Blog Post

Looking ahead at the Commission’s imbalances report

The European Commission will release the analysis of its macroeconomic scoreboard on November 15. However, most of the indicators are already available through Eurostat. In this post, we discuss the broad macroeconomic trends that are likely to be detected by this early-warning procedure.

By: and Date: November 13, 2013 Topic: European Macroeconomics & Governance

The European Commission will release the analysis of its macroeconomic scoreboard on November 13. However, most of the indicators are already available through Eurostat. In this post, we discuss the broad macroeconomic trends that are likely to be detected by this early-warning procedure.

The Macroeconomic Imbalances Procedure (MIP) was introduced in autumn 2011 as a response to the economic and financial crisis. As part of the ‘six-pack’, the MIP aims to reinforce the surveillance of national macroeconomic policies in the EU and the euro area. The MIP is articulated in 3 steps: i) an early identification of countries presenting potential severe imbalances for which further economic analysis is deemed necessary, ii) the in-depth review (IDR) for the countries identified, and, iii) were excessive imbalances to be confirmed, the decision to open an Excessive Imbalances Procedure, implying corrective action plans and potential sanctions[1].

The 2014 MIP is expected to be launched this week with the European Commission’s release of the so-called Alert Mechanism Report (AMR) on November 13th. This early warning system is based on a macroeconomic scoreboard. The scoreboard, as devised by the European Commission services, consists of a set of eleven indicators (i.e. current account balance, net international investment position, real effective exchange rate, export market shares, unit labor costs, house price index, private sector debt, private sector credit flow, general government sector debt, unemployment rate and total financial sector liabilities) and fixes threshold that  are supposed to provide “a reliable signaling device for potentially harmful imbalances and competitiveness losses at an early stage of their emergence”[2]. Throughout the year Eurostat updates the relevant national data and makes them partially available.

A comparison with the (revised) 2011 MIP scoreboard allows to detect some interesting trends. Unsurprisingly, given the recession, current account deficits have been broadly correcting across the EU, with Latvia as a notable exception. However, one-sided adjustment might translate in an increasing number of countries being put under observation for excessive surpluses: Luxembourg, The Netherlands, Sweden, and Germany. In this regard, it is worth noting that last year Germany avoided breaking the +6% threshold by 0.1 p.p., only to see the figure later revised to 6.1%.

Like last year, more than half (16) of the EU28 countries display largely imbalanced net international investment profiles. However, this statistic should be interpreted with due care, as it is subject to large revisions: Luxembourg’s net position was corrected by roughly 30p.p. of GDP last year. This also suggests it might not be a great metric for advanced warnings, notwithstanding its importance.

MIP Scoreboard (2012)

On top of illustrating how the correction of labour costs is progressing, the MIP scoreboard displays some notorious EU-wide problems, as the rising unemployment, and the over-indebtedness of households and governments, with half of the EU28 countries breaching the threshold in this respect. Unemployment (3 year average) has worsened in a majority of countries, with Spain and Croatia recording the highest score increase as compared to 2011. 


[1] If, following the in-depth review, the gravity of imbalances is deemed to be low, the MIP allows the EC and the Council to adopt preventive recommendations in the context of the European semester (the so-called preventive arm).

[2] Cf. European Commission, Scoreboard for the surveillance of macroeconomic imbalances, European Economy | Occasional Papers | February 2012, p.4


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.


Warning: Invalid argument supplied for foreach() in /home/bruegelo/public_html/wp-content/themes/bruegel/content.php on line 449
View comments
Read about event

Live Event

Jan
24
12:30

Corporate taxation in the digital era

How can we address digital taxation in the EU? Is the proposed "equalisation tax" on turnover the best policy to tackle the challeges posed by digital taxation?

Speakers: Johannes Becker, Dmitri Jegorov, Maria Demertzis, Stephen Quest, Stef van Weeghel and Georgios Petropoulos Topic: European Macroeconomics & Governance, Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article Download PDF More on this topic

Blueprint

People on the move: migration and mobility in the European Union

Migration is one of the most divisive policy topics in today’s Europe. In this publication, the authors assess the immigration challenge that the EU faces, analyse public perceptions, map migration patterns in the EU and review the literature on the economic impact of immigration to reflect on immigration policies and the role of private institutions in fostering integration.

