AREAS OF REFORM AT MEMBER STATE LEVEL FOR 2015

For 2015, the Commission recommends focusing attention on a number of key reforms. The areas chosen are relevant for all Member States although the exact measures to be taken will vary from country to country. Within the euro area, particular attention should be paid to better co-ordination of some of these reforms to enhance positive synergies and to avoid negative spill overs. The areas for reform are the following:

1. Improving the dynamics in labour markets and tackling the high level of unemployment: The most competitive and resilient countries are those where companies and entrepreneurs value and invest most in continuous skills development and innovation is encouraged and where people are able to move easily between occupations, sectors and/or regions. Employment protection rules and institutions should provide a suitable environment to stimulate recruitment, while offering modern levels of protection to both those who are already in employment and those looking for a job. Member States must do more to remove obstacles to job creation, with the involvement of social partners, including where necessary by reforming labour dispute resolution schemes. Reforms targeting labour tax reductions to help restore employment should be intensified. Reducing labour market segmentation should help to eliminate employment barriers for those who are currently unemployed, underemployed or employed on a temporary contract, and facilitate upward professional mobility. The EU needs a skilled work force in growing sectors such as the digital economy, green sectors and health care. Education has a key role to play to ensure the responsiveness of skills to labour market signals. Vocational training and dual education systems should be upgraded to provide young people with the necessary skills sets. Lifelong learning should become a central priority, through the mobilisation of both public and private actors, with broader access at all ages and for those most in need. A better assessment of the skills needs at regional and sectoral levels is also necessary. The situation of young people and the long-term unemployed in particular requires determined action. Benefit systems should combine adequate income replacement with activating and enabling services, targeted at individual needs and delivered through one-stop shops. Fiscal disincentives to seeking employment must be removed. The Youth Guarantee represents an ambitious effort combining different instruments to address youth unemployment effectively. However, the available funds, including the EUR 6.4 billion of the Youth Employment Initiative, should be used faster and more efficiently by Member States, and enhanced by national means. Only three relevant Operational Programmes worth a total of EUR 1.6 billion have been adopted for France, Italy and Lithuania allowing pre-financing payments to be made to these countries. In order to be able to adopt most of the relevant Operational Programmes by the end of the year, Member States must address the Commission's observations as soon as possible. On average, there are more than 2 million unfilled vacancies in the EU. While there are limits to geographic mobility, it appears that workers are not using the opportunities of free movement to the full. Removing barriers will require increasing the scope of portability of pension rights across the EU and helping workers make an informed choice about mobility, for example through the EURES network. At the same time, steps must be taken against the abuse of existing rules and to prevent a permanent brain drain from certain regions. Enhanced EU cooperation in exchange of information and good practices will be essential. A high level of employment requires real wages to move in line with productivity developments, including at industry and firm level. Some Member States still need to complete the correction of pre-crisis trends, with wages outpacing productivity gains. The role of social partners is crucial. Collective agreements should allow a certain degree of flexibility for differentiated wage increases across sectors and within sectors, according to specific productivity developments.
2. Pension reforms:  Across the EU there is a need to ensure both sustainability and adequacy of pension systems. A majority of Member States have reformed their public pension systems in recent years so as to put them on a sounder footing as European society ages. However, as mirrored in the 2014 country-specific recommendations, in many cases further reforms are necessary to increase the efficiency and financial sustainability of pensions. At the same time, the adequacy of pension systems needs to be preserved, so that a decent level of income after retirement is ensured. Given the trend of increasing longevity, in many countries a more dynamic view on the age at which people can retire needs to be established, including linking statutory retirement ages to life expectancy more systematically to ensure an adequate balance between life spent working and spent in retirement.
3. Modernising social protection systems: Social protection mechanisms should be efficient and adequate at all stages of a person's life. There is a need for simplified and better targeted social policies complemented by affordable quality childcare and education, prevention of early school leaving, training and job assistance, housing support and accessible health care. Healthcare systems need to be reformed to provide quality health care through efficient structures, including eHealth.
