title: Proposition de RECOMMANDATION DU CONSEIL concernant les politiques de réduction de l’abandon scolaire

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52011PC0019

	[pic] | EUROPEAN COMMISSION |Brussels, 31.1.2011COM(2011) 19 finalProposal for aCOUNCIL RECOMMENDATIONOn policies to reduce early school leavingSEC(2011) 98 finalSEC(2011) 97 finalSEC(2011) 96 finalEXPLANATORY MEMORANDUM1. CONTEXT OF THE PROPOSALIn June 2010, the European Council adopted the Europe 2020 Strategy, based on three mutually reinforcing priorities for smart, sustainable and inclusive growth. One of its five headline targets is to reduce the rate of early school leaving[1] in the EU to less than 10% by the year 2020. Currently, around 6 million young people in the EU leave school with only lower secondary education or less. We cannot afford to allow this to continue. Preventing early school leaving is particularly important both in order to combat the negative consequences of poverty and social exclusion on the child’s development and in order to empower children and break the intergenerational inheritance of disadvantage.As the EU emerges from economic crisis, the motor for growth will be increasing skill levels and there will be fewer and fewer jobs for the low-skilled. High rates of early school leaving are a bottleneck for smart and inclusive growth. They impact negatively on youth employment and increase the risk of poverty and social exclusion. Early school leaving represents missed opportunities for young people as well as a loss of social and economic potential. Drastically reducing the numbers of young people leaving school early is a key investment in the future prosperity and social cohesion of the EU.Early School Leaving is not a new problem, but it is becoming more acute. Nearly a decade ago, Education Ministers in the Council set themselves the objective to reduce the rate of early school leaving, reflecting a policy priority across all Member States. There has been progress, from 17.6% in 2000 to 14.4% in 2009[2], but this is not enough and the rate of improvement is not fast enough to reach the 2020 target. There are many examples of good practice in Member States, but the overall policy approach is not effective enough nor sufficiently strategic in most countries. The EU can add value by helping Member States to develop more effective policy approaches and so to accelerate the process of improvement.Although the reasons to leave education and training prematurely are highly individual, early school leavers are in general more likely to come from socio-economically disadvantaged and low education backgrounds. Vulnerable groups and young people with special educational needs are overrepresented among early leavers from education and training. Boys are much more likely to leave school early than girls. The EU average early school leaving rate is double for migrant first generation youth than for natives; in some countries more than 40% of migrant youth are early school leavers. Early school leaving among Roma is running at even higher levels.Students who have encountered difficulties in general education often go into vocational education and training (VET). For this reason, vocational schools face a particular responsibility and challenge with respect to the reduction of early school leaving. VET can increase the motivation to learn, can offer students more flexibility, a more appropriate pedagogy and can target directly the labour market aspirations of young people.Despite slow aggregate progress across the EU in reducing early school leaving, some Member States have been highly successful. However, both the joint work within the Open Method of Coordination, comparative data and analytical research suggest that the key issues for successful policies include a strong evidence base on the drivers and incidence of early school leaving, the consistency and coherence of measures taken against it, the cross-sectoral nature of collaboration and the comprehensiveness of the approach. Early school leaving needs to be addressed across a range of social, youth, family, health, local community, employment, as well as education policies. Also extended educational concepts such as cultural education, cooperation with businesses or other outside school actors, and sports can play an important role in reducing early school leaving by promoting creativity, new ways of thinking, intercultural dialogue, and social cohesion.Given the strong subsidiarity in the area of education and the diversity of education systems, it would be neither possible nor desirable to impose a single solution common to all Member States. Continuing with the status quo has led to only limited progress far short of the ambition jointly expressed by Ministers of Education and confirmed by the European Council. The Commission therefore judges that a Council Recommendation is the most effective way of providing a framework for the development of such a comprehensive approach in Member States to support the Europe 2020 headline target.The Recommendation will add value to Member States’ efforts by supporting them in developing policies that identify the causes of and address early school leaving in a lifelong learning perspective, shift from implementing individual measures against early school leaving to introducing comprehensive strategies, tackle it as a phenomenon that cuts across several related policy areas, involve all stakeholders, and make policy interventions more systematic and consistent.It sets out basic guidelines for coherent, comprehensive and evidence based policies against early school leaving and aims:-  to provide a reference framework to assist Member States to develop more effective policies against early school leaving,-  to support Member States in their implementation, and so-  to lead to a significant reduction in the rate of early school leaving in all Member States.2. RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENTSThe proposal is based on the work of Member States under the Open Method of Coordination focusing on "Access and social inclusion in lifelong learning", between 2006 and 2010. The substance of the policy framework has been subject of extensive consultation with stakeholders from a variety of backgrounds: education ministries, European stakeholder organisations in school and vocational education, organisations for children's rights and well-being, for migrants and Roma. The topic of early school leaving has also been addressed in two public consultations, 'Schools for the 21st century' (2007) and 'Migration and Education' (2008). Stakeholders strongly supported the idea of EU level action to underpin national efforts and underlined the urgency of the problem in times of economic crisis. Most recently, the Ministerial Seminar organised under the Belgian Presidency in July 2010 stressed the need to intensify the exchange of experiences and good practice among Member States and welcomed suggestions that the Union should provide a flexible policy framework, building on experience on issues such as the common European definition of key competences for school education.The Impact Assessment Board provided a first opinion on the Impact Assessment on 24 September 2010 and gave a positive opinion on the revised Impact Assessment Report on 22 October 2010. The final version of the Impact Assessment Report has taken the comments of the Board into account.3. LEGAL ELEMENTS OF THE PROPOSALSummary of the proposed actionThe Recommendation sets out the main elements of a coherent, comprehensive and evidence based policy against early school leaving. These include prevention, intervention and compensatory measures. They address all levels of education and training, structural aspects in education and training systems, the possible interventions at school level and support schemes for individual pupils at risk of dropping out.The Recommendation reflects the fact that early school leaving is a complex phenomenon and that its characteristics differ from country to country, between and sometimes even within regions. This requires not only close monitoring of the problem, but tailored action, in line with the subsidiarity principle. The Recommendation also aims to provide a focal point for further exchanges of good practice and for policy development within the open method of coordination.The Recommendation invites Member States:-  to identify main factors leading to early school leaving and monitor developments at national, regional and local level,-  to develop and implement comprehensive and cross-sectoral policies against early school leaving, based on their specific conditions.The Recommendation invites the European Commission to support policies at national level by:-  monitoring developments across Member States and supporting peer learning and exchange of good practice between them,-  supporting policies to reduce early school leaving in all relevant activities managed by the Commission which are targeted at children and young people and promoting cross-sectoral cooperation,-  launching studies, comparative research and cooperation projects.Legal basisAccording to article 165 of the Treaty on the Functioning of the European Union, the Union shall contribute to the development of quality education by encouraging cooperation between Member States and, if necessary, by supporting and complementing their action. Article 166 TFEU refers to implementation of a vocational training policy which shall support and supplement the action of the Member States. The proposed Recommendation aims to strengthen Member State efforts to combat early leaving from education and training. It supports Member States by providing a framework for the development of targeted and comprehensive policies against early school leaving.In line with Article 9 of the Treaty on the Functioning of the European Union, which requires the Union to "take into account requirements linked to the promotion of a high level of employment, the guarantee of adequate social protection, the fight against social exclusion, and a high level of education, training and protection of human health" in its policies and activities, the proposed Recommendation emphasizes the need to combat early school leaving in the policies and programmes supported by the Commission and by the Member States.Subsidiarity, complementarity and proportionality principlesThe proposed Recommendation is intended to contribute to the quality of education and training by facilitating the work to which Member States have committed themselves within the Europe 2020 strategy. It supports policy development within Member States and learning from good practice in order to help Member States to create comprehensive strategies to reduce in a sustainable way early school leaving and the number of low skilled adults. The Recommendation establishes a framework within which Member States can more effectively