Euro area-european-union-enhancing-european-cooperation-oecd-economic-survey-2016
1. 2016 OECD ECONOMIC SURVEYS
EUROPEAN UNION & EURO AREA
Enhancing European cooperation
Paris, 10 June
@OECD
@OECDeconomy
http://www.oecd.org/eco/surveys/economic-survey-european-union-and-euro-area.htm
2. • Macro policies have become more supportive,
but demand is still weak and unemployment
very high.
• Inflation remains well below 2%.
• Financing for firms remains a problem in
several countries.
• Investment is still well below pre-crisis levels.
• Barriers to intra-EU labour mobility remain
high.
2
Main findings
3. • Countries with fiscal space should use budgetary
support to raise growth.
• Commit to keep monetary policy accommodative until
inflation is clearly rising to near the target.
• Speed up the resolution of non-performing loans and
complete banking union. Promote non-bank financing.
• Increase targeted public support to investment.
Prioritise Trans-European networks.
• Reduce administrative burdens and regulatory
barriers in the services sector.
• Speed up recognition of professional qualifications
and legislate effective portability of pension rights.
3
Main recommendations
4. • Broad reforms in tax structure, R&D expenditure, active labour
market policies and PMR could increase EU GDP by 6% in 10 years
(Varga and in’t Veld, 2014)*
• Sectoral reforms are also important:
– Single market in services would increase EU GDP by 2.6%, with only 0.9%
reaped so far (Monteagudo et al., 2012; EU Commission, 2015)
– Digital single market reforms that are in place could raise EU GDP by 1%,
while planned reforms could add another 3% of EU GDP (Lorenzani and Varga,
2014). Civic Consulting (2011) and European Parliament (2014) find similar
gains of 1 to 2% of EU GDP.
– External trade agreements could also increase EU GDP, by an amount
depending on the trading partner: 0.1% in the case of Canada, 0.3% in the case of
Japan and 0.5% in the case of the US.
* For references see the bibliography of Annex 1.A.1. in OECD (2016), OECD Economic Surveys: European Union 2016.
4
GDP gains from EU structural reforms can be
large
5. 5
Losses from fragmentation can be large, too
Source: R. Kierzenkowski et al. (2016), “The economic consequences of Brexit: A taxing decision”, OECD Economic Policy Papers, No. 16.
Brexit is a large negative shock, which would spill over to the EU
EU GDP would decline by 1% in 2018 and still be almost 1%
lower in 2023 than without Brexit
6. 6
Growth has picked up only gradually
1. European Union member countries that are also members of the OECD (21 countries).
Source: OECD (2016), OECD Economic Outlook: Statistics and Projections (database).
7. 7
Tensions in financial markets have
receded
1. Ten-year government bond yields relative to the German rate.
Source: OECD (2016), Main Economic Indicators (database).
8. 8
Unemployment is still high
1. European Union member countries that are also members of the OECD (21 countries).
2. Unweighted average.
Source: OECD (2016), OECD Economic Outlook: Statistics and Projections (database).
9. 9
Investment is weak
1. European Union member countries that are also members of the OECD (21 countries).
Source: OECD (2016), OECD Economic Outlook: Statistics and Projections (database).
11. Countries with fiscal space should use budgetary support to raise
growth.
Ensure that the application of the debt reduction rule of the Stability
and Growth Pact does not threaten the recovery.
11
Demand is still weak
Source: Eurostat (2016), “Government deficit and debt”, Eurostat Database.
12. Commit to keep monetary policy accommodative until
inflation is clearly rising to near the target.
12
Inflation remains well below 2%
Source: Eurostat (2016), “Harmonised indices of consumer prices”, Eurostat Database.
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2012 2013 2014 2015 2016
Y-o-y % changeY-o-y % change
Euro area consumer prices
Total Core (excluding energy, food, alcohol and tobacco)
14. When NPLs create a serious economic disturbance, facilitate their resolution by waiving
some of the requirements of state aid rules, such as triggering bail-in obligations.
Consider setting up asset management companies, possibly at the European level.
Take supervisory measures (e.g. capital surcharges) to encourage banks to resolve NPLs.
