Commission executive vice president Valdis Dombrovskis, Economy Commissioner Paolo Gentiloni and Commissioner for Jobs and Social Rights Nicolas Schmit presented the European Semester Autumn Package for 2022 in a press conference in Brussels on Wednesday.
The Autumn Package includes the Annual Sustainable Growth Survey, opinions on euro area Draft Budgetary Plans (DBPs) for 2022, policy recommendations for the euro area and the Commission`s proposal for a Joint Employment Report.
This package draws on information and data found in the Autumn 2021 Economic Forecast, which noted that the European economy is moving from recovery to expansion but is now facing new challenges.
On Cyprus, the Commission finds that its fiscal stance is expected to be supportive.
Also, regarding the post-programme surveillance reports for Cyprus, as well as Spain, Portugal and Ireland, the Commission notes all four member states retain their capacity to service their outstanding debt.
However, this year’s Alert Mechanism Report (AMR) concludes that Cyprus is one of 12 member states for which in-depth reviews (IDRs) are warranted (the other countries are Croatia, France, Germany, Greece, Ireland, Italy, the Netherlands, Portugal, Romania, Spain, and Sweden).
The Commission recalls that during the previous annual Macroeconomic Imbalance Procedure surveillance cycle, Cyprus was one of three countries that were considered to be experiencing excessing imbalances (along with Greece and Italy).
In general, the Commission notes that this year’s Annual Sustainable Growth Survey steers the EU away from crisis management towards a sustainable and fair recovery that strengthens the EU economy`s resilience. It also sets out how the Recovery and Resilience Facility will be more deeply integrated into the new European Semester cycle.
Concerning the outlook from the draft budgetary plans of the euro area’s member states, the Commission notes that member states are unwinding the temporary emergency measures and increasingly focusing support measures on sustaining the recovery.
The euro area fiscal stance is projected to be expansionary over the 2020-2022 period, the Commission also points out.
In its recommendation on the economic policy of the euro area, the Commission recommends that euro area member states take action over 2022-23, individually and collectively within the Eurogroup, to continue to use and coordinate national fiscal policies to effectively underpin a sustainable recovery.
The recommendation calls for a moderately supportive fiscal stance to be maintained in 2022 across the euro area and for fiscal policy measures to gradually pivot towards investments that promote a resilient and sustainable recovery.
Finally, the Joint Employment Report (JER) confirms that the labour market is recovering, though employment is not yet back to pre-crisis levels. The COVID-19 crisis affected in particular young people, workers in non-standard forms of employment, the self-employed and third-country nationals. Sectors with high demand are already experiencing labour shortages.
Opinion on Cyprus’ Draft Budgetary Plan
According to the opinion on Cyprus’s Draft Budgetary Plan, the country’s fiscal stance, “is projected to be supportive” in 2022, as recommended by the Council. This projection is based on the Commission’s forecast and including the information incorporated in Cyprus’ Draft Budgetary Plan, including the impulse provided by the Recovery and Resilience Facility.
“Cyprus plans to provide continued support to the recovery by making use of the Recovery and Resilience Facility to finance additional investment” the opinion adds.
“Broadly as recommended by the Council, Cyprus plans to almost preserve nationally financed investment. The Commission recalls the importance of the composition of public finances and the quality of budgetary measures, including through growth-enhancing investment, notably supporting the green and digital transition” it is noted.
According to the Commission, “investments and reforms funded by the Recovery and Resilience Facility are expected to fulfil these objectives and contribute to support the long-term sustainability of public finances”.
“Taking into account the strength of the recovery, Cyprus is invited to regularly review the use, effectiveness and adequacy of the support measures and stand ready to adapt them as necessary to changing circumstances”, the section on Cyprus concludes.