
Lu ing ia
Ne Gr ia
U em om
Ge ce
Au ia
Es nia
Sw nia
ain
Sl land
Cy a
Hu ly
Po d
M d
R stria
Sl onia
De enia
ec E n
La y
us
ite Bu gal
Po s
Ire es
Re 2
ar
th eec
an
n
al t
ar
lan
e
nd
iu
Li ubl
K r
ak
tv
ted u
Ita
an
la
d lga
pr
at
h U
ed
nm
ua
a
x d
rt u
ni bo
rm
lg
ng
la
om
ov
n
t
ov
Be
Fi
Cz
Un
Source: European Commission. As 2010 dat a is unavailable for Cyprus, the dat a point for 2010 refers to 2007. T he tax burden is measured as the
difference between the before- and after-tax wage for an employed person with low earnings.
− Improving the efficiency of Shadow economy (as percent of GDP)
50
tax collection and tackling
45
tax evasion to increase 40
2000
government revenue, 2007 35
including through agreements 30
with third countries based on a 25
coordinated approach where 20
15
relevant. Measures to
10
encourage moves from
5
informal or undeclared work
0
to regular employment should
eth gd g
to a
H S pa m
h pu en
p a
nl k
Bu a n a
l ia
th c e
Cz ak S w a n d
un in
Popub ic
D ma d
G rel a ce
La ni a
en n y
M ary
ia
e r om
lg l
ov d
F r nds
rtu l ic
I ta
ni x us s
d b ia
Po ta ly
Li ree s
Es ga ri
Be g a
N Ki n our
Cy eni
Fi ma r
m i
er n
U Lu A t ate
Sl lan
G ru
l
iu
Ro uan
tv
te e m t r
e c Re e d
al
I n
Re b
g
a
la
be reinforced. Gains from
S
d
te
ni
ov
U
doing so appear large in
Sl
Source: Shadow Economies all over the World: New Estimates for 162 Countries from 1999 to 2007
Southern and Eastern Europe (2010); Paper for World Bank Regional Report.
and the Baltic Countries.

5. 2. Growth and competitiveness
A number of priority areas to Product Market Efficiency and Growth, 2000–10
reduce the productivity gap,
enhance trade and reap the 1,0
benefits of the Single Market
Adjusted change in real GDP per capita,
0,5 Sweden
have been identified by the Greece
2000–10, annualized (percent)
Austria
Finland Netherlands
Switzerland
Commission in the Annual 0,0
Iceland Germany
Ireland
Growth Survey and by Member United Kingdom
Belgium
-0,5 Cyprus
France Denmark
States. Reforms which improve Spain Malta
the business environment and -1,0
raise competitiveness are a Italy
-1,5
Portugal
priority. Member States need to
focus on: -2,0
3,5 4,0 4,5 5,0 5,5 6,0
Goods market efficiency index (2010)¹
Further opening of Source: IMF; October 2011 Regional Economic Outlook
¹ Higher value means better score. Because of data limitations, not all MS are shown.
sheltered sectors by removing The indicator 'Goods market efficiency' is developed by the World Economic Forum. It is an aggregate measure
of domestic and foreign competition in product markets, including measures on the extent of market dominance,
unjustified restrictions on effectiveness of antimonopoly policy, tariffs, restrictive rules on FDI etc.
professional services and the
retail sector. Efforts are
underway, notably in countries Global Government Effectiveness Rank
such as Italy, Portugal or Greece. ROMANIA
BULGARIA
IT ALY
GREECE
Ensuring a more effective HUNGARY
LAT VIA
government sector, for example POLAND
LIT HUANIA 2005
by ensuring that exchanges SLOVAKIA
SPAIN
2010
between administrations and CZECH
SLOVENIA
enterprises as well as citizens can PORT UGAL
MALT A
be done mostly digitally; reducing EST ONIA
IRELAND
administrative burdens; increasing FRANCE
UNIT ED ST AT ES
CYPRUS
the absorption rates of EU funds, GERMANY
UNIT ED
and ensuring that the judiciary BELGIUM
LUXEMBOURG
operates swiftly and fairly. The NET HERLANDS
AUST RIA
Nordic countries are indeed world SWEDEN
DENMARK
leaders in government FINLAND
effectiveness, and large gaps 45 55 65 75 85 95
Source: World Bank Governance Indicators 2011, A x percentile rank implies that x percent of 213
separate them from many other countries in the world have a lower ranking on the indicator in that year. T he WGI summarize
information from 30 existing data sources on views and experiences of citizens, entrepreneurs, and
Member States. Worth noting also experts in the public, private and NGO sectors. Government effectiveness captures perceptions of the
quality of public services and the civil service; the degree of its independence from political pressures,
that the relative ranking of a the quality of policy formulation and implementation, and the credibility of the government's
commitment to such policies.
number of Member States has