develop policies to reduce early school leaving. The choice of policy measures to be adopted remains theirs, adapted to the specific conditions which obtain in the Member States. Therefore, this proposal conforms to the principle of subsidiarity.It is intended to enhance political commitment for reforms that cannot be achieved by using only the EU education and training programmes or Structural Funds. Moreover, it emphasizes the need for policy coordination and for actions from several policies, thus moving beyond the strict focus on education policies within the open method of coordination ET2020. However, the implementation arrangements remain the responsibility of the Member States, at the appropriate level and in accordance with national, regional and/or local circumstances, and are therefore in conformity with the proportionality principle.4. BUDGETARY IMPLICATIONThe proposal has no implication for the EU budget.5. OPTIONAL ELEMENTSN/AProposal for aCOUNCIL RECOMMENDATIONOn policies to reduce early school leaving(Text with EEA relevance)THE COUNCIL OF THE EUROPEAN UNION,Having regard to the Treaty on the Functioning of the European Union, and in particular Article 165 and 166 thereof,Having regard to the proposal from the European Commission,Whereas:(1) Reducing early school leaving[3] is essential for achieving a number of key objectives in the Europe 2020 strategy[4]. It addresses both the aims for 'smart growth' by improving education and training levels and for 'inclusive growth' by addressing one of the major risk factors for unemployment and poverty. The Europe 2020 strategy therefore includes the headline target to reduce early school leaving to less to 10% by 2020, from 14.4% in 2009. Member States have undertaken to establish national targets, taking account of their relative starting positions and national circumstances.(2) The Integrated Guidelines for the implementation of the Europe 2020 strategy call on Member States to take all necessary efforts to prevent early school leaving[5].(3) The flagship initiative "A European Platform against Poverty and Social Exclusion"[6] sets a framework for action to ensure social and territorial cohesion, with a specific focus on breaking the cycle of disadvantage and stepping up preventive action. It addresses the Europe 2020 headline target to lift at least 20 million people out of poverty and social exclusion in the next decade.(4) 'Youth on the Move', a flagship initiative within the Europe 2020 Strategy, aims to "enhance the performance and international attractiveness of Europe's higher education institutions and raise the overall quality of all levels of education and training in the EU, combining both excellence and equity, by promoting student mobility and trainees' mobility, and improve the employment situation of young people"[7].(5) The Council conclusions of May 2003 adopting the work programme Education and Training 2010[8] stated that the share of early school leavers should be below 10% by 2010, defining early school leavers as persons between 18 and 24 years old with only lower secondary education or less and no longer in education or training. The benchmark was not achieved. One in seven young people currently leave education and training before they have completed upper secondary education.(6) The reasons for early school leaving differ widely from country to country and also within regions. Policies to reduce early school leaving need to be adjusted to the specific situation within a region or country; there is no single solution for all Member States.(7) Despite the differences between countries and regions, there is strong evidence in all Member States that disadvantaged and vulnerable groups are more affected. Also young people with special educational needs are overrepresented among early leavers from education and training. Early school leaving both results of social disadvantage and perpetuates the risk of social exclusion.(8) The Council conclusions of 26 November 2009 on the education of children with a migrant background[9] noted that while large numbers of children with migrant background succeed in education, students with migrant background are generally more likely to leave school early. For migrants the average early school leaving rate across the EU is double that of native students. Available evidence indicates that early school leaving is higher still among the Roma population.(9) The Council Conclusions of 22 May 2008 on adult learning[10] recognise the role of adult learning in addressing early school leaving by offering a second chance to those who reach adulthood without a qualification, focusing especially on basic skills, IT skills and language learning.(10) The Council Resolution of 15 November 2007 on 'New skills for new jobs'[11] stressed the need to raise overall skill levels and to give priority to the education and training of those at risk of economic and social exclusion, particularly early school leavers. They underlined the need to provide vocational guidance and personal training plans to job seekers and to develop the validation of learning outcomes acquired through formal, informal and non-formal learning.(11) The Council agreed in May 2010 in its conclusions on the social dimension of education and training[12] that the successful prevention of early school leaving requires the development of knowledge about groups at risk of dropping out at local, regional and national level, and systems for identifying early individuals who are at such risk, and concluded that comprehensive and cross-sectoral strategies should be implemented, which provide a range of school-wide and systemic policies targeting the different factors leading to early school leaving.(12) Education reforms take time to have effect. In order to achieve a reduction of early school leaving rates within the next decade and reach the Europe 2020 target, comprehensive and cross-sectoral strategies to reduce early school leaving need to be implemented as soon as possible.(13) A common European framework for comprehensive approaches to reduce early school leaving can help Member States to review existing policies, to develop their National Reform Programmes under the Europe 2020 strategy, and to innovate and develop new strategies with a high impact and a good cost-benefit ratio. It can also provide a basis for collaboration through the Open Method of Cooperation and a focus for the use of EU funding instruments,HEREBY RECOMMEND THAT MEMBER STATES:Make use of the framework set out in the Annex to this Recommendation in order to:1. Identify the main factors leading to early school leaving and monitor the characteristics of the phenomenon at national, regional and local level as a precondition for targeted and effective evidence based policies.2. Adopt by the end of 2012 and ensure the implementation of comprehensive strategies to reduce early school leaving, in line with national Europe 2020 targets; these strategies should include prevention, intervention and compensation measures.3. Ensure that these strategies include appropriate measures for groups at increased risk of early school leaving in the Member State, such as children with a socio-economically disadvantaged, migrant or Roma background, or with special educational needs.4. Ensure that these strategies address both general education and vocational education and training and the challenges specific to each.5. Since early school leaving is a complex phenomenon that cannot be tackled by education and training alone, integrate measures which support the reduction of early school leaving rates in all relevant policies targeted at children and young people and coordinate activities among different policy sectors and stakeholders to help people who are at risk of early school leaving, including those who have dropped out already.INVITE THE COMMISSION TO:1. Contribute to the efforts made by Member States by monitoring developments across Member States to determine tendencies.2. Support the development of national strategies and the exchange of experience and good practice, and facilitate effective peer-learning among Member States on measures to reduce early school leaving and to improve educational outcomes of children from groups at risk of early school leaving.3. Integrate measures which support the reduction of early school leaving rates in all relevant EU actions targeted at children and young adults.4. Support the development of effective policies against early school leaving by launching comparative studies and research.5. Ensure that, in cooperation with the Member States, the EU's Lifelong Learning Programme and the European Structural Funds and the Framework Programme for Research and Innovation support and contribute to the implementation of national strategies.6. Report periodically on the progress towards the Europe 2020 target on early school leaving through the Annual Growth Survey, and on the implementation of national strategies within the reporting of the strategic framework for European cooperation in education and training (ET 2020), for the first time as part of the joint progress report 2015.Done at Brussels,For the CouncilThe PresidentANNEXA framework for comprehensive policies to reduce early school leavingStrategies to reduce early school leaving should be based on an analysis at national, regional and local level of the conditions leading to the phenomenon, as average rates often mask large differences between different regions or countries. Early school leavers are a heterogeneous group and individual motivations to leave education prematurely differ widely. Family background and wider socio-economic conditions such as pull from the labour market are important factors. Their impact is conditioned by the structure of the education and training system, by available learning opportunities, and by the learning environment. The coordination of policies addressing the well-being of children and young people, social security, youth employment and future career perspectives has an important role to play in reducing early school leaving.1. IDENTIFICATION OF MAIN FACTORS AND MONITORINGEarly school leaving processes have complex and varied causes, but are often linked to socio-economic disadvantage, to low education backgrounds, to alienation from or poor achievement in education and training, to pull factors from the labour market, and/or to a combination of social, emotional and educational problems putting individuals at risk of dropping out.Account needs to be taken of the type of education in which students are enrolled. In some Member States, students who have encountered difficulties in general education often go into vocational education and training (VET). For this reason, vocational schools face a particular responsibility and challenge with respect to the reduction of early school leaving. Evidence-based policies require that a particular attention be given to performance by sector of education or training.The development of evidence-based and cost-effective policies to combat early school leaving requires gathering and maintaining data on the phenomenon. This should allow analysis at local, regional and national levels. It may contain information on early school leaving rates, on transitions between educational levels, as well as on school absenteeism and school avoiding behaviour.