STRUGGLING economies across Europe need to focus on freeing up their labour markets and injecting competition into their stagnant industries if they ever want to recover, the European Commission (EC) said yesterday.
Almost all nations still need to cut their budget deficits further, it said in its annual growth survey, though the need is less pressing this year as borrowing costs have begun to come down – countries like Italy are no longer in on the EC’s excessive deficit procedure, which is reserved for those in the depths of a crisis.
As a result the troubled governments from Spain to France to Belgium have all been given at least an extra year to get borrowing under control while they implement other pro-growth reforms.
“While fiscal consolidation is on-going and should continue with a pace that reflects the situation in each country, member states should now intensify their efforts on structural reforms for competitiveness,” said EC President Jose Manuel Barroso.
“In the first place, labour market reforms, which are the best way to kick-start job creation, will be particularly helpful for the young and the long-term unemployed, who have difficulty breaking into the jobs market.”
Even the relatively healthy German economy needs work, the report said, noting more can be done to encourage female participation in the labour market and to increase wages.
The Commission has shifted its focus away from government debts
The EC said the UK must cut spending , make more finance available to firms and take action – like improving training courses – to cut youth joblessness.
Spain has been told to create a fiscal watchdog to make sure its budget does not get out of control in future. And it should try to make spending more efficient.
The Commission wants France to reform its rigid labour market in an effort to reduce unemployment. And it needs to take firmer action to reduce its budget deficit.
It is time for Germany to allow wages to increase, reducing one of the key imbalances in the Eurozone which makes peripheral economies so uncompetitive.
Italy was congratulated for getting its deficit under control, and told to work at keeping a primary budget surplus. It must tackle corruption and its complex taxes.
Malta is moving in the opposite direction to most EU countries and has been put back into the excessive deficit procedure, a key warning it is borrowing too much.
Belgium failed to meet EC targets on borrowing, but is among the countries given more time. It has been told to cut taxes on labour and open up competition.
The Czech Republic has been told it should take EU money to pump into infrastructure projects while cutting its own budget deficit, to avoid getting into trouble.
Luxembourg has been told to rebalance its economy away from financial services, which have been key to growth in recent decades.
And the Commission wants the small state to create a monitoring body to get more control of finances.
Poland is now under orders to shake up its labour market, training more young people and improving child care to encourage more women to work.
The EC wants the Netherlands to reduce incentives to buy property and boost renting as it fears households are too indebted.
Austria needs to promote competition in services to revitalise the economy, the Commission said, particularly in transport.
Ireland, Greece, Portugal and Cyprus have all avoided any further instructions as the bailed-out nations are already engaged in detailed planning with the EC.