Economic and budgetary outlook for the European Union 2017

Study 27-01-2017

This study presents the economic and budgetary outlook for the European Union (EU) in 2017 and beyond. Economic estimates point to moderate growth and creation of new employment against a backdrop of persistent external and internal challenges that may hinder recovery. An investment gap persist in almost all EU Member States and a number of EU measures contribute to addressing it. While fiscal policies remain mainly within EU Member States' remit, they are increasingly coordinated at EU level through rules and processes such as the European Semester. However, a central tool of fiscal stabilisation is missing, as the EU budget was not designed to play this role. This is due to the size of the EU budget (only some 1 % of the area's gross national income) and its limited flexibility in the context of multiannual financial planning. While the structure of the 2017 EU budget is largely determined by the 2014-2020 Multiannual Financial Framework (MFF), EU institutions have used the flexibility provisions of the MFF to strengthen resources in areas considered of key concern – the economic and migration crises, and emerging security issues. The need to resort to such provisions appears to be a constant feature of the current MFF. The debate on the future of the EU budget is expected to gain momentum in 2017 in the run-up to the European Commission proposal for a post-2020 MFF. In a rapidly evolving world, the design of the EU budget has to ensure the right balance between predictability of investments and capacity to respond to new challenges and priorities.