-  Collection of information should allow for the analysis of the main reasons underlying early school leaving for different groups of pupils, schools, types of education and training institution, municipalities or regions.-  The combination of data on early school leaving and socio-economic data can help in the targeting of measures and policies. Gathering and analysing information on the motivation of early school leavers, their employment and career perspectives can also help in the targeting of measures and policies.-  Evaluation of the effectiveness and efficiency of existing policy measures aimed at reducing early school leaving is an important basis for improving strategies and programmes for increasing pupils' chances of school success.2. POLICY FRAMEWORKComprehensive strategies comprise a mix of policies, coordination across different policy sectors and the integration of measures supporting the reduction of early school leaving into all relevant policies aimed at children and young people. These are principally social policy and support services, employment, youth, family, and integration policies. Horizontal coordination between different actors and vertical coordination through different levels of government are equally important. Strategies against early school leaving should comprise prevention, intervention and compensation elements. Member States should select the detailed components of their strategies according to their own circumstances and contexts.2.1 Prevention policies aim to reduce the risk of early school leaving before problems start. Such measures optimise the provision of education and training in order to support better learning outcomes and to remove obstacles to educational success.They aim to lay a solid early foundation for children to develop their learning potential and to integrate well in schools.1.  Providing high quality early childhood education and care is beneficial for all children and especially relevant for those from disadvantaged backgrounds, including migrants and Roma. It enhances physical well-being, social and emotional development, language and basic cognitive skills. Provision should be high quality, affordable, adequately staffed and accessible to families with a disadvantaged background.They address the organisation of education and training systems, the resources available to schools, the availability, permeability and flexibility of individual learning pathways. They also address the gender gap, the support of children from disadvantaged backgrounds or with a different mother tongue.2.  Increasing the educational offer by extending the duration of compulsory education or by providing education and training guarantees beyond the age of compulsory education can influence the behaviour of young people and their families and lead to higher rates of completion of upper secondary qualifications.3.  Implementing active desegregation policies and providing additional support for schools in disadvantaged areas or with high numbers of pupils from socio-economic disadvantaged backgrounds help them to improve their social composition and their educational offer, so lifting the educational achievements of pupils from socio-economic disadvantaged backgrounds and reducing their risk of early school leaving.4.  Supporting children with a different mother tongue to improve their proficiency in the teaching language and supporting teachers to teach children with different levels of linguistic competence improve the educational achievements of children with migrant background and reduce their risk of early school leaving.5.  Increasing the flexibility and permeability of educational pathways (e.g. by modularisation of courses or alternation of school and work), supports especially pupils with lower academic performance, can motivate them to continue education and training which is better adapted to their needs and abilities. It also allows to address gender specific reasons for early school leaving such as joining the labour market early or teenage pregnancy.6.  Strengthening vocational pathways and increasing their attractiveness and flexibility provide pupils at risk with credible alternatives to early school leaving. VET provision which is well integrated into the overall education and training systems allows for alternative pathways into upper secondary and tertiary education.2.2 Intervention policies aim to avoid early school leaving by improving the quality of education and training at the level of the educational institutions, by reacting to early warning signs and by providing targeted support to pupils or groups of pupils at risk of dropping out. They address all educational levels, starting from early childhood education and care to upper secondary education.At the level of the school or training institution strategies against early school leaving are embedded in an overall school development policy. They aim at creating a positive learning environment, reinforcing pedagogical quality and innovation, enhancing teaching staff competences to deal with social and cultural diversity, and developing anti-violence and anti-bullying approaches.7.  Developing schools into learning communities based on a common vision for school development shared by all stakeholders, using the experience and knowledge of all, and providing an open-minded, inspiring and comfortable place for learning to encourage young people to continue education and training and become successful learners.8.  Developing early-warning systems for pupils at risk can help to take effective measures before problems become manifest, pupils start to alienate from school, play truant or drop-out.9.  Enhancing the involvement of parents, reinforcing their cooperation with the school and creating partnerships between schools and parents encourage family support for successful education and training. It can be facilitated by mediators from the local community who are able to support communication and to reduce distrust.10.  Networking with actors outside school such as local community services, migrant or minority community organisations, sports and culture associations, employers and civil society organisations allows for holistic solutions to help pupils at risk and eases the access to external support such as psychologists, social and youth workers, cultural and community services.11.  Supporting and empowering teachers in their work with pupils at risk is a pre-requisite to successful measures at school level. Targeted teacher training helps them to deal with diversity in the classroom, to support pupils from socially disadvantaged backgrounds and to solve difficult teaching situations.12.  Extra-curricular activities after and outside school and artistic, cultural and sport activities can raise the self-esteem of pupils at risk and increase their resilience against difficulties in their learning.Intervention policies at individual level aim to provide a set of support mechanisms for individual students at risk of dropping out which can be tailored to their needs. They focus both on personal development in order to build resilience for students at risk and on redressing concrete difficulties, which can be of a social, cognitive or emotional nature.13.  Mentoring supports individual pupils to overcome specific academic, social or personal difficulties. Either in one-to-one approaches (mentoring) or in small groups (tutoring), pupils receive targeted assistance, often provided by education staff or by community members.14.  Strengthening personalised learning approaches and providing learning support for pupils at risk helps them to adapt to the demands of formal education and to overcome barriers created by the education and training system.15.  Strengthening guidance and counselling supports students’ career choices, transitions within education or from education to employment. It reduces poor decision-making based on false expectations or insufficient information. It helps young people to make choices which meet their ambitions, personal interests and talents.16.  Financial support measures such as study allowances respond to financially motivated early school leaving. Such support might be conditional on regular attendance or might be linked to families' social benefits.2.3 Compensation aims to help those who left school prematurely, offering routes to re-enter education and training and gain the qualifications they missed.17.  Successful second chance programmes provide learning environments which respond to the specific needs of premature leavers, recognise their prior learning and support their well-being. They are different from schools in both organisational and pedagogical approaches and are often characterised by small learning groups, personalised and innovative teaching and flexible learning pathways. They need to be easily accessible and free of charge.18.  It is important to provide different routes back into mainstream education and training. Transition classes can help to bridge the gap between previous school failure and re-entering mainstream education.19.  Recognising and validating prior learning including competences achieved in non-formal and informal learning improves pupils' confidence and self-esteem and facilitates re-entry into school. It can motivate them to continue education and training, helps them to identify their talents and to make better career choices.20.  Targeted individual support integrates social, financial, educational and psychological support for young people in difficulties. It is especially important for young people in situations of serious social or emotional distress which hinders them from continuing education or training.[1] The term 'Early School Leaving' includes all forms of leaving education and training before completing upper secondary education or equivalents in vocational education and training.[2] Eurostat, Labour Force Survey 2010.[3] The term 'Early School Leaving' includes all forms of leaving education and training before completing upper secondary education or equivalents in vocational education and training.[4] COM(2010) 2020.[5] OJ L 308, 24.11.2010, p. 50.[6] COM(2010) 758.[7] "A strategy for smart, sustainable and inclusive growth" - COM(2010) 2020.[8] Council Conclusions of 5-6 May 2003 on reference levels of European average performance in education and training (Benchmarks) (doc 8981/03).[9] OJ C 301, 11.12.2009, p. 5.[10] OJ C 140, 6.6.2008, p. 10.[11] OJ C 290, 4.12.2007, p. 1.[12] OJ C 135, 26.5.2010, p. 2.


