A Design for an Operational Capacity of the European Semester

Abstract

Since 2011, the European Semester constitutes the main instrument for strengthening economic policy coordination between member states. Economic policy coordination is of particular importance in a monetary union deprived of a full-fledged fiscal union as a backstop for shock-smoothing capacity. Against this background, the European Semester -- despite its two reforms occurred in 2011 and 2013 -- has proven unable to provide effective coordination. The existing system is flawed by two main weaknesses: on the one hand, it lacks an effective incentive mechanism for member states to implement the country-specific recommendations; on the other hand, its democratic legitimacy provisions are not sufficiently developed and prevent the European Parliament to actively participating in the system. Against this background, this policy contribution proposes the creation of an operative arm for the European Semester in order to address both flaws and strengthen the effectiveness and legitimacy of the Semester.

Keywords: european union, economic governance, eurocrisis, crisis, fiscal capacity, fiscal integration, fiscal union, monetary union, EU, Europe, contractual agreements, presidents report