ECB calls to fine Eurozone governments lacking in reforms

In a report published on Monday, the European Central Bank (ECB) has urged European Commission and leaders to fine Eurozone governments who have failed to pursue key economic reforms. ECB warned that a lack of progress over economic reforms hurts long-term growth and stability in the region. According to the central bank’s recommendation, the governments should be fined up to 0.1 percent of their respective gross domestic products (GDP). The measure is part of a new risk-monitoring system known as the macroeconomic imbalances procedure which was designed to prevent worrisome economic developments such as high current account deficits, unsustainable debt levels, and house-price bubbles.

The EU’s executive arm, the European Commission said that the number of countries in which EU authorities have identified excessive imbalances is at an all-time high. France, Croatia, Italy, Cyprus, Portugal, and Bulgaria, are among those countries. According to a report released by the EU commission suggests that 90 percent of the recommended reforms in 2016 have seen limited or no progress at all. Every year the European Commission issues country-specific recommendations (CSRs) for each EU Member State, which contain the policy priorities for the following year. These recommendations are approved by the EU Council following endorsement by the Heads of State or Government of all EU Member States. The CSRs provide guidance tailored to the individual Member States on how to enhance growth and resilience while maintaining sound public finances.

Despite the recommendations from the ECB, the commission may be reluctant to push for large fines as they might contribute to the current social threat to the existence of the EU as well as the Eurozone.  Here is the link to the full ECB report, http://www.ecb.europa.eu/pub/pdf/other/ebbox201705_05.en.pdf?375c1c0f99759e4fa05734bee73f2247