               EUROPEAN COMMISSION
            Brussels, 18.5.2016
            COM(2016) 341 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2016 national reform programme of Polandand delivering a Council opinion on the 2016 convergence programme of Poland

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2016 national reform programme of Poland

                  and delivering a Council opinion on the 2016 convergence programme of Poland

               THE COUNCIL OF THE EUROPEAN UNION,

               Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 121(2) and 148(4) thereof,

               Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies
                  1
               , and in particular Article 9(2) thereof,

               Having regard to the recommendation of the European Commission
                  2
               ,

               Having regard to the resolutions of the European Parliament
                  3
               ,

               Having regard to the conclusions of the European Council,

               Having regard to the opinion of the Employment Committee,

               Having regard to the opinion of the Economic and Financial Committee,

               Having regard to the opinion of the Social Protection Committee,

               Having regard to the opinion of the Economic Policy Committee,

               Whereas:

               (1)On 26 November 2015, the Commission adopted the Annual Growth Survey
                  4
               , marking the start of the 2016 European Semester of economic policy coordination. The priorities of the Annual Growth Survey were endorsed by the European Council on 17-18 March 2016. On 26 November 2015, on the basis of Regulation (EU) No 1176/2011, the Commission adopted the Alert Mechanism Report
                  5
               , in which it did not identify Poland as one of the Member States for which an in-depth review would be carried out.

               (2)The 2016 country report for Poland
                  6
                was published on 26 February 2016. It assessed Poland’s progress in addressing the country-specific recommendations adopted by the Council on 14 July 2015 and Poland's progress towards its national Europe 2020 targets.

               (3)On 28 April 2016, Poland submitted its 2016 national reform programme and its 2016 convergence programme. To take account of their interlinkages, the two programmes have been assessed at the same time.

               (4)Relevant country-specific recommendations have been addressed in the programming of the European Structural and Investment Funds for the 2014-2020 period. As foreseen in Article 23 of Regulation (EU) No 1303/2013, where it is necessary to support the implementation of relevant Council recommendations, the Commission may request a Member State to review and propose amendments to its Partnership Agreement and relevant programmes. The Commission has provided further details on how it would make use of this provision in guidelines on the application of the measures linking effectiveness of the European Structural and Investment Funds to sound economic governance.
                  7

               (5)Poland is currently in the preventive arm of the Stability and Growth Pact. In its 2016 convergence programme, the government plans for the headline balance to increase from 2.6% of GDP in 2015 to 2.9% of GDP in 2017 before declining to 1.3% of GDP in 2019. The medium-term budgetary objective — a deficit of 1 % of GDP in structural terms — is not expected to be achieved by 2019, the period covered by the programme. According to the convergence programme, the government debt-to-GDP ratio is expected to increase from 51.3% of GDP in 2015 to 52.5% of GDP in 2017 before declining to 50.4% of GDP in 2019. The macroeconomic scenario underpinning these budgetary projections is plausible in 2016 and favourable thereafter. Based on the Commission 2016 spring forecast, there is a risk of a significant deviation from the recommended adjustment both in 2016 and, under unchanged policies, in 2017. Based on its assessment of the convergence programme and taking into account the Commission 2016 spring forecast, the Council is of the opinion that there is a risk that Poland will not comply with the provisions of the Stability and Growth Pact. Therefore further measures will be needed to ensure compliance in 2016 and 2017.

               (6)Poland is the only Member State without a fully-fledged independent fiscal council and no known plans to create one. In addition to the debt brake built into the Polish constitution, Poland introduced an expenditure stabilising rule in 2013, which was fully applied for the first time in the 2015 budget. The rule was, however, amended in December 2015 to allow for higher expenditure. There are significant fiscal sustainability risks in the longer term due to an unfavourable initial budgetary position and the projected increase in the costs of population ageing, mainly in relation to healthcare spending. From a debt sustainability perspective, the medium-term fiscal risk is high, owing to the projected increase in the stock of debt.

               (7)VAT revenues for 2015 are projected to have remained low as a proportion of GDP, despite the measures introduced so far, which include the reverse charge mechanism and the joint liability of firms in sensitive sectors. Increasing VAT collection and fighting VAT fraud are priorities for the Polish government and a strategy is being prepared in this respect. It is expected to include measures such as new IT tools for detecting and combating VAT fraud and a reform of the tax administration. A lower limit for cash payments between companies will be introduced in January 2017. Poland still faces the long-standing challenge of inefficient tax administration. The cost-of-collection ratio, i.e. administrative costs per net tax revenue collected, is the highest in the EU.

               (8)Poland continues to apply reduced VAT rates to a large number of goods and services. This contributes to lost revenues and reduces the efficiency of the VAT system. Evidence suggests that reduced VAT rates are not an effective social policy instrument, particularly as they are not specifically targeted to vulnerable households. They tend to translate into significant subsidies to rich taxpayers. Social benefits and income tax are considered to be better targeted and thus more suitable for achieving redistributive goals. The potential lost revenue due to reduced VAT rates and optional exemptions is among the highest in the EU.

               (9)Despite recent improvements, the Polish labour market faces significant challenges — an ageing labour force, low productivity and high segmentation of the labour market. These are coupled with shortcomings in the education system. Although the education system has improved significantly in recent years, it still fails to equip pupils sufficiently with the transversal skills needed for the rapidly changing labour market and innovation. The relatively low average standing of Polish higher education and science has a negative effect on the quality of provision.  The degree of internationalisation of Polish higher education is very limited, both in terms of the number of foreign students and participation in international scientific collaboration. The financing model of higher education does not promote quality sufficiently, as it largely uses past university standings and quantity variables, such as the number of students and academic staff. According to employers, graduates lack transversal skills such as problem solving, critical thinking, or teamwork. Participation in lifelong learning is low, and vocational education and training do not correspond to market needs.

               (10)While the availability and take-up of pre-school education has increased significantly in recent years, the availability of early childcare services remains among the lowest in the EU. Raising the obligatory school starting age to the age of seven years, and removing the obligation for five year olds to attend the pre-school, combined with the new child benefit, may have further negative effects on labour market participation, especially of women.

               (11)Despite a strong rise in permanent employment contracts in 2015, the proportion of fixed-term employment in Poland is among the highest in the EU. Poland has recently taken a number of measures to tackle labour market segmentation. An amendment to the Labour Code has been introduced, the social security contributions connected to some civil law contracts have been increased and a minimum hourly remuneration for those working on civil law contracts is expected to be introduced in January 2017.However, certain features of the Labour Code create disincentives for employers to hire people on open-ended contracts and the use of these contracts remains limited. This is predominantly due to the complexity of labour regulation and the high implicit costs of dismissals under such contracts. These include high procedural costs, costs associated with lengthy and uncertain dispute resolution mechanisms and provisions such as the special protection of older workers from layoffs.

