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Economic and monetary challenges - Prospects of the EU economy and the Eurozone

Implementation of structural reforms not a technocratic exercise

By Šadžius Rimantas - The Minister, Ministry of Finance, Lithuania

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We have excellent procedures, but lack political will and ownership.

Structural reforms in Member States remain the key issue on the EU agenda. Their importance is reflected once again in the 2016 Annual Growth Survey and in the euro-area recommendations.

In the EU we have a well-organized process on the structural reform identification and implementation monitoring, called the European Semester. Every year we adopt country-specific recommendations (CSRs), in which the Member States are encouraged to undertake particular structural reforms. A year later the Member States provide National Reform Programmes, where they report on how the CSRs are addressed and what progress in structural reforms is achieved.

Despite all these elaborate EU procedures, it seems more and more that we have got reform fatigue. More visible progress on structural reforms was achieved only during the crises period, but now we are clearly losing momentum.
In order to foster the progress, the Five Presidents’ Report suggests further institutional and procedural improvements: for example, to establish National Competitiveness Boards and use benchmarks for convergence. But is this enough to address the problem – to speed up the implementation of most needed structural reforms?

It is very important to understand that the structural reforms is not a mere technocratic exercise. We also need political will and commitment to implement them. For this, it is crucial to have public support leading to political ownership of reforms. The reforms should therefore have clear public goals and added value well perceived by the society. Creation of a new independent institution, which is essentially outside the process of political decision-making, will provide little help to increase political ownership. Setting the benchmarks for convergence towards the best performers will also work only if there is political will to follow them.

We have excellent procedures, but lack political will and ownership.

Therefore, we should think about political rather than bureaucratic remedies to address the problem of political will and ownership. Here are some of them.

Increasing political commitment: Each Member State could be required to present a commitment letter to inform the Commission and peer Member States about the planned progress in the implementation of the most recent CSRs and how it is going to contribute to the implementation of the euro-area recommendations.

At the same time, ensuring reasonable flexibility: We have to acknowledge that Governments have their own national agendas as well, which they are seeking to implement during their term. An election cycle therefore has a particular impact on the progress of structural reforms. Therefore, the Member States should be given flexibility to decide on the scope, order and implementation pace of the reforms in the context of their national development priorities.

Finally, strengthening the role of the European Council: The implementation of structural reforms needs increased political ownership of the Government in corpore rather than to be separate business of a finance minister or other line ministries. Therefore, more substantial discussion on the implementation of the CSRs by European leaders at the European Council with emphasis on monitoring of achievements could help in turn to mobilise political leadership and push for progress in the Member States.