6. deteriorated over the past few Patents and Growth, 2000–10
years. 1,0
Adjusted change in real GDP per capita,
2000–10, annualized (percent)
0,5 Sweden
Greece
Promoting innovation and Austria
Netherlands Finland
0,0 Switzerland
Iceland
Ireland Germany
business creation by improving Belgium
United Kingdom
-0,5 Cyprus
Malta France Denmark
the quality of support systems, Spain
-1,0
and promoting entrepreneurial
-1,5 Portugal Italy
skills. European venture capital
-2,0
markets remain underdeveloped, 0 1 2 3 4 5 6 7 8 9 10
Patent applications in 2008 per billion euro GDP
and patenting especially
Sources: IMF October 2011 Regional Economic Outlook and 2011 Innovation scoreboard
sluggish in some parts of
Europe.
Venture Capital as percent of GDP in 2010
Percent
0,25
0,2
0,15
Average
0,1
0,05
0
ES
R
SE
LU
CH
RO
BG
L
E
IE
K
K
O
U
FR
27
BE
CZ
FI
IT
T
PT
PL
N
D
G
U
D
N
A
H
EU
Source: Innometrics. Innovation Union Scoreboard 2011
3. Employment
Labour costs and export growth (2000-2010)
Mobilising labour for
14
growth: 12
Germany
Increase in export/GDP ratio, 2000–10
10
Austria Netherlands
8 Switzerland
To create jobs and ensure a job-rich
(percentage points)
6 Sweden
Ireland
4 Denmark
recovery, several priorities have been 2 United Kingdom
Belgium
Portugal
identified in the Annual Growth 0 Italy
-2
Spain
Survey. -4 France Greece
-6 Finland
-20 -10 0 10 20 30 40 50
Revising wage-setting Change in ULC in manufacturing, 2000–10 (percent)
Sources: IMF October 2011 Regional Economic Outlook
mechanisms, in conformity
with national social dialogue practices, to better align changes in wages with

7. productivity developments. Recent substantial improvements notwithstanding, Belgium,
Italy, Ireland, Spain and Portugal have seen nominal unit labor costs in manufacturing
rising by over 20 percent in 2000-2010.
Enhancing labour mobility. According to the September 2011 Eurobarometer, around
one in 10 EU citizens has worked in another Member State, the proportion being higher
in Luxembourg (35 percent) and Ireland (21 percent). But for more than half of
respondents working abroad was considered of no interest.
Restricting access to early retirement schemes and other early exit pathways while
supporting longer working lives. In most EU member states, the average effective
retirement age still remains below 62 years, while in many other developed parts of the
world it now exceeds 65 years.
Effective average retirement age of men (2004-2009)
Korea
Iceland
Japan
Romania
New Zealand
Portugal
Cyprus
Chile
Estonia
Sweden
Switzerland
United States
Australia
Norway
Denmark
United Kingdom
Bulgaria
Latvia
Canada
Ireland
Turkey
Netherlands
Czech Republic
Slovenia
Lithuania
Greece
Finland 62 years
Germany
Spain
Poland
Italy
Malta
Hungary
Slovak Republic
Belgium
France
Austria
Luxembourg
45,0 50,0 55,0 60,0 65,0 70,0
Number of years
Source: OECD
As agreed by the EC on January 30th, a particular effort needs to be placed on
raising employment of the young. Improving skill-sets, training and apprenticeships
can play a role here.

8. Protecting the vulnerable:
As demonstrated by the chart, many EU Member States face significant challenges with regard
to poverty and social exclusion. Action should thus focus on:
− the effectiveness of social protection systems;
− the implementation of active inclusion strategies;
− access to services supporting integration in the labour market and in society.
People at risk of poverty after social transfers (percent of total population)
Percent
25
2005
20
2010
15
10
5
0
in e n
Fr ain
ep ia
L ru s
ec Bu ium
e n ic
ov a
Fi kia
G nd
N M ry
Po tri a
ay
un g
N and
Sp e
Es any
ted Sw and
Ic o m
A ds
Cy ly
r d
Ire nia
r la a
ov a
m l
ce
er k
L u thu ia
m ia
Sl e n i
Ro tuga
H our
ec
Po lan
he lt
Sl a n i
G m ar
R r
D ubl
K ed
Li atv
x e an
I ta
ga
n
w
an
h lga
la
et a
p
a
re
to
gd
us
m
nl
lg
el
or
b
Be
Cz
ni
U
Source: Eurostat; data for Slovenia in 2005 is unavailable, the data point thus reflects 2004.
*****
This paper illustrates the extent of current reform challenges at hand. To address these, a
comprehensive and broad approach, to be reflected in the national reform programmes, should
be adopted, facilitating the reform process - politically, socially and via improved market
perception. This and coherence across sectors and ministries would also ensure that reform
efforts are sustained and can bear fruits relatively quickly.