               (12)Preferential sector-specific social security arrangements, in particular the highly subsidised pension systems for farmers and miners, have high budgetary costs and may contribute to reducing labour mobility. The number of insured under special security system for farmers has been slowly decreasing since 2007, and the government expects that in 2019 it will amount to 1.18 million people, while the number of retirement benefits of 1.229 million will probably grow until 2018. Since 2011, the share of state budget expenditure for KRUS in GDP has been constant at 1%. There is no general tax requirement for the farmers or an obligation to have an accounting system, and the self financing of KRUS is low. There were 1.382 million farms in Poland in 2014 of which 52% under 5 ha (GUS). Miners are exempt from the general defined-contribution public pension system with special preferential pension multiplier coefficients, which is a significant yearly cost to the public finances of over 0.5 % of GDP. The unfavourable demographic outlook has already translated into a declining working age population. Preserving the positive trend in employment, especially of older workers, is therefore essential, also with a view to preserving public pension system adequacy and sustainability. Although the average effective retirement age increased in recent years, it remains significantly below the statutory retirement age. Therefore, an increase in the effective retirement age is crucial for the longer-term social adequacy of future pensions and the stability of public finances, as well as to increase labour market participation.

               (13)Despite sizeable investment in recent years, bottlenecks and deficiencies in transport, energy and communication networks persist. Investment activity is hampered by barriers in relation to the functioning of the public administration, taxation, the environment for research, development and innovation activities, and lengthy contract enforcement. Weaknesses in managerial and administrative capacity have a negative effect on the timely implementation of investment projects in the railway sector and other transport, energy and telecommunication infrastructure projects. The Polish economy is still energy- and carbon-intensive and the potential gains from improving energy efficiency are significant. Electricity generation facilities are ageing and remain heavily dependent on coal. The power network is insufficiently connected to neighbouring countries. The renewable energy support scheme, which was meant to take effect on 1 January 2016, has been delayed, creating investment uncertainty. Key factors hampering investments, in particular in construction, are very low coverage of and instability in spatial planning, especially at the local level, as well as over-regulation and regulatory and administrative inconsistencies that impede the issuing of construction permits.

               (14)In the context of the European Semester, the Commission has carried out a comprehensive analysis of Poland’s economic policy and published it in the 2016 country report. It has also assessed the convergence programme and the national reform programme and the follow-up to the recommendations addressed to Poland in previous years. It has taken into account not only their relevance for sustainable fiscal and socioeconomic policy in Poland but also their compliance with EU rules and guidance, given the need to strengthen the EU's overall economic governance by providing EU-level input into future national decisions. The recommendations under the European Semester are reflected in recommendations 1 to 3 below.

               (15)In the light of this assessment, the Council has examined the convergence programme, and its opinion
                  8
                is reflected in particular in recommendation 1 below.

               HEREBY RECOMMENDS that Poland take action in 2016 and 2017 to:

               1.Achieve an annual fiscal adjustment of 0.5% of GDP towards the medium-term budgetary objective in 2016 and in 2017. Strengthen the fiscal framework, including by establishing an independent fiscal council. Improve tax collection by ensuring better VAT compliance, and limit the extensive use of reduced VAT rates.

               2.Ensure the sustainability and adequacy of the pension system and increase participation in the labour market, by starting to reform the preferential pension arrangements, removing obstacles to more permanent types of employment and improving the labour market-relevance of education and training.

               3.Take measures to remove obstacles to investment in transport, construction and energy infrastructure, and increase the coverage of spatial planning at local level.

               Done at Brussels,

                     For the Council

                     The President

                     (1)
                  OJ L 209, 2.8.1997, p. 1.

                     (2)
                  COM(2016) 341 final.

                     (3)
                  P8_TA(2016)0058, P8_TA(2016)0059, and P8_TA(2016)0060.

                     (4)
                  COM(2015) 690 final.

                     (5)
                  COM(2015) 691 final.

                     (6)
                  SWD(2016) 89 final.

                     (7)
                  COM(2014) 494 final.

                     (8)
                  Under Article 9(2) of Council Regulation (EC) No 1466/97.


               EUROPEAN COMMISSION
            Brussels, 18.5.2016
            COM(2016) 326 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2016 national reform programme of Germanyand delivering a Council opinion on the 2016 stability programme of Germany

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2016 national reform programme of Germany

                  and delivering a Council opinion on the 2016 stability programme of Germany

               THE COUNCIL OF THE EUROPEAN UNION,

               Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 121(2) and 148(4) thereof,

               Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies
                  1
               , and in particular Article 5(2) thereof,

               Having regard to Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances
                  2
               , and in particular Article 6(1) thereof,

               Having regard to the recommendation of the European Commission
                  3
               ,

               Having regard to the resolutions of the European Parliament
                  4
               ,

               Having regard to the conclusions of the European Council,

               Having regard to the opinion of the Employment Committee,

               Having regard to the opinion of the Economic and Financial Committee,

               Having regard to the opinion of the Social Protection Committee,

               Having regard to the opinion of the Economic Policy Committee,

               Whereas:

               (1)On 26 November 2015, the Commission adopted the Annual Growth Survey
                  5
               , marking the start of the 2016 European Semester of economic policy coordination. The priorities of the Annual Growth Survey were endorsed by the European Council on 17-18 March 2016. On 26 November 2015, on the basis of Regulation (EU) No 1176/2011, the Commission adopted the Alert Mechanism Report
                  6
               , in which it identified Germany as one of the Member States for which an in-depth review would be carried out. On the same day, the Commission also adopted a recommendation for a Council recommendation on the economic policy of the euro area
                  7
               . This recommendation was endorsed by the European Council on 18-19 February 2016 and adopted by the Council on 8 March 2016. As a country whose currency is the euro and in view of the close interlinkages between the economies in the economic and monetary union, Germany should ensure the full and timely implementation of the recommendation.

               (2)The country report for Germany
                  8
                was published on 26 February 2016. It assessed Germany’s progress in addressing the country-specific recommendations adopted by the Council on 14 July 2015 and Germany's progress towards its national Europe 2020 targets. It also included the in-depth review under Article 5 of Regulation (EU) No 1176/2011. On 8 March 2016, the Commission adopted a Communication
                  9
                presenting the results of the in-depth review. The Commission’s analysis leads it to conclude that Germany is experiencing macroeconomic imbalances. In particular, the large and persistent current account surplus reflects excess savings and subdued investment in both the private and public sectors. Weak domestic investment hampers potential growth and strong reliance on external demand entails macroeconomic risks in a context of subdued foreign demand. The current account surplus also has, given its size, adverse implications for the economic performance of the euro area. Addressing it through increased investment would raise Germany’s growth potential and help sustain the recovery in the euro area.

               (3)On 15 April 2016, Germany submitted its 2016 stability programme and on
                  29 April 2016 it submitted its national reform programme. To take account of their interlinkages, the two programmes have been assessed at the same time.

               (4)Relevant country-specific recommendations have been addressed in the programming of the European Structural and Investment Funds for the 2014-2020 period. As foreseen in Article 23 of Regulation (EU) No 1303/2013, where it is necessary to support the implementation of relevant Council recommendations, the Commission may request a Member State to review and propose amendments to its Partnership Agreement and relevant programmes. The Commission has provided further details on how it would make use of this provision in guidelines on the application of the measures linking effectiveness of the European Structural and Investment Funds to sound economic governance
                  10
               .

