The EU continues to be resilient amidst the multiple shocks endured in recent years, but has lost growth momentum in 2023 amid high inflation and tighter financing conditions, with only a moderate uptick expected in 2024, the European Commission has said.
Challenges include low productivity growth, green and digital transitions, ageing and social inclusion.
The European Union (EU) economy continues to be resilient in the face of the multiple shocks endured in recent years, but has lost growth momentum in 2023 amid high inflation and tighter financing conditions, with only a moderate uptick in growth expected in 2024, according to the European Commission’s Autumn 2023 economic forecast.
The EU is facing a number of important structural challenges, including low productivity growth, green and digital transitions, ageing and social inclusion that need to be tackled to stay on the path of sustainable competitiveness, the Commission, which recently launched the 2024 European Semester cycle of economic policy coordination, noted.
Disruptive geopolitical events have also demonstrated the need for the EU to remain competitive in a global market, while ensuring that no one is left behind, it said in a release.
The European Semester provides a framework for coordinating economic and employment policies of the member states. Since its introduction in 2011, it has become a well-established forum for discussing EU countries' fiscal, economic and employment policy challenges under a common annual timeline.
This year's Annual Sustainable Growth Survey puts forward an ambitious agenda to further strengthen a coordinated EU policy response to enhance the EU's competitiveness through a green and digital transition, while ensuring social fairness and territorial cohesion.
The four priorities to be promoted under the European Semester are environmental sustainability, productivity, fairness and macroeconomic stability, to foster competitive sustainability.
Addressing structural and emerging challenges, to fully realise each Member State's competitiveness potential will be one of the focal points of this year's cycle. This includes removing bottlenecks to private and public investment, supporting a conducive business environment, and ensuring the development of the skills required for the green and digital transitions.
In this respect, the 2024 cycle of the European Semester will specifically focus on synergies and complementarities between the implementation of the recovery and resilience plans and the Cohesion Policy programmes, and on identifying areas with further investment and reform needs at national and regional level, the release said.
Euro area member states should adopt coordinated prudent fiscal policies and wind down energy support measures to enhance public finance sustainability and avoid inflation, the Commission suggested.
It advised them to ensure high and sustained levels of public investment and promote private investment through the acceleration of the implementation of the Recovery and Resilience Facility and Cohesion Policy programmes.
It also recommended the countries to support wage developments that mitigate the loss in workers' purchasing power, taking into account competitiveness dynamics, and monitor risks related to tightening financial conditions, while completing the Banking Union.