Macroeconomic Imbalance Procedure
The Macroeconomic Imbalance Procedure (MIP) is defined by the European Commission as ‘a surveillance mechanism that aims to identify potential risks early on, prevent the emergence of harmful macroeconomic imbalances and correct the imbalances that are already in place’.
The MIP was set up in 2011 as part of the ‘six-pack’ of legislative measures, aimed at reinforcing economic governance in the European Union. It is based on Article 121.6 of the Treaty on the Functioning of the European Union (TFEU 450 KB PDF) and is made up of four main elements:
- An early warning system. This isbased on a scoreboard of 11 indicators covering the major sources of macroeconomic imbalances. This scoreboard is published in the Alert Mechanism Report that marks the starting point of the annual cycle of the MIP. The aim of the scoreboard is to determine whether potential imbalances identified in the early-warning system are problematic.
- Preventive action. The MIP allows the Commission and the Council to adopt preventive recommendations under article 121.2 of the TFEU. These form part of the package of country-specific recommendations made by the Commission every May/June in the context of the European Semester.
- Corrective action. In severe cases, an Excessive Imbalance Proce400: Concluding the first European semester of economic policy coordination: Guidance for national policies in 2011-2012).dure (EIP) may be set out for a Member State whereby the Member State is required to submit a clear strategy with deadlines for implementing corrective action.
- Rigorous enforcement. The MIP establishes a new enforcement regime for eurozone countries, based on a two-step approach: first, an interest-bearing deposit can be imposed after a failure to comply with the recommended corrective action; second, in the event of a second failure to comply, this interest-bearing deposit can be converted into a fine (up to 0.1% of GDP). Sanctions can also be imposed for failing twice to submit an appropriate corrective action plan.
In October 2013, the European Commission issued a Communication on strengthening the social dimension of Economic and Monetary Union (188 KB PDF), in which it recommended that the MIP should also take social considerations, such as unemployment and poverty, into account. The aim is to foster better understanding of how these issues are affected by such imbalances. Hence the Commission suggested adding social indicators – such as the participation rate, the long-term unemployment ratio, the youth unemployment rate and the risk of poverty and social exclusion rate – to the Alert Mechanism Report.
See also: Broad Economic Policy Guidelines; Economic And Monetary Union; Employment guidelines; European economic governance; European Employment Strategy; EU system of industrial relations; European Globalisation adjustment Fund; Integrated guidelines; Lisbon Strategy; National Action Plans; National Reform Programmes; Treaty on Stability, Coordination and Governance.