By: Uuriintuya Batsaikhan, Zsolt Darvas and Inês Goncalves Raposo Topic: European Macroeconomics & Governance Date: January 22, 2018
Read about event More on this topic

Upcoming Event

Jan
29
09:30

Integration of migrants in the EU

This event will discuss the integration of migrants in the EU as well as the EU's response to the recent refugee crisis

Speakers: Manu Bhardwaj, Herbert Brücker, Jutta Cordt, Zsolt Darvas, Naika Foroutan, Marcel Fratzscher, Manjula M. Luthria and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Mohrenstraße 58, 10117 Berlin, Germany
Read about event More on this topic

Upcoming Event

Feb
2
10:30

Europe’s immigration and integration challenges: Financial and labour market dimensions

The event, organised by Bruegel in cooperation with the Institute for International Affairs will discuss these and related questions and will also feature the launch in Rome of the study authored by Zsolt Darvas on the impact and integration of migrants in the European Union.

Speakers: Roberto Ciciani, Zsolt Darvas, Marcela Escobari, Tatiana Esposito, Manjula M. Luthria, Carlo Monticelli, James Politi and Nathalie Tocci Topic: European Macroeconomics & Governance Location: Rome, Italy
Read about event More on this topic

Upcoming Event

Jan
30
12:30

Why think tanks matter in the era of digital and political disruptions

Bruegel is pleased to host this panel discussion as part of the global launch of the 2018 Global Go To Think Tank Index, published by the University of Pennsylvania’s Think Tanks and Civil Societies Program.

Speakers: Matt Dann, Shada Islam, Blanche Leridon and Hlib Vyshlinsky Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More on this topic More by this author

Podcast

Podcast

Remaking Europe

This instalment of the Sound of Economics features Bruegel fellows Reinhilde Veugelers, Simone Tagliapietra and J. Scott Marcus explain how European industries are adapting to new manufacturing, and what more can be done to help EU countries and companies keep pace with the burgeoning 'Industry 4.0'

By: The Sound of Economics Topic: European Macroeconomics & Governance Date: January 19, 2018
Read article More on this topic More by this author

Blog Post

Macroprudential policy: The Maginot line of financial stability

The ability of macroprudential policies to assure financial stability and thus leave central banks free to assign the interest rate tool exclusively to price stability is unproven. As the Maginot line did not protect France from a German invasion in WWII, so macroprudential policy may not be sufficient to counter financial instability. Central banks should prepare to deal with dilemmas in the use of the interest rate.

By: Francesco Papadia Topic: European Macroeconomics & Governance Date: January 17, 2018
Read article Download PDF More on this topic

External Publication

Reconciling risk sharing with market discipline: A constructive approach to euro area reform

This publication, written by a group of independent French and German economists, proposes six reforms which, if delivered as a package, would improve the Eurozone’s financial stability, political cohesion, and potential for delivering prosperity to its citizens, all while addressing the priorities and concerns of participating countries.

By: Agnès Bénassy-Quéré, Markus K. Brunnermeier, Henrik Enderlein, Emmanuel Farhi, Marcel Fratzscher, Clemens Fuest, Pierre-Olivier Gourinchas, Philippe Martin, Jean Pisani-Ferry, Hélène Rey, Isabel Schnabel, Nicolas Véron, Beatrice Weder di Mauro and Jeromin Zettelmeyer Topic: European Macroeconomics & Governance Date: January 17, 2018
Read about event More on this topic

Upcoming Event

Feb
27
12:30

Bruegel - Financial Times Forum: The future of euro-area governance

The third event in the Bruegel - Financial Times Forum series will look into the future of euro-area governance.

Speakers: Maria Demertzis, Gideon Rachman, Manfred Weber and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More on this topic

Blog Post

Does the European Parliament miss an opportunity to reform after Brexit?

While Brexit negotiations are beginning to progress, the European Parliament is preparing to vote on the possible reallocation of seats following the UK's departure. With many of the current proposals reflecting Member States' concerns about losing seats, this paper advocates for options that could better achieve equality of representation even within the constraints of the EU treaties.

By: Robert Kalcik, Nicolas Moës and Guntram B. Wolff Topic: European Macroeconomics & Governance Date: January 10, 2018
Read article Download PDF More by this author

Policy Contribution

European Parliament

Bank liquidation in the European Union: clarification needed

Critical functions and public interest. What role do they play in Member States’ decision to grant liquidation aid? The author of this paper looks at how resolution and liquidation differ substantially when it comes to the scope of legislation applicable to the use of public funds and how the diversity in national insolvency regimes is a source of uncertainty about the outcome of liquidation procedures.

By: Silvia Merler Topic: European Macroeconomics & Governance, European Parliament, Finance & Financial Regulation, Testimonies Date: January 10, 2018
Read article More on this topic More by this author

Podcast

Podcast

Multispeed Europe

In this episode of the Sound of Economics, Maria Demertzis, and Italy's State Secretary for European Affairs Sandro Gozi, discussed about the issue of member-state integration in two or more speeds, one of the recurring questions in the debate about the European project.

By: The Sound of Economics Topic: European Macroeconomics & Governance Date: January 3, 2018
Load more posts