Economic policy coordination in the euro area under the European semester : in-depth analysis

The European Semester is a well-intentioned attempt to foster macroeconomic policy coordination between Member states. However, the concept of euro area fiscal stance lacks operational instruments, the concept of macroeconomic imbalances is loosely defined, the Macroeconomic Imbalance Procedure (MIP) is weakened by its complexity, and its blurred frontier with respect to the Europe 2020 process further obscures the Semester. The euro area is still not well equipped to design a consistent macroeconomic policy and reduce the risk of long-lasting stagnation. We propose to use the future European Fiscal Board to promote an integrated view of fiscal policy, to make the MIP symmetric to the Stability and Growth Pact (SGP), with a flagship indicator (the current account) complemented with a limited number of indicators related to medium-term imbalances. Growth-enhancing policies would all fall under the Europe 2020 process ("integrated guidelines"), with alternating building blocks.