Economic Survey of the European Union 2016 / Economic Survey of the Euro Area 2016

This 2016 OECD Economic Survey of the European Union (and separate Euro Area report), published in June 2016, examined recent economic developments, policies and prospects. A special chapter covered: Priorities for completing the Single Market.

The European economy was gradually recovering but further policy action would be required to address unresolved legacies of the global economic crisis that were weighing on growth and major new concerns that have emerged, according to the two OECD reports.

The OECD Economic Surveys of the European Union and of the Euro Area, presented on 10 June 2016 by OECD Secretary-General Angel Gurría, underlined the challenges facing European policymakers. Although growth had gradually strengthened, unemployment in many countries was still high, investment remained below pre-crisis levels in most European countries, and credit growth was still sluggish.

The Surveys said that countries with fiscal space should use budgetary spending to boost growth. Given the deep cuts in public investment since the global financial crisis, the reports recommend increasing public support for key investment projects. Enacting broad reforms to tax structures and public spending would also favour growth.

Easing financial constraints would bring benefits across the economy, notably to private sector firms considering future investment plans. This will require addressing one of the legacies of the crisis - the resolution of non-performing loans in many countries, which threaten financial stability and act as a drag on bank credit. Waivers could be applied to the new Bank Recovery and Resolution Directive rules to help put in place government-supported schemes when non-performing loans are a serious economic disturbance, the Surveys said.

The Surveys discussed the need for additional steps to deepen the single European market, notably with regard to labour mobility, which can be a key tool to reduce unemployment and boost productivity. Reducing administrative and regulatory barriers in the services sector and speeding up the recognition of professional qualifications from one country to another would encourage internal mobility, the Surveys said.

Prioritising Trans-European solutions for fragmented transport and energy networks, boosting competition in network industries and enhancing R&D policy and the Digital Single Market would also offer a strong boost to GDP.

The OECD addressed a number of downside risks facing the European economy, most immediately that posed by a possible United Kingdom vote to leave the EU. Brexit would lead to economic uncertainty and hinder trade and foreign direct investment flows both of the UK and the EU, hurting growth.

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• Primary Source

Website: OECD iLibrary http://www.oecd-ilibrary.org/

OECD: Economic Survey of the Euro Area 2016 (for OECD iLibrary subscribers) http://dx.doi.org/10.1787/eco_surveys-euz-2016-en

OECD: Economy: Economic surveys and country surveillance: Economic Surveys of the European Union and Euro Area http://www.oecd.org/economy/surveys/economic-survey-european-union-and-euro-area.htm

OECD: Newsroom, 10.06.16: European economy is slowly recovering but legacies of the crisis remain and new challenges are emerging https://www.oecd.org/newsroom/europe-is-underachieving-in-the-global-competition-for-talent.htm

ESO: Background information: Economic Survey of the European Union 2014 http://www.europeansources.info/record/economic-survey-of-the-european-union-2014/

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