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Economic Policy Reforms 2023
Going for Growth
Report
Economic Policy Reforms
Table of contents
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European Union
Product and labour markets functioning
Performance gaps
Resilient labour markets can help reduce large differences in business cycles across countries, which is threatening economic convergence and European cohesion. Countries that favour within-firm work flexibility in case of shocks and have a good training system for the unemployed enjoy more resilient employment in the face of shocks.
Strengthening the single market for capital will reduce the reliance of European financial markets on banks. The European banking system is not yet fully integrated and deposits in euro area banks are vulnerable to shocks in individual countries, amplifying the risk of financial fragmentation.
Recommendations
Encourage member states to reinforce job retention schemes to be used in case of a temporary shock, together with training.
Rigorously assess the economic impact of the European instrument for temporary Support to mitigate Unemployment Risks in an Emergency (SURE) and Next Generation EU as they could provide valuable inputs to the debate on the completion of the Economic and Monetary Union.
Complete the Banking Union by addressing all outstanding issues in a holistic manner and with the same level of ambition.
Digital transition
Performance gaps
Substantial investment, largely private, will be needed to reach the EU 2025 connectivity targets, which envisage much higher connection speeds than today, at least 100 Mbps for all households and 1000 Mbps for digitally intensive firms and main public institutions. Widespread use of digital technologies would also improve consumer choice and facilitate cross-border labour mobility.
Recommendations
Use digital tools to provide information on products, including on recycling and repair possibilities.
Remove barriers to private investment for the climate and digital transitions by simplifying licensing procedures.
Complete the implementation of the Electronic Exchange of Social Security Information.
Inclusiveness, social protection, and ageing
Performance gaps
Higher cross-border labour mobility is needed to improve resilience and the matching of workers with job offers across countries. Moreover, EU budget support should be made more efficient to support regional convergence.
Half of cohesion funding is spent through public procurement, but tendering procedures are often not competitive enough and projects are often selected on a first-come first-served basis.
Recommendations
To favour job reallocation in case of a durable shock, encourage member states to enhance activation policies, including for workers under job retention schemes.
Extend cross-border recognition of professional qualifications.
Make public procurement more competitive and ensure compliance with transparency requirements.
Further adopt competitive project selection procedures, emphasising regional growth objectives.
Climate transition
Performance gaps
Reducing EU net emissions of greenhouse gases to zero by 2050 implies electrifying most energy end use, generating most electricity from renewables, developing low-carbon fuels for sectors hard to electrify alongside carbon capture and storage, and increasing energy efficiency. Higher carbon pricing, stronger regulatory standards and more innovation are key to achieving climate neutrality. Moreover, bringing transport and buildings into an Emissions Trading System could spur emission abatement, accompanied by more demanding standards for energy efficiency and further assessment and disclosure of climate related risks.
Recommendations
Increase the EU Emissions Trading System coverage, by for example including transport and buildings.
Strengthen regulatory standards for energy efficiency.
Require comprehensive disclosure of climate and environment-related risks by financial intermediaries and large non-financial firms.