14.11.2013

Today, the European Commission published the Annual Alert Mechanism Report for the presence of macroeconomic imbalances. It is the first step of the application of the prevention and correction of macroeconomic imbalances procedure pursuant to Regulation (EU) 1176/2011 and Regulation (EU) 1174/2011 of the European Parliament and of the Council of 16 November 2011. Both regulations have been in force since 13 December 2011. The Alert Mechanism Report (AMR) is the starting point of the yearly cycle of the Macroeconomic Imbalance Procedure (MIP), which aims at identifying and addressing imbalances that hinder the smooth functioning of the EU economies. The AMR is an initial screening device, based on a scoreboard of indicators with indicative thresholds, plus a set of auxiliary indicators. The report shows that it is necessary to analyse in further detail the accumulation and unwinding of imbalances, and the related risks, in 16 Member States - Spain, Slovenia, France, Italy, Hungary, Belgium, Bulgaria, Denmark, Malta, the Netherlands, Finland, Sweden, United Kingdom, Germany, Luxembourg, Croatia.

The report shows that over the last year, most EU Member States, that have been part of the procedure, advanced in correcting their imbalances. This concerns not only the current account deficits and the main competitiveness indicators, but also the fiscal accounts, the private balance sheets and the financial sectors.

The report states that for Bulgaria, Belgium, Denmark, Malta, Netherlands, Finland, Sweden and the United Kingdom an in-depth review (IDR) will contribute to assess for which Member States imbalances persist or for which they have been overcome. The Commission takes the view that, since imbalances are identified after the detailed analyses in the previous IDRs, the conclusion that an imbalance has been overcome should also take place only after duly considering all relevant factors in another in-depth review, which could potentially lead to the closure of the MIP for some Member States.

In April 2013, the Commission concluded that Bulgaria was experiencing macroeconomic imbalances, in particular involving the impact of deleveraging in the corporate sector as well as the continuous adjustment of external positions, competitiveness and labour markets. In the updated scoreboard, a few indicators are above the indicative threshold, namely the NIIP and unemployment, while in 2012 Bulgaria exceeded the indicative thresholds of the following indicators, namely the net international investment position, unit labour costs and private sector debt. Bulgaria has registered progress regarding its current account given the large deficits and unstable developments in previous years. The current account correction appears to be mainly noncyclical and had a relatively small impact on economic activity. The negative NIIP remains high (above 50% of GDP), while net external debt is substantially lower. A positive trend is noticed also in respect of trade. Over the last five years, only Bulgaria, Estonia, Lithuania, Latvia, Malta, Poland and also Romania have shown positive exports development and have increased their market shares.

As to Spain and Slovenia the EC stresses that the IDRs will assess whether the excessive imbalances persist or unwind, and the contribution of the structural policies implemented by these Member States to overcome these imbalances. For France, Italy and Hungary, Member States with imbalances (but not excessive) and for which the Commission indicated the necessity of adopting decisive policy actions, the respective IDR will assess the persistence of imbalances. Germany and Luxembourg are new for the procedure Member States for which IDRs will also be prepared in order to better scrutinise their external position and analyse internal developments, and assess whether any of these countries is experiencing imbalances. An IDR is also warranted for Croatia, a new Member of the EU, given the need to understand the nature and potential risks related to its external position, trade performance and competitiveness, as well as internal developments in order to assess whether it is experiencing imbalances.