1. The Macroeconomic Imbalances Procedure - brief overview
ESTP Course Luxembourg 9-11 December 2014 Kirsten Wentzel & Dario Buono, MIP TF

2. Outline Policy context Scoreboard: Application and Indicators
Data sources and role of Eurostat
Dissemination issues and statistical challenges
2014 Statistical Annex to the Alert Mechanism Report (AMR) – flashing indicators
2014 In-Depth Reviews (IDR)

3. Policy context:
The economic, financial and sovereign debt crisis EU policy initiatives: Six-Pack Regulation: enhanced economic policy coordination and surveillance, including MIP MIP: surveillance mechanism - part of European Semester - preventive and corrective arm

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5. Macroeconomic Imbalances Procedure (MIP)
Scoreboard of relevant macro-economic and macro-financial indicators
currently 11 headline indicators
neither policy targets nor policy instruments
supplemented by economic judgment and country specific expertise
thresholds defined by the Commission
may evolve over time
annual exercise - results published in the Alert Mechanism Report (AMR)

6. Macroeconomic Imbalances Procedure
Alert Mechanism Report (AMR)
starting point of MIP
Initial screening device
identifies countries for in-depth reviews
MIP scoreboard + economic reading

7. Macroeconomic Imbalances Procedure
In-depth reviews (IDRS)
the Commission determines if imbalances exist
Not excessive: country-specific recommendations (preventive arm)
Excessive: Member State prepares a 'corrective action' roadmap If failure to comply: sanctions
Programme countries not covered but under tight surveillance

8. MIP Headline Indicators Scoreboard
Internal Imbalances
House price developments
Private sector credit flow
Private sector debt
General government debt
Unemployment rate +
Total financial sector liabilities
(since second exercise)
External Imbalances
Balance of Payments
Current account
Net international investment
Competitiveness
Real effective exchange rate (REER)
Share of world exports
Nominal unit labour cost

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10. Data sources
Main providers: National Statistical Institutes and Eurostat
some BoP indicators co-produced by National Central Banks and the European Central Bank
REER indicators compiled by DG ECFIN
figure for global exports provided by the International Monetary Fund

11. The role of Eurostat Ensure statistical support for the MIP
Produce and supply the relevant statistical data
Ensure high quality of data
Set up and implement a quality and monitoring framework for MIP relevant statistics
Provide methodological support in the process of choice and definition of indicators
Foster harmonisation and documentation of production processes

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13. Statistical challenges
Comparability, Reliability, Consistency
Inventories and quality reports
Data for the last 10 years
Backward data calculation
Estimates (current year)
In 2014
- ESA 2010
- BPM6

14. The Statistical Annex 2014 11 headline indicators +
28 auxiliary indicators (8 social indicators)
- Activity rate
- Long-term unemployment rate
- Youth unemployment rate
- % of young people not in employment, education or training
- people at risk of poverty or social exclusion
- At risk of poverty rate
- Severely materially deprived people
- People living in households with very low work intensity

15. 2013 scoreboard– flashing indicatorsIE 6
IDR - imbalances (just out of programme) IT 3
IDR - Excessive Imbalances ES
IDR -imbalances UK CY
programme HR PT SE EL 5 EE 2 NL SI DE 4 SK FR BG LU
IDR -No imbalances DK HU LV BE LT MT PL AT RO FI CZ 1

16. Number of flashing Indicators
All Member States: Min. one indicator beyond the thresholds
maximum number of flashing indicators: 6 out of 11
For RO, under financial assistance programme, only 2 indicators are flashing: CA and NIIP
Some indicators not flashing: HPI yoy, private sector credit flow, total financial sector liabilities yoy

17. IDRs 2014 – countries overview
Covering 17 countries
Excessive Imbalances: HR, IT, Sl
Imbalances for 11 out of 17
No imbalances : DK, MT, LU
Specific monitoring of policy implementation for:
HR, IT, Sl and IE, ES and FR
SGP: for FR and SI risk of non-compliance with budgetary target

18. IDRs 2015 – countries overview
AMR 2015: 16 countries will be subject to IDRs
Follow-up on excessive imbalances: HR, IT and SI
Imbalances in need of policy action: IE, ES, FR, HU
Imbalances: BE, BG, DE, NL, FI, SE and UK
After completion of adjustment programme: PT, RO
No IDR at this stage: CZ, DK, EE, LV, LT, LU, MT, AT, PL and SK
Surveillance in context of adjustment programme: GR, CY

20. Reading of the MIP scoreboard
No single indicator can capture all potential risks:
- Analysis in connection with other scoreboard indicators
The number of flashes is not the key criteria
The scoreboard should be read also over time
The severity of a breach of a threshold can be considered
The auxiliary indicators play an important role 24 24

21. Conclusions - overview
MIP: surveillance mechanism
integrated part of the European Semester
prevention and correction of macroeconomic imbalances
early warning system based on scoreboard of indicators + economic reading
AMR starting point of MIP  In-Depth Reviews
preventive and corrective arm

22. Any questions?

23. Useful links
MIP website
AMR
IDR for Germany al_paper/2014/pdf/ocp174_en.pdf
IDR for Malta al_paper/2014/pdf/ocp184_en.pdf