16 FEBRUARY 2012

Twelve European Union (EU) member states were identified to be in a potential « macroeconomic imbalance »  according to the European Commission's (EC) first Alert Mechanism Procedure (AMP) report, part of the European Semester or public debt surveillance program effective since January 1st , following last November adoption of a deficit detection rule under the Six-Pack (five regulations and one directive).

Seven Euro area countries (France, Italy, Spain, Belgium, Finland, Cyprus, and Slovenia) and five European Union members (the UK, Bulgaria, Denmark, Hungary, and Sweden) need « further investigation » according to the Commission's communication while another 11 (Germany, Austria, Luxembourg, Malta, The Netherlands, the Czech Republic, Estonia, Latvia, Lithuania, Poland, and Slovakia) will solely receive « recommendations on fiscal and macroeconomic policies» as per the European Semester guidelines.

The Surveillance program excludes Greece, Ireland, Portugal and Romania, bailed-out and already under the European Commission and International Monetary Fund (IMF) « enhanced economic surveillance ».
 
Based on ten economic, financial and structural indicators, the alert mechanism scoreboard includes public and private indicators ( government and private debt, private credit flow, house prices and unemployment), current account balances (to assess imbalances), in addition to net investment positions, real effective exchange rates to evaluate a country‘s competitiveness and consumer price developments over three years, share of world exports on a five-year span, and nominal unit labor cost by comparing remuneration and productivity with a percentage change over three years. House price developments are expressed as year-on-year growth while unemployment is expressed as the average of the past three years.     

France's « gradual deterioration of (its) trade balance » and loss of competitiveness calls for the country's watch-list inclusion, according to the Commission, and equally Italy, to which the Commission adds public debt and  structural weaknesses as major concerns. Spain, with its  « internal and external imbalances » joins the list for « in-depth analysis » which will confirm, or leave out, actual macroeconomic imbalances based on evaluations, which will be followed by an action plan, when and if applicable, as per the Commission‘s Six-Pack terms.