From its beginnings in 2012, EU Economic Governance, more commonly known as ‘the European Semester’, was very important to EPF and its members, because it was an opportunity to put EU pressure on member states to reform rent regulation and planning law.

Born of the financial crisis, it was designed as a way of collectively protecting the EU from economic and financial meltdown by setting up an ‘alert mechanism’ to detect national ‘economic imbalances’ and then prescribing the medicine that each country needed to take to stay out of trouble and avoid contributing to EU-wide systemic failure. The ‘alert mechanism’ was based on a ‘scoreboard’ of 10 macroeconomic and macrofinancial indicators which, if too many red lights went on, led to ‘excessive imbalance’ leading in turn to Commission-proposed and Council-approved ‘Recommendations’ for ‘corrective action’ by the targeted member state. A Eurozone country’s refusal to act could lead to a fine of 0.1% of its GDP.

One of the ten ‘scoreboard indicators’ was “percentage year-on-year change in house prices” which caused the Commission to take a hard look at the root causes of house price inflation. That’s what gave EPF the opportunity to help the Commission zero in on rent controls and planning as major contributors to house price inflation.

The pandemic up-ended the European Semester, leading to a common EU mantra for all member states:

“Take all necessary measures, in line with the general escape clause of the Stability and Growth Pact, to effectively address the COVID-19 pandemic, sustain the economy and support the ensuing recovery. When economic conditions allow, pursue fiscal policies aimed at achieving prudent medium-term fiscal positions and ensuring debt sustainability, while enhancing investment.”

Now the Commission is reviewing the whole process and seeking advice. Its consultation questionnaire is very macro and more suited to economists or public administration academics than to industry associations, and yet there are some good ones that show that the Commission has identified its weaknesses:

How can one simplify the EU framework and improve the transparency of its implementation?

How can surveillance focus on the Member States with more pressing policy challenges and ensure quality dialogue and engagement?

How can the framework ensure effective enforcement? What should be the role of pecuniary sanctions, reputational costs and positive incentives?

Full EPF Secretariat report under epf21-80 of 05.11.2021