Macroeconomic Imbalance Procedure: Alert Mechanism Scoreboard 07/05/2020
The Macroeconomic Imbalance Procedure (MIP) is based on Article 121.6 of the Treaty that deals with the coordination of EU Member States economic policies (23/11/2011). This coordination is deemed necessary in order to avoid unsustainable trends that have been observed over the last decade.
The procedure has a large scope, encompassing both external and internal imbalances and can be divided up into two parts: a preventive arm and a corrective arm.
As part of the preventive arm, the European Commission's main tool used to identify the risks of emerging macroeconomic imbalances in Member States is a scoreboard of fourteen indicators, five related to external imbalances and competitiveness, six to internal imbalances and three to labour market conditions. For each indicator, a threshold has been identified, usually based on statistical analysis and common findings in the economic literature. Thresholds are different between Euro Area Member States and non-Euro Area Member States for the real effective exchange rate and the nominal unit labour cost.
Countries that are considered by the European Commission as having a risk of imbalances, receive an in-depth review (IDR). If imbalances exist in a country, the country is expected to correct it in the corrective part of the procedure. If a country fails to do so, it risks receiving a fine.
The official MIP site of the Commission can be reached at http://ec.europa.eu/economy_finance/economic_governance/macroeconomic_imbalance_procedure/index_en.htm