The European Commission (EC) opened the Macroeconomic Imbalance Procedure (MIP) for Romania and Portugal, following the macroeconomic imbalances recorded by the two countries which were identified in November. As of Wednesday, Romania is placed in the 2nd MIP stage out of six. “The category of countries with macroeconomic imbalances is an ‘honorable’ category which includes also other states. Romania has improved its economic balance, but needs further steps in this direction,” PM Victor Ponta said on Thursday.
“Romania is experiencing macroeconomic imbalances, which require policy action and monitoring. In the three consecutive EU-IMF programmes, external and internal imbalances have been significantly reduced. However, risks from the relatively large negative net international investment position and a weak medium-term export capacity deserve attention. Moreover financial sector stability has been preserved so far, but external and internal vulnerabilities of the banking sector remain,” the EC announced on Wednesday in a press release.
Of the 16 countries identified in November as experiencing macroeconomic imbalances, the Commission stepped up the procedure for three countries: France (stage 5), Germany (stage 3) and Bulgaria (stage 5). For Slovenia, the Commission deescalates the procedure. The other 10 countries will see no change in their status.
EC is making these recommendations to the Council of the European Union. They are expected to be discussed at the Council of Economic and Finance (ECOFIN) Ministers meeting in March.
In March, the Commission will organize another round of bilateral meetings with the member states to provide an opportunity to discuss the country reports. By mid-April, the member states are expected to present their National Reform Programmes and their Stability or Convergence Programmes. Based on all these sources, the Commission will present a new, focused set of country specific recommendations for 2015-2016 in May, targeting the most important priorities to be tackled.
The MIP is a surveillance mechanism that aims to identify potential risks early on, prevent the emergence of harmful macroeconomic imbalances and correct the imbalances that are already in place.
The annual starting point of the MIP is the Alert Mechanism Report: based on a scoreboard of indicators, it is a filter to identify countries and issues for which an in-depth review is deemed necessary.
The outcome of these in-depth reviews forms the basis for further steps under the MIP whereby a graduated approach is followed reflecting the gravity of imbalances.