               (5)Germany is currently in the preventive arm of the Stability and Growth Pact and subject to the debt rule. In its 2016 stability programme, the government plans a balanced budgetary position in headline terms over 2016-2020. The medium-term budgetary objective — a structural deficit of 0.5 % of GDP — continues to be met with a margin throughout the programme period. According to the stability programme, the government debt-to-GDP ratio is expected to gradually decline to 59½% in 2020. The macroeconomic scenario underpinning these budgetary projections, which has not been endorsed by an independent body, is plausible. Based on the Commission 2016 spring forecast, the structural balance is forecast to register a surplus of 0.4 % of GDP in 2016 and in 2017, above the medium-term budgetary objective. Possible future deviations, including to accommodate public investment needs, would be assessed against the requirement to maintain the structural balance at the medium-term budgetary objective. Gross debt is forecast to remain on a firm downward path beyond the requirements of the debt rule. This creates scope to boost public investment. Based on its assessment of the stability programme and taking into account the Commission 2016 spring forecast, the Council is of the opinion that Germany is expected to comply with the provisions of the Stability and Growth Pact.

               (6)Although the federal government has adopted several measures to increase infrastructure investment in the years to come, these funds still do not appear to bring about a sustainable upward trend in public investment and to meet infrastructure investment requirements. Overall education and research expenditure has increased only slightly in recent years and may have fallen short of the national target of 10 % of GDP in 2015. Continued investment in education, research and innovation is essential for securing Germany’s competitive position in the future. As the budget is expected to remain balanced in headline and structural terms in 2016-2017, there continues to be sufficient fiscal space for higher public investment, without breaching the rules of the Stability and Growth Pact and the national debt brake. Reforming the pension system would contribute to ensuring the long-term sustainability of public finances. The current design of fiscal equalisation is complex and tends to reduce incentives to improve revenue in individual Länder. The ongoing review of federal fiscal relations provides an opportunity to strengthen the framework, including by ensuring sufficient public investment at all levels of government, especially for municipalities. The current compromise proposal agreed among the Länder would involve simplified horizontal fiscal equalisation. However, it remains vague in terms of further disentangling spending competencies and falls short of increasing revenue autonomy. At the same time, alternative instruments to traditional state funding of transport infrastructure, including through public-private partnerships, are used only to a limited extent. Moreover, complex planning responsibilities across the different levels of government, bottlenecks linked to administrative capacity and complicated approval procedures are all barriers to investment. A more efficient use of public procurement could also have a positive impact on investment, since the volume of procurement tenders published EU-wide remains far below the EU average.

               (7)The complexity of the corporate tax system remains a hindrance to private sector investment and the overall income tax burden on corporations, including the local trade tax (Gewerbesteuer) and the solidarity surcharge, remains high. Inefficiencies arise from the local trade tax due to the inclusion of non-profit elements in the tax base. The tax system favours debt financing over equity financing, the relevant indicator on the 'debt bias' being the eighth highest in the EU in 2015. The share of relatively growth-friendly consumption taxes and recurrent taxes on property in total taxation remained stable between 2007 and 2014 at around 28-29 %, which is low compared with an average of around 32-33 % in the EU. Moreover, the trend of increasing real estate transfer taxes has continued, instead of relying more on less distortive recurrent property taxes. Steps taken to modernise the tax administration were limited to the federal government's adoption of legislation to simplify tax administration procedures. An automatic exchange of tax data between the tax administrations of the 16 Länder, which could improve the efficiency of tax audits, still does not exist. Overall, structural shortcomings and delayed modernisation result in the relative underperformance of the tax administration and inefficiencies in tax collection.

               (8)Financing conditions in Germany are generally favourable. However, the venture capital market remains underdeveloped in international comparison and tax-related framework conditions may limit its size. Improving access to venture capital is an important factor in stimulating entrepreneurial activity, including in high-tech sectors and knowledge-intensive services. The German government has launched a range of measures to improve conditions for venture capital and further measures are under discussion. Additionally, a review of the regulatory framework for venture capital could contribute to stimulating private investment, including from foreign investors.

               (9)Policy action to stimulate competition in the service sectors, especially in professional services, has been limited. Germany is among the Member States with high regulatory barriers in services. Restrictive product market regulations affect prices and productivity. Low labour productivity and high mark-ups indicate that Germany has considerable scope to improve the performance of professional services. Problems in business services stem from authorisation requirements, restrictions on multidisciplinary activities, insurance requirements and fixed tariffs. Legal form and shareholding requirements are also still imposed. The action plan submitted by Germany as a result of the mutual evaluation on access to and practice of regulated professions proposes only a limited number of actions, whereas there is clear scope for more ambitious proposals.

               (10)Although the overall labour market performance is very strong, in particular with unemployment at historically low levels, ageing-related labour and skills shortages are looming, calling for full use of the existing labour force. As these trends challenge not only the labour market, but also the sustainability and adequacy of the pension system, stronger incentives for later retirement appear indispensable. The risk of old-age poverty is expected to increase and the replacement rate of the statutory pension scheme is being gradually reduced, while rates of enrolment in second or third-pillar pension schemes are too low to alleviate this risk significantly. The number of beneficiaries receiving a means-tested minimum income for retirees nearly doubled between 2003 and 2014. However, proposals to improve incentives for later retirement (Flexi-Rente) have not yet been formalised. It remains to be seen how effective they can be in counteracting the incentives for early retirement introduced in 2014.

               (11)The labour market potential of certain groups, especially women and people with a migrant background, remains under-utilised and work disincentives, especially for second earners, remain in place. Specific characteristics of the tax system and health insurance discourage second earners from taking up a job or increasing the number of hours worked. This contributes to a low proportion of women working full-time and one of the lowest numbers of hours worked on average by women in the EU, despite a high female employment rate. Although there has been a slight transition from mini-jobs to standard employment as a by-product of introducing the minimum wage, the former still account for about seven million employees. The exemption of mini-jobs from personal income tax – and in many cases from all employee social contributions – discourages workers from moving into jobs with earnings above the mini-job threshold of EUR 450 per month. This disincentive is in many cases even stronger for spouses subject to joint income taxation. The positive impact on households’ incomes and consumption from the slight increase in several allowances and the compensation of fiscal drag might be largely offset by higher social contributions from employees. The tax wedge at the level of the minimum wage is high in comparison with other Member States, resulting in lower incomes at the bottom end of the wage scale. Reducing employees’ social security contributions or the personal income tax, including by targeted allowances or refunds, would reduce this tax wedge, increasing in turn the disposable income of low wage earners and thereby increasing consumption possibilities.

               (12)The high influx of refugees experienced in the past year has a number of social and economic consequences for Germany. While in the short run, the inflow of refugees is set to increase public expenditure and to create additional domestic demand, thereby raising GDP, the medium-term effect on employment and growth hinges on refugees’ successful labour market and social integration, including via educational support. This issue is high on the political agenda both at the EU and Member State level and will be monitored and analysed closely, including in the 2017 country report.

               (13)In the context of the European Semester, the Commission has carried out a comprehensive analysis of Germany’s economic policy and published it in the 2016 country report. It has also assessed the stability programme and the national reform programme and the follow-up given to the recommendations addressed to Germany in previous years. It has taken into account not only their relevance for sustainable fiscal and socio-economic policy in Germany but also their compliance with EU rules and guidance, given the need to strengthen the overall economic governance of the European Union by providing EU-level input into future national decisions. The recommendations under the European Semester are reflected in recommendations 1 to 3 below.

               (14)In the light of this assessment, the Council has examined the stability programme, and is of the opinion
                  11
                that Germany is expected to comply with the Stability and Growth Pact.

               (15)In the light of the Commission’s in-depth review and this assessment, the Council has examined the national reform programme and the stability programme. Its recommendations under Article 6 of Regulation (EU) No 1176/2011 are reflected in recommendations 1 to 3 below.

