Countries are still slow to follow European Union policy recommendations

The main product of the European Semester – the European Union’s annual process of coordinating member-country economic policies – is country-specific recommendations (CSRs). These, proposed by the European Commission and endorsed by the Council of the EU after possible amendments, aim to enforce the EU’s fiscal and macroeconomic imbalances rules and to advise EU countries on how to foster growth, ensure fiscal and macroeconomic sustainability, address climate change challenges and improve social cohesion, among other areas. 

However, making recommendations to countries does not guarantee their implementation. From the beginning of the European Semester in 2011, the CSR implementation rate was modest. It gradually worsened until the COVID-19 pandemic (Figure 1), and was not higher than the implementation rate by EU countries of unilateral recommendations from the Organisation for Economic Co-operation and Development (Darvas and Leandro, 2015). 

Weak implementation of CSRs could be explained by the inherent difficulty in influencing national policy decisions (Darvas and Leandro, 2015), the lack of coherence with political parties’ programmes (Maatsch, 2017) and limited involvement of national parliaments in the CSR process (Hagelstam et al, 2018). In the pre-pandemic period, CSR implementation was better in situations of greater financial-market pressure, larger fiscal and current account deficits, better quality governance, more fragmentation of government coalitions and fewer recommendations received (Efstathiou and Wolff, 2022). Meanwhile, implementation worsened when the economic environment improved and market pressure on sovereigns lessened. 

However, there was a major increase in implementation during the pandemic, though there have been some setbacks since then.

When the EU launched its landmark pandemic-recovery programme, NextGenerationEU (NGEU) and its main instrument, the Recovery and Resilience Facility (RRF) in 2021, one of the eleven requirements for EU countries to receive investment and reform support was to address all or a significant subset of challenges identified in the relevant CSRs. These were the 2019 and 2020 CSRs for the first 25 countries that submitted their the National Recovery and Resilience Plans (NRRPs), in which reform and investment plans were set out, while for the Netherlands and Hungary, the 2019, 2020 and 2022 CSRs were considered. The Commission assessed compliance with this requirement as follows: A) the NRRP contributes to effectively addressing all or a significant subset of CSRs, B) the NRRP contributes to partially addressing all or a significant subset of CSRs, and C) the NRRP does not contribute to addressing any CSR. The Commission gave all EU countries the best A score. This might suggest that the RRF was instrumental in fostering the implementation of the 2019-2020 CSRs.

In fact, the average implementation rate for 2019-2020 CSRs (which were incorporated in the NRRPs) increased little. Where it did, it was mainly attributable to easier fiscal recommendations. The implementation of 2022-2023 CSRs remains low. The implementation rate for 2020, and especially 2021, fiscal recommendations increased significantly partly because some of the recommendations were relatively easy to comply with, because they required what countries were doing anyway: addressing the adverse effects of the pandemic. However, there was no increase in difficult reform areas for which pre-pandemic implementation rates were low.

About the Author

Zsolt Darvas is a Senior Fellow at Bruegel and a part-time Senior Research Fellow at the Corvinus University of Budapest. He joined Bruegel in 2008 as a Visiting Fellow, and became a Research Fellow in 2009 and a Senior Fellow in 2013.