4. Improving the flexibility of product and services markets: Modernising the functioning of network industries, upgrading infrastructure capacity and further opening services sectors remains a challenge for most Member States, as shown in the country-specific recommendation issued to the Member States in 2014, which put the focus on measures to improve the functioning of their network industries and to enhance competition in product and services sectors, notably as regards regulated professions. Effective enforcement of consumer legislation can also increase trust and create demand in the single market. EU legislation provides a framework for modernisation at national level, and for making Europe more attractive and competitive as a whole. Member States have undertaken numerous reforms in the services sector following the entry into force of the Services Directive in 2006, but progress has been more uneven recently. The full implementation of the Services Directive would significantly improve the functioning of the single market for services and could lead to an economic gain of up to 1.6% of EU GDP in the long run on top of the 0.8% of EU GDP under the current level of implementation. The overall persistence of a high number of exceptions to the general principles foreseen by the Directive, together with lengthy reform processes in a number of Member States, are still weighing on the full implementation of the Directive and thus do not allow reaping its full benefits. Stepping up national reforms should focus on removing the following barriers: (i) disproportionate and unjustified authorisation requirements in some Member States, notably legal form and shareholding requirements; (ii) lack of clarity of domestic legislation as to the rules applicable to businesses providing cross-border services; (iii) lack of mutual recognition; (iv) cumbersome administrative rocedures, with scope for improving the performance of the Points of Single Contact; (iv) uneven progress on the ongoing mutual evaluation of professional regulations and reforms of regulated professions; (v) remaining obstacles to the free movement of goods. The Commission will continue to work closely with the Member States to remove these barriers.
5. Improving framework conditions for business investment: Efforts to strengthen the business environment to make it more investment-friendly is key to bring in private investment, in particular in Member States with limited fiscal space for public investment. Public private partnerships and governance of state owned enterprises will need to be carefully designed to make public spending and private investment more efficient. Public procurement contracts should be opened further, in particular using EU legislation. This also implies that the administrative capacity of procuring authorities to plan and implement is strengthened, in particular through e-procurement. In many cases, improved efficiency of procedures and greater transparency are also required. Well-functioning insolvency frameworks are also crucial for an efficient reallocation of resources.
6. Improving the quality of research and innovation (R&I) investment: Investment in R&I at national and regional level has a critical role to play in kick-starting sustainable growth. Member States should continue to prioritise public investment in research and innovation, ensuring its efficiency and leverage with regard to private investment. Member States should focus on the quality of R&I institutions, on their strategy development and policy-making processes, and on programmes. At the same time, they need to keep up the pace of reforms to ensure an investment-friendly environment, which is a necessary condition for business investment in R&I and for fast growing innovative SMEs.
7. Improving efficiency in public administration: Public administrations across the EU continue to face the challenge of delivering "better with less", i.e. meeting public needs in times of tighter budgets, improving the business environment by alleviating the administrative and regulatory burden for firms and citizens, and adapting to the needs of the digital economy. This remains a challenge in the vast majority of Member States. A number have embarked on institutional or territorial reforms, with the two-fold objective of achieving savings through the rationalisation of their organisation, and ensuring smooth decision-making and implementation of reforms through a clarification of the competences of the various institutional or government layers. In addition, similar to the regulatory fitness and performance programme (REFIT) carried out at EU level, most Member States need to pursue simplification and a more digital approach to public administration. Removing red tape and regulatory obstacles should lead to higher quality, simpler and more accessible legislation and pave the way for a more business- and citizen-friendly environment, which in turn fosters investment. In this respect, enhancing the efficiency and securing the fairness of independent judicial systems is also an important prerequisite. There is a clear need to tackle issues such as the length of proceedings, the number of pending cases, the insufficient use of ICT, the promotion of alternative dispute resolution mechanisms and the independence of judicial systems.