14
NPLs are still very high in some countries,
which hampers credit
Non-performing loans (NPLs)1
1. Gross non-performing debt instruments as a percentage of total gross debt instruments. 2015 is an average of the first three quarters.
Source: ECB (2016), “Monetary and financial statistics”, Statistical Data Warehouse, European Central Bank.
15. Collect and share internationally comparable credit information on
smaller firms
Ease the regulatory treatment of simple, transparent and
standardised securitisation to unlock lending to SMEs
Lower the regulatory barriers in corporate bond markets
15
Finance is largely bank-based
Source: Eurostat, European Central Bank, US Bureau of Economic Analysis, Board of Governors of the Federal Reserve System, and Securities
Industry and Financial Markets Association.
16. Complete banking union by:
Implementing a European Deposit Insurance Scheme
Creating a common fiscal backstop to the Single Resolution Fund
Further harmonising banking regulation in Europe
16
During the crisis, financial markets
became fragmented along national lines
Interest rates on loans for non-financial corporations1
1. New business loans of up to and including EUR 100 million with an initial rate fixation period of less than one year. Loans other than revolving
loans and overdrafts, convenience and extended credit card debt.
Source: ECB (2016), “MFI interest rate statistics”, Statistical Data Warehouse, European Central Bank.
18. Increase targeted public support to investment
Further upgrade national budgetary frameworks
Adopt national expenditure rules and conduct spending reviews linked
to budget preparation
Ensure that national independent fiscal institutions have resources to
fulfil their mandate 18
Public investment has taken deep cuts
1. Consolidation episodes considered are those starting in 2009 or later.
Source: See Figure 21 of OECD (2016), OECD Economic Surveys: Euro area 2016 for further details and source information.
19. Reduce administrative burdens and regulatory barriers in the
services sector
Improve the quality of impact assessment of legislative proposals
and the quality of ex post evaluation of policies
19
Regulatory burdens are high in much of Europe
1. European Union member countries that are also members of the OECD (21 countries).
Source: OECD (2015), ”Sectoral regulation”, OECD Product Market Regulation Statistics (database).
20. Prioritise the Trans-European transport and energy network
projects
Take advantage of the guarantees under the Juncker Plan to
finance higher-risk projects
20
Network sectors are fragmented
1. 2014 for Germany, Greece, Netherlands and United Kingdom. Aggregates are unweighted averages of latest data available. The European Union
covers member countries that are also members of the OECD (21 countries) excluding Spain (no data available) and the OECD covers 29 countries.
Source: IEA (2016), IEA Energy Prices and Taxes Statistics and OECD (2016), OECD Economic Outlook: Statistics and Projections (databases).
21. Harmonise national regulations and technical specifications in
network sectors, with the target of transferring decision powers in
technical matters to a single EU regulator.
21
Competition in network sectors is uneven
1. European Union 28 countries.
Source: OECD (2015), OECD Product Market Regulation Statistics (database).
23. 23
Labour market mobility is low
Increase portability of supplementary pension schemes and social
benefits
Simplify the eligibility requirements and procedures for the Blue
Card scheme
1. Population mobility for Australia, Canada and the United States; labour mobility for the European Union.
2. NUTS: Nomenclature of territorial units for statistics.
Source: Eurostat, Australian Bureau of Statistics, Statistics Canada and US Census Bureau.
24. Use electronic procedures to reduce administrative burdens for recognition
of professional qualifications
Use electronic services passports to reduce administrative burdens for
service providers and regulatory barriers in the services sector
24
The recognition of professional qualifications
is still a challenge
1. Within European Union applications only. The European Union aggregate is an unweighted average of data for the 28 member countries.
Source: European Commission (2016), Regulated Professions Database, http://ec.europa.eu/growth/tools-databases/regprof (accessed on 11 May).
25. Strengthen joint protection of external borders
Speed up administrative decisions on asylum applications and
ease labour market access for recognised refugees
25
Asylum applications have surged
1. Resident population at 1 January.
2. 2014 only for Austria, 2012-14 for Finland and 2013-14 for Hungary.
3. European Union 28 countries.
Source: Eurostat (2016), “Asylum and managed migration” and “Demography and migration”, Eurostat Database.
26. 26
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