               HEREBY RECOMMENDS that Germany take action in 2016 and 2017 to:

               1. Achieve a sustained upward trend in public investment, especially in infrastructure, education, research and innovation, by using the available fiscal space and prioritising expenditure. Improve the design of federal fiscal relations, also with a view to addressing the persistent public under-investment, especially at municipal level.

               2. Reduce inefficiencies in the tax system, in particular by reviewing corporate taxation and the local trade tax, modernise the tax administration and review the regulatory framework for venture capital. Step up measures to stimulate competition in the services sector, in particular in business services and regulated professions.

               3.Increase incentives for later retirement and reduce disincentives to work for second earners. Reduce the high tax wedge for low wage earners and facilitate the transition from mini jobs to standard employment.

               Done at Brussels,

                     For the Council

                     The President

                     (1)
                  OJ L 209, 2.8.1997, p. 1.

                     (2)
                  OJ L 306, 23.11.2011, p. 25.

                     (3)
                  COM(2016) 326 final.

                     (4)
                  P8_TA(2016)0058, P8_TA(2016)0059, and P8_TA(2016)0060.

                     (5)
                  COM(2015) 690 final.

                     (6)
                  COM(2015) 691 final.

                     (7)
                  COM(2015) 692 final.

                     (8)
                  SWD(2016) 75 final.

                     (9)
                  COM(2016) 95 final.

                     (10)
                  COM(2014) 494 final.

                     (11)
                  Under Article 5(2) of Council Regulation (EC) No 1466/97.


               EUROPEAN COMMISSION
            Brussels, 13.5.2015
            COM(2015) 258 final
            Recommendation for a
            COUNCIL RECOMMENDATION
            on the 2015 National Reform Programme of Irelandand delivering a Council opinion the 2015 Stability Programme of Ireland

               Recommendation for a

               COUNCIL RECOMMENDATION

               on the 2015 National Reform Programme of Ireland

                  and delivering a Council opinion the 2015 Stability Programme of Ireland

               THE COUNCIL OF THE EUROPEAN UNION,

               Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 121(2) and 148(4) thereof,

               Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies
                  1
               , and in particular Article 5(2) thereof,

               Having regard to Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances
                  2
               , and in particular Article 6(1) thereof,

               Having regard to the recommendation of the European Commission
                  3
               ,

               Having regard to the resolutions of the European Parliament
                  4
               ,

               Having regard to the conclusions of the European Council,

               Having regard to the opinion of the Employment Committee,

               Having regard to the opinion of the Economic and Financial Committee,

               Having regard to the opinion of the Social Protection Committee,

               Having regard to the opinion of the Economic Policy Committee,

               Whereas:

               (1)On 26 March 2010, the European Council agreed to the Commission’s proposal to launch a new strategy for growth and jobs, Europe 2020, based on enhanced coordination of economic policies. The strategy focuses on the key areas where action is needed to boost Europe’s potential for sustainable growth and competitiveness.

               (2)On 13 July 2010, the Council, on the basis of the Commission’s proposals, adopted a recommendation on the broad guidelines for the economic policies of the Member States and the Union (2010 to 2014) and on 21 October 2010 it adopted a decision on guidelines for the employment policies of the Member States. Together these form the ‘integrated guidelines’ which Member States were invited to take into account in their national economic and employment policies.

               (3)On 8 July 2014, the Council adopted a recommendation on Ireland’s National Reform Programme for 2014 and delivered its opinion on Ireland’s updated Stability Programme for 2014. On 28 November 2014, in line with Regulation (EU) No 473/2013
                  5
               , the Commission presented its opinion on Ireland’s draft budgetary plan for 2015
                  6
               .

               (4)On 28 November 2014, the Commission adopted the Annual Growth Survey
                  7
               , marking the start of the 2015 European Semester of economic policy coordination. On the same day, on the basis of Regulation (EU) No 1176/2011, the Commission adopted the Alert Mechanism Report
                  8
               , in which it identified Ireland as one of the Member States for which an in-depth review would be carried out.

               (5)On 18 December 2014, the European Council endorsed the priorities for boosting investment, accelerating structural reforms and pursuing responsible growth-friendly fiscal consolidation.

               (6)On 26 February 2015, the Commission published its 2015 country report for Ireland
                  9
               . This assessed Ireland’s progress in addressing the country-specific recommendations adopted on 8 July 2014. The country report also includes the results of the in-depth review under Article 5 of Regulation (EU) No 1176/2011. The Commission’s analysis leads it to conclude that Ireland is experiencing macroeconomic imbalances which require decisive policy action and specific monitoring. In particular, Ireland completed the EU-IMF financial assistance programme in 2013 and is currently subject to post-programme surveillance and European Semester surveillance. Despite a marked improvement in the economic outlook, some risks continue to deserve close attention: the high levels of private- and publicsector indebtedness; remaining financial sector challenges, in particular with regard to banks’ profitability; and labour market adjustment marked by high structural unemployment.

               (7)On 29 April 2015, Ireland submitted its 2015 National Reform Programme and on 30 April 2015 its 2015 Stability Programme. To take account of their interlinkages, the two programmes have been assessed at the same time.

               (8)Ireland is currently in the corrective arm of the Stability and Growth Pact. In its 2015 Stability Programme, the government plans to correct the excessive deficit by 2015, in line with the deadline set by the Council. Thereafter, it plans to reach the medium-term objective – a balanced budget in structural terms - by 2019. The government plans to reduce the headline deficit to 2.3 % of GDP in 2015 and to turn it into a surplus of 0.7 % of GDP in 2019. According to the Stability Programme, the government debt-to-GDP ratio is expected to be brought down from 109.7 % in 2014 to 105.0 % of GDP in 2015 and gradually to 89.4 % of GDP in 2019. The macroeconomic scenario underpinning these budgetary projections is favourable in 2015 and plausible in 2016. Based on the Commission's 2015 spring forecast, a timely and durable correction of the excessive deficit by 2015 is foreseen. The fiscal effort for 2011-2015 is estimated to be below the recommended effort, but the amount of discretionary measures taken under the programme and thereafter is in line with what was required. Assuming a timely and durable correction of the excessive deficit as planned, Ireland will be subject to the preventive arm of the Pact as of 2016. Measures to support the planned deficit targets and progress towards the medium-term objective from 2016 onwards have not been specified in sufficient detail. Therefore, in the light of the Commission's 2015 spring forecast, there appears to be a risk of a significant deviation from the required adjustment towards the medium-term objective in 2016, and further structural measures will be needed in that year. Based on its assessment of the Stability Programme and taking to account the Commission's 2015 spring forecast, the Council is of the opinion that there is a risk that Ireland will not comply with the provisions of the Stability and Growth Pact.

               (9)Tax reforms have contributed to the fiscal adjustment, but there is further scope to reduce distortions, improve the efficiency of the tax system and raise its growth and environmental friendliness. Property taxation has been turned into a recurrent tax, but the base is still relatively narrow as certain non-residential properties remain outside the tax net. Labour taxation lacks simplicity due to complex social contributions. The tax bases for consumption and environment taxes are limited by reduced rates and exemptions. Zero and reduced rates for valueadded tax make it less efficient than the EU average and there seems to be no systematic evaluation of such tax expenditures. There is scope to improve the effectiveness of environmental tax instruments and remove environmentally harmful subsidies. Recent changes to tax residency rules are welcome, even if their effect may take time to assess. Major reforms to the fiscal framework have been undertaken in recent years. New rules and procedures, in particular the medium-term expenditure framework, are expected to provide a safeguard against pro-cyclical fiscal policy and are crucial for fiscal sustainability. However, under current rules, the government has considerable discretion to change expenditure ceilings beyond pre-defined contingencies, which weakens medium-term budgetary plans.

