The European Commission’s 2019 assessment of macroeconomic imbalances and progress on reforms

On 27 February 2019, the European Commission published its annual assessment of macroeconomic imbalances and the progress made with structural reforms based on the country-specific recommendations as adopted in July 2018. According to the Commission, the number of countries experiencing imbalances has increased to 13 overall, from 11 in 2018. Despite the persistence of excessive imbalances in some Member States, the excessive imbalance procedure has never been triggered since the introduction of the macroeconomic imbalance procedure in 2012. Persistent macroeconomic imbalances – whether excessive or not – leave Member States vulnerable to adverse macroeconomic shocks and tend to increase the probability of recessions, which often carry high social and economic costs. Debt levels are still historically high in some Member States, for both government and private debt, which makes responding to a downturn or to negative shocks more difficult. To support rebalancing and avoid new imbalances in cost competitiveness across the EU, accelerating growth in unit labour costs in some countries has to be carefully monitored. Reforms remain crucial to address these imbalances, and progress on recommended reforms is assessed annually by the Commission. The Commission assessment again finds only limited progress on recommended reforms. In addition, progress with reforms has been uneven, and is particularly lacking in the areas of product markets and public finances. Further reforms to improve the investment environment are essential to stimulate well-targeted investment that improves productivity, potential growth and resilience. JEL Classification: E02, E6, F02