“Structural reform” is a term that’s commonly used in European politics. In particular, it tends to be mentioned during – and after – economic crises. But what is structural reform? And how does it benefit EU member states?
The meaning of structural reform is policy measures that are used to improve a country’s economy, with the aim of making it more competitive and boosting its growth potential.
Right not, Europe’s economy is growing, and has been for the last seven years. However, it’s predicted that growth will significantly slow down this year, especially in the eurozone. Structural growth is seen as one of the key ways that the EU can avoid a downturn.
Every year, the European Commission carries out the European Semester, which is a detailed analysis from each country. It looks at plans for budget and structural reforms and gives recommendations for any improvements.
Additionally, the EU uses the Structural Reform Support Programme (SRSP), which provides extra support to struggling member states. The budget for this programme is €222.8 million for 2017-2020. In 2019, it will help 26 member states to implement over 260 projects.
Another benefit of structural reforms are that they can help to reduce income inequality and make economic growth more inclusive.
For example, some of the projects involve changes and reforms to education systems, like introducing vocational schools which focus on preparing students for careers. This can increase their chances of securing a better job with a higher salary.
There is also a lot of focus on redistribution and reforms to the tax system to tackle inequality. For instance, changes to the tax system can help the poorest by reducing how much tax they pay.
In an interview, Chief economist Laurence Boone from the Organisation for Economic Cooperation and Development(OECD) explained: “Structural reforms are absolutely key to make sure that every single decimal of growth will increase employment, productivity and ultimately will increase investment.
“For example, to increase employment, to make sure that the cost of wages is lower than the way firms want to hire more people.”
“And to increase employment as well, what we do is better job matching, so you have all the job agencies increasing education in structural reforms, in vocational training, in life-long learning and many-many countries miss that.”
It’s believed that the Commission is set to increase its structural reforms in the coming years with more changes to its policies, which it hopes will drive more equality in Europe.
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