               (10)Public expenditure on healthcare is comparatively high even though population health status indicators are generally no better than in the rest of the EU. Efficiency gains have been achieved in recent years. However, the health system needs deeper structural reforms to contain expected cost increases and maintain favourable health outcomes in the face of an ageing population. Ireland aims to introduce a single-tier universal health insurance scheme in the medium term and is implementing reforms under the Future Health strategy. Intermediate steps are being pursued in the introduction of universal health insurance to address some of the pressing challenges and improve cost-effectiveness. Effectively rolling out e-health tools, activity-based funding and improved prescription practices have significant potential to increase cost-effectiveness. At the same time, the potential remains to reduce public spending on pharmaceuticals, in particular patented medicines, which is well above the EU average.

               (11)Ireland has one of the highest proportions of people living in ‘low work-intensity’ households in the EU. This generates serious social challenges and raises the risk of child poverty. As low work-intensity is particularly severe among single-parent households, the proportion of children living in households with low work-intensity is nearly three times the EU average. Some progress has been made in addressing pockets of inactivity traps by altering the operation of some welfare payments. Nevertheless, access to full-time childcare remains limited and expensive, which is a barrier to female and single-parent participation in the labour market.

               (12)With the stronger macroeconomic environment, the overall situation of SMEs has improved but they face very contrasting financial positions; a relatively small proportion is still suffering from legacy issues and concentrating the sector’s further deleveraging needs. Credit demand is also showing signs of recovery. SMEs continue to rely heavily on bank financing for investment and non-bank sources of finance are relatively underdeveloped. As the recovery gathers momentum and domestic demand recovers, supply constraints are likely to increase unless credit channels are repaired adequately and financing sources are diversified; this is crucial for investment and the growth outlook. Significant policy initiatives have been taken to support SMEs’ access to finance and to offer new products with longer duration. These include the establishment of the Strategic Banking Corporation of Ireland (SBCI), the Ireland Strategic Investment Fund (ISIF) and other schemes. However, the uptake on some of these schemes has so far been low and the effectiveness and impact of the SBCI and ISIF can be judged only in the light of experience.

               (13)Ireland has made good progress in restructuring, downsizing and recapitalising its domestic banks. Banks’ funding profiles have returned to normal and profitability continues to improve. However, legacy challenges remain critical. The high stock of nonperforming loans is declining only slowly and continues to weigh on the capacity of banks to support the economic recovery. Such loans represented 23.2 % of total loans in the three main domestic banks in the fourth quarter of 2014, one of the highest rates in the EU. While banks continue to meet their mortgage arrears resolution targets, the longest-term arrears (over 720 days) continue to build up, increasing to 9.8 % of total loan balances in the fourth quarter of 2014. Progress is being made in implementing sustainable restructuring solutions; in April, the Central Bank of Ireland required banks to have solutions in place for the vast majority of borrowers by end-2015. However, banks have relied significantly on standard self-restraint techniques involving the rescheduling of principal or interest payments rather than lowering both. Banks also continue to rely heavily on legal proceedings as a way of convincing customers in arrears to engage. The planned introduction of a central credit register has progressed only slowly even though it is key to improving supervision, credit underwriting and risk management.

               (14)The situation in the labour market has improved since 2013, with renewed job creation in the private sector and a steady fall in unemployment. Nevertheless, the unemployment rate is still high and long-term unemployment remains a serious concern. The risk exists that some cyclical unemployment could become structural as skills mismatches have emerged with the rebalancing of the economy. Youth unemployment is still much higher than in the pre-crisis period. Activation reforms have made significant progress in recent years, but some concerns remain about the effectiveness of existing activation policies and training programmes, and of the ability of employment services to deliver on the scale required. The recently launched JobPath initiative is a positive development; its effectiveness will need to be tested. In the past, the further education and training system has been ineffective in providing the type of skills that the rebalanced economy needs and reforms have started only recently.

               (15)Costs for legal services remain higher and still have to adjust in line with other professional services. Adjustment is important, as legal services are an input to all sectors of the economy and their cost has a bearing on Ireland’s competitiveness. Reform of the regulatory framework for legal services with a view to increasing competition and reducing costs is a long-standing project to which the authorities are committed. However, the Legal Services Regulation Bill, published in 2011, has not been adopted. In addition, an actual reduction in costs can be achieved only if the competition-enhancing and cost-reducing provisions of the planned regulatory framework are preserved and incorporated into the regulations to be issued by the Legal Services Regulatory Authority that is about to be set up. Therefore, the Commission will continue to monitor progress in this area in the context of the European Semester.

               (16)In the context of the European Semester, the Commission has carried out a comprehensive analysis of Ireland’s economic policy and published it in the 2015 country report. It has also assessed the Stability Programme and the National Reform Programme and the follow-up given to the recommendations addressed to Ireland in previous years. It has taken into account not only their relevance for sustainable fiscal and socio-economic policy in Ireland but also their compliance with EU rules and guidance, given the need to strengthen the overall economic governance of the European Union by providing EU-level input into future national decisions. The recommendations under the European Semester are reflected in recommendations 1 to 4 below.

               (17)In the light of this assessment, the Council has examined Ireland’s Stability Programme, and its opinion
                  10
                is reflected in particular in recommendations 1 and 2 below.

               (18)In the light of the Commission’s in-depth review and this assessment, the Council has examined the National Reform Programme and the Stability Programme. Its recommendations under Article 6 of Regulation (EU) No 1176/2011 are reflected in recommendations 1 and 4 below.

               (19)In the context of the European Semester, the Commission has also carried out an analysis of the economic policy of the euro area as a whole. On the basis of this analysis, the Council has issued specific recommendations for the Member States whose currency is the euro. Ireland should also ensure the full and timely implementation of these recommendations,

               HEREBY RECOMMENDS that Ireland take action in 2015 and 2016 to:

               1.Ensure a durable correction of the excessive deficit in 2015. Achieve a fiscal adjustment of 0.6% of GDP towards the medium-term objective in 2016. Use windfall gains from better-than-expected economic and financial conditions to accelerate the deficit and debt reduction. Limit the existing discretionary powers to change expenditure ceilings beyond specific and predefined contingencies. Broaden the tax base and review tax expenditures, including on value-added taxes.

               2.Take measures to increase the cost-effectiveness of the healthcare system, including by reducing spending on patented medicines and gradually implementing adequate prescription practices. Roll out activity-based funding throughout the health system.

               3.Take steps to increase the work-intensity of households and to address the poverty risk of children by tapering the withdrawal of benefits and supplementary payments upon return to employment and through better access to affordable full-time childcare.

               4.Finalise durable restructuring solutions for a vast majority of mortgages in arrears by end-2015 and strengthen the monitoring arrangements by the Central Bank of Ireland. Ensure that restructuring solutions for loans to distressed SMEs and residual commercial realestate loans are sustainable by further assessing banksʼ performance against own targets. Take the necessary steps to ensure that a central credit registry is operational by 2016.

               Done at Brussels,

                     For the Council

                     The President

                     (1)
                  OJ L 209, 2.8.1997, p. 1.

                     (2)
                  OJ L 306, 23.11.2011, p. 25.

                     (3)
                  COM(2015) 258..

                     (4)
                  P8_TA(2015)0067, P8_TA(2015)0068, P8_TA(2015)0069.

                     (5)
                  OJ L 140, 27.5.2013, p. 11.

                     (6)
                  C(2014) 8803 final..

                     (7)
                  COM(2014) 902.

                     (8)
                  COM(2014) 904.

                     (9)
                  SWD(2015) 27 final.

                     (10)
                  Under Article 5(2) of Council Regulation (EC) No 1466/97.