It is a pleasure to be here for our regular exchange on the European Semester.
Last month, the Commission published its Spring Package.
It comes at a key moment as Europe navigates a period of heightened global uncertainty, with volatile trade and security conditions.
Confronted with such extraordinary challenges, a strong Europe in the world begins with a strong Europe at home.
The overall themes of the European Semester are therefore competitiveness and security.
Our Competitiveness Compass plots the course for the next five years.
It is vital that the EU continues to coordinate its economic and social policies effectively to bolster our competitiveness and secure our long-term prosperity.
The country-specific recommendations adopted by the Council on 8 July translate the priorities set out in the Compass into concrete policy actions for Member States.
In that way, Member States can play their part in enhancing Europe's competitiveness.
They include recommendations on:
- improving and simplifying the business environment
- fostering innovation
- increasing access to finance
- boosting defence spending, and
- ensuring social fairness.
This year's recommendations have become more comprehensive, while remaining focused on macroeconomically relevant issues.
This widening of the scope also reflects the nearing end of the Recovery and Resilience Facility.
This is why the Commission also made recommendations to Member States on the implementation of their recovery and resilience plans.
In many cases, implementation needs to accelerate, as we discussed in our Recovery and Resilience Dialogue a few weeks ago.
We presented ways for Member States to ensure that their plans are implemented in time and to the fullest possible extent.
With just over a year remaining until the August 2026 deadline, there is no time to waste.
Turning to security.
Raising defence spending in the EU is absolutely necessary given the deteriorated security situation.
The Commission positively assessed 15 requests to activate the national escape clause.
The Council has by now adopted the related recommendations.
This will allow these Member States to temporarily deviate from the normal fiscal requirements in the years ahead, to rapidly increase defence spending.
At the same time, we need to acknowledge that the required increase in defence spending will pose challenges.
The activation of the national escape clause provides Member States with the possibility to ramp of expenditure in the coming years.
But it is not a solution for structurally higher defence expenditure.
Over time, higher defence spending will need to be integrated into budgets.
This brings me to the fiscal elements of the spring package.
The Commission assessed the implementation of medium-term plans – introduced under the new economic governance framework – for the first time.
Our assessment was, overall, positive.
Regarding the Member States not under an excessive deficit procedure, 12 are compliant with the recommended maximum growth of net expenditure, taking into account, where relevant, the flexibility provided by the national escape clause.
Two Member States - Portugal and Spain - are broadly compliant.
Four Member States - Ireland, Cyprus, Luxembourg, and the Netherlands - are at risk of deviating from the recommended net expenditure path this year.
Regarding the Member States under an excessive deficit procedure, the procedures for Italy, Slovakia, Hungary, Poland, France and Malta were put in abeyance, as sufficient policy action has been taken.
Also Belgium was assessed to be compliant with its path under the excessive deficit procedure - which has in the meantime been approved by the Council.
Austria, in turn, recorded a public deficit well above 3% of GDP since last year and, on that basis, an excessive deficit procedure was opened.
For Romania, which has been subject to the excessive deficit procedure since more than five years, net expenditure growth has been well above the allowed maximum.
Therefore, the Council adopted a decision on lack of effective action on 20 June.
In recent weeks, substantial progress has been made, however.
The Romanian authorities announced a package of measures on 3 July.
A first part of that package has been legislated yesterday.
This is an important positive step towards complying with the new EDP recommendation.
Following the Council's decision on non-effective action of 20 June, the Commission must also implement the macroeconomic conditionality provisions of the common provisions and RRF regulations.
And, as a first step, the Commission will inform the European Parliament shortly.
Turning to the macroeconomic imbalances procedure.
The Commission has provided its assessment of imbalances for 10 Member States.
We found that Germany and Cyprus are no longer experiencing imbalances.
In Germany, the large current account surplus has declined over the years.
In addition, significant policy progress has been announced; in particular a large investment package to be implemented in the coming years.
In Cyprus, external, private and government debts have receded.
Cyprus has also taken measures to address its vulnerabilities, and it has run important budgetary surpluses.
Romania, on the contrary, continues to experience excessive imbalances, for the reasons I just mentioned.
To conclude, let me stress that dialogue with this House remains an essential part of the European Semester process, both to ensure transparency and accountability, and to hear the valuable input shared in your reports.
We count on you to support the implementation of the ambitious reforms and investments needed to build a more competitive Europe.
