Commission warns about excessive macroeconomic imbalances in Spain and Slovenia

The European Commission has presented its conclusions on the in-depth reviews conducted in thirteen Member States economies. These findings indicate that both Spain and Slovenia show excessive macroeconomic imbalances which can represent a serious risk for growth and financial stability.

The conclusions drawn by the in-depth reviews of macroeconomic imbalances carried out in 13 Member states show that a general macroeconomic adjustment is taking place in Europe. However, as highlighted by Commissioner for Economic Affairs, Olli Rehn, despite the fact that the policies which have been implemented are helping to rebalance the European economy, certain imbalances still remain and will need to be tackled.

Many European economies are facing difficulties due to excessive private sector indebtedness, significant adjustments in the housing market or due to external liabilities. These are issues that still need to be addressed in order to ensure growth, enhance financial stability and create jobs. For all that, the Commission says, a close monitoring of the economic situation will still be required as well as deepening on the commitment to implement the necessary structural reforms.

In the case of Spain the first Alert Mechanism Report stated in February 2012 that the country was going through an adjustment period. The Commission considers a year later that the Spanish economy shows high levels of internal and external debt which still represent a risk for growth and financial stability. In the case of Slovenia, the report notes that corporate debt and deleveraging are significantly high and may threaten the stability of the financial sector. In the case of Cyprus no in-depth review is published despite the fact that it was one of the countries selected for it as the countries under financial assistance programs are not covered by the excessive imbalance procedure.

On May 29th, the Commission will present its policy recommendations both for Spain and Slovenia whose imbalances are considered excessive and the rest of the thirteen states that have been evaluated. These recommendations are to be adopted in view of the policy responses in time for the conclusion of this year’s European Semester of economic policy coordination.