EU Policy Recommendations for Biggest Member States

The European Commission’s recommendations for France, Germany, Italy, the Netherlands and Spain.

Flags of the European Union outside the Berlaymont building in Brussels, July 22, 2016
Flags of the European Union outside the Berlaymont building in Brussels, July 22, 2016 (European Commission)

The European Commission has released its annual policy recommendations for the 28 member states.

Here are the highlights for the biggest economies on the continent.

France

  • Reduce state spending, currently the highest in the EU at 56 percent of GDP.
  • Simplify the tax code.
  • Harmonize different pension schemes. (Something President Emmanuel Macron has said he will do.)
  • Reduce labor costs for employers to encourage the use of open-ended, full-time contracts.
  • Improve labor force participation of workers with a migrant background by providing language training, job counseling and recruitment support and by taking firmer action on discrimination.
  • Apprenticeships can help close the skill mismatch between graduates and companies.

Germany

  • Take (more) steps to boost domestic demand rather than rely on export-driven growth.
  • Public investment has increased, but remains modest.
  • Shift the tax burden from income to consumption, inheritance and property.
  • Expand high-speed Internet access to small towns and rural areas.
  • Make it more attractive for women to work.

Italy

  • Use windfalls to reduce debt, at 130 percent of GDP one of the highest in the world.
  • Shift taxes away from capital and labor and toward consumption and property.
  • Simplify the tax code. (The incoming Five Star-League government wants to reduce business and income tax rates to two, although that would mainly benefit high incomes and do little to improve tax compliance.)
  • Reduce pension spending. At 15 percent of GDP, Italy has one of the highest rates in the EU. (The Five Stars and League want to reverse pension reforms.)
  • Encourage higher public- and private-sector investment.
  • Step up job training and requalification services.
  • Reduce regional disparities in education.
  • Improve the efficiency of the justice system, which would both improve the business climate and tackle corruption.

Netherlands

  • Clamp down on international tax evasion.
  • The share of self-employed workers is rising and they are often underinsured against disability, unemployment and old age.
  • Provide more affordable housing on the private rental market to mend imbalances in housing, which is the main source of high household indebtedness.

Spain

  • Reduce public- and private-sector debt.
  • Use growth to structurally improve public finances.
  • Incentivize more transitions from temporary into open-ended contracts to boost productivity and social security.
  • Simplify income support schemes and family benefits. Too many poor Spaniards don’t get the help they are legally entitled to.
  • Under- and over-qualification at work are widespread due to high school-dropout rates and skill mismatches.
  • Regulatory disparities between regions inhibit growth.