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Winter Package 2018: European Commission presents Country Reports within the European Semester

On Wednesday, 7 March 2018, the European Commission presented its Country Reports within the scope of the European Semester. The economic and social situation of individual Member States is assessed on the basis of these Country Reports in order to derive from them subsequently country-specific recommendations. New this year is the further enrichment of social aspects, as the principles of the European Pillar of Social Rights have become an extended topic in the Country Reports.

On 7 March 2018, the three Commissioners Valdis Dombrovskis, Marianne Thyssen und Pierre Moscovici presented the Country Reports within the scope of the European Semester in Brussels. In view of continuing economic growth, positive economic prognoses and falling unemployment rates, they now think the time has come to tackle necessary reforms in the Member States. Compared to previous years, it is very positive that greater importance has been attached to the social dimension within the scope of the Country Reports. Commissioner Marianne Thyssen, in charge of Social Affairs, pointed out that social and economic developments have to go hand in hand.

In view of the indicators of the social scoreboards within the scope of the European Pillar of Social Rights, Austria's relatively positive performance is generally confirmed. The Austrian Country Report emphasises that Austria has robust policies to ensure fair working conditions, to reduce poverty and policies against social exclusion risks are generally effective. The social partnership gets a special mention.

However, the Commission also emphasises numerous undesirable developments, which the Chamber of Labour too has been referring to for years: the high share of women in part-time jobs and the high Gender Pay Gap also give the Commission cause for concern. It sees the cause of this in an still comparatively scarce and uneven provision of childcare for children under three. Subsequently, the danger of poverty for women over 65 is significantly higher than for men.

The Commission also regards the long-term financing of expenses for the pensions and Social insurance system as problematic and recommends reducing the gap between legal and actual Pension age. However, the Chamber of Labour finds it difficult to comprehend this risk of lacking financial feasibility of the pension system. The Commission refers to the “Ageing Report 2018”, which the European Commission will probably publish in May. For Austria, the report forecasts an increase of public pension expenses of currently ca. 14 % of GDP to only ca. 15 % by 2040. However, this share shall fall to 14.3 % by 2070. Hence, there is no question of being no longer able to finance pensions in the long-run.

The Commission regarded the Austrian wage tax reform in 2016, which was also demanded by the Chamber of Labour, as positive, as this stimulated demand. However, at the same time, the continuing high tax ratio of the factor 'work’ attracted criticism.

It must be regarded as positive that in the Country Reports for the European Semester the EU Commission for the first time has taken a closer look at seven Member States because of aggressive tax constructions. These countries are Belgium, Cyprus, Hungary, Ireland, Luxembourg, Malta and the Netherlands. The Commission will decide in April, whether it will issue the Member States concerned with country-specific recommendations against tax dumping. To coincide with the Country Reports, the Commission today has also published a study to how prone tax laws in individual EU Member States are to aggressive tax constructions.

The study focusses on tax avoidance due artificial interest and license payments as well as group-internal transfer prices.

Austria belongs to those 15 countries where in the past no particular economic imbalances were established. The Commission prepared in-depth analyses for those countries where this had been the case in the previous year. Italy, Croatia and Cyprus are still having “excessive economic imbalances” and therefore find themselves in the highest category of imbalances. Eight further countries, among them also Germany, the Netherlands and Sweden still have economic imbalances. Compared to the previous year, the analysis of the Commission found for Slovenia that no more imbalances have been observed.

The Member States have been asked, as next steps in the European Semester cycle, to prepare a national programme by mid-April to further improve the economic and social development of the countries. The Commission will hold relevant talks with national governments, parliaments and social partners. Based on these talks, the Commission will publish the country-specific recommendations in May to continue to combat the weak point, shown in the Country Reports.

Further information:

European Semester – Winter Package: reviewing Member States’ progress on their economic and social priorities

European Semester 2018: Country Reports

European Semester 2018: Country Report Austria

AK EUROPA: Winter Package: Germany admonished again without being punished, mediocre news for Austria

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