Economic Policy: Commission discusses 2015 European Semester, publishes country reports

27 February 2015

On 25 February, the European Commission published its country reports on all 28 member states as part of the European Semester process. The Commission assessed the macroeconomic situation of each member state and drafted a report that will further be discussed by the Council, as well as individually with each state. Member states will then prepare their reform programs, based on which the Commission will prepare the so-called country-specific recommendations – list of actions that the states should undertake as a priority in the following year. Aside from this, the Commission decided that 16 states experience macroeconomic imbalances. Also the highly debated issue of fiscal deficits of France, Italy and Belgium was discussed by the college of commissioners. The Commission decided that none of the three states violated the budget rules in such a way that sanctions should be called. Especially France openly ignored the Stability and Growth Pact (SGP) rules, the famous 3/60 rule (3% GDP fiscal deficit, 60% GDP public debt). France is under the Excessive Deficit Procedure since years and should have brought its deficit under the 3% of GDP this year. The 2015 deadline was already an extension. When last year the French announced that they will not be able to make it, many member states called for tough stance by the Commission and for sanctions, which are an option under SGP rules. But France indicated that it is willing to comply with the rules, but needs even more time to reform. This led the Commission to assess the fiscal compliance of the member states with some flexibility. Thanks to this, France has avoided sanctions and was granted an extension of the deadline once again. The new deadline is 2017. Some point out, however, that 2017 is an election year in France and therefore it is improbable that this deadline will be respected.

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Competitiiveness: Czech economy results for 4Q 2014

27 February 2015

According to the data provided by the Czech Statistical Office the Czech economy grew in 4Q of 2014 by 1.5 % instead of 1.3 % as were the original estimates of the Czech Statistical Office. Also the growth compared to previous quarter was eventually higher when it ended at the value of 0.4 % instead of 0.2 %. What remained unchanged according to the estimate was Czech overall economy growth that was confirmed at the level of 2 %. This was particularly beause of the number of domestic demand that were 2 % higher in year-on-year comparison and compared to 3Q the economy grew by 1.2 % that was the highest growth since 2010. In spite of the improvement there were areas that fared slightly worse such as construction, agriculture or enterprise facilities and services. On the contrary other sectors, for example transportation, fared better or at least retained their dynamics. The 2014 economy growth was also supported by foreign demand, raise of gross capital and of household expenditures that grew by 1.7 % in year-on-year comparison with 2013.

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Economic Policy: Meeting of economic ministers on Action Plan of Economic Growth

17 February 2015

On Tuesday 17th February Prime Minister Bohuslav Sobotka met with his economic ministers to discuss and asses the steps taken according to the Action Plan of Support of Economic Growth and Employment in the Czech Republic. The result of this meeting stated that that the government had successfully fulfilled its commitments by adopting the Civil Service Act and thus enabling the disbursement of European funds. Another of the governmental successes according to the meeting was the acquisition of new investments and creation of new workplaces. Namely the government managed to support total 149 investment projects in 2014 in the value of 78.5 bn CZK and supported the creation of nearly 15,000 new workplaces. The Czech Republic also negotiated the exception from the European Commission to be able to provide the incentive in the overall value above the limit of 150 million EUR per year.

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Economic Policy: Greece reaches interim deal with the creditors

20 February 2015

After weeks of discussions, allegations and suspicion, the Eurogroup finally reached an agreement on the Greek bailout program in the evening of 20 February. It truly is a last-minute achievement – the program was originally set to end on 28 February and without any follow-up arrangement, Greece would quickly run out of money and even be forced to leave the euro. Also, worried Greeks have been taking their deposits away from Greek banks, which seriously threatens the overall stability of the banking system. Without a deal, the outflow of capital could have led to collapse.

The Eurogroup agreed to extend the current bailout program by 4 months, giving the new Greek government of Alexis Tsipras more time to prepare a follow-up solution. Greece is still not ready to function fully without any sort of financial assistance. On Monday 23 February, Greece must present a list of reforms it will undertake. The list will be assessed by the Troika institutions (EC, ECB, IMF). If the three institutions are satisfied, the program will formally be prolonged. Also, negotiations on the final list of reforms will start, with the aim to agree on a final list of reforms by the end of April. Based on these new arrangements, the review process will be carried out and, upon its satisfactory completion, Greece will receive the badly needed last bailout tranche. Greece also declared that it will honor all of its financial commitments and will refrain from any unilateral steps, such as rollback on reforms already in place.

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