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Every saint has a past, every sinner has a future
The European Commission published yesterday the results of its in-depth reviews (IDRs) to assess the existence of macroeconomic imbalances in EU Member States. The IDRs are based on a scoreboard of indicators, which includes macroeconomic variables such as the external accounts, savings and investment balances, effective exchange rates, export market shares, cost- and non-cost competitiveness, productivity, private and public debt, housing prices, credit flows, financial systems, unemployment and so on. The exercise is part of the recently introduced Macroeconomic Imbalance Procedure (MIP) which, together with the strengthened Stability and Growth Pact (SGP), forms the basis of the reinforced European framework for economic governance.
In particular, the MIP was born to remedy the absence of a mechanism to monitor and tackle the development of macroeconomic imbalances of non-fiscal nature, after the recognition that the latter played a major role in the build up and amplification of the euro crisis. This year’s in-depth reviews identified the existence of imbalances in 14 out of the 17 EU countries reviewed, i.e. Belgium, Bulgaria, Germany, Ireland, Spain, France, Croatia, Italy, Hungary, Netherlands, Slovenia, Finland, Sweden, and the United Kingdom. In particular, Croatia, Italy and Slovenia are found to be experiencing excessive imbalances. In Spain, were imbalances had been classified as “excessive” in 2013, the Commission finds that “significant adjustment has taken place over the last year and […] on current trends, imbalances will continue to abate over time”. As a consequence, Spanish imbalances are no longer considered to be excessive in the sense of the MIP, although “substantial risks are still present” (for a more accurate description of the red flags that were raised in the past years, see table in the appendix).