Making progressive reforms possible: a real European socio-economic governance

How can we ensure that structural reforms are being re-oriented from cost-cutting to a sustainable economic model? It needs to be done at EU level. It is essential for the EU to develop a real socio-economic governance based on a long-term strategy for sustainable growth. We want European policies and tools to ensure re-convergence in Europe as well as national ownership of reforms rather than one-size-fits-all measures.

This is how we can achieve real progressive reforms favouring social cohesion, efficient taxation and innovation, resource-efficiency and a sustainable industrial pattern.

This new policy mix would put social issues are on par with economic considerations.

This is particularly crucial within the Economic and Monetary Union, to ensure that competitiveness and growth are pursued through improvements in employment and productivity, rather than through internal devaluation and persistently contradictory fiscal policies.

Instruments such as the European Semester should be rebalanced towards more delivery on the Union‘s employment and social objectives, as well as a change in the political structures responsible for its implementation.

So, it is important to continue reviewing European fiscal rules and governance mechanisms so as to enable greater counter-cyclicality and ensure that public budgets can play their role as economic stabilizers.

This new balance in socio-economic governance should also be reflected in the review of the Europe 2020 Strategy.

No one-size-fits-all measures.

15 PES Proposals

We must reaffirm the EU’s growth targets!The objectives and headline targets of the Europe 2020 Strategy should be reaffirmed as the overall framework for the EU‘s sustainable development and socio-economic governance. The Integrated Guidelines, Annual Growth Survey, National Reform Programmes and Country-Specific Recommendations prepared during the European Semester should then all be aligned with this Europe 2020 framework.
We must not penalize countries for investment!When the European Commission is assessing public deficits, investment should be distinguished from current expenditures. The Commission’s communication on making the best use of flexibility within the stability and growth pact” should allow for more room for manoeuvre for investment. However, a broader investment clause should be envisaged, treating countries in the preventive and corrective arm of the Excessive Deficit Procedure equally.
We must make investment a permanent pillar of EU governance! It is crucial to ensure that the European Fund for Strategic Investments (EFSI) and the Multiannual Financial Framework (MFF) together constitute an adequate investment capacity that can restore economic convergence at European level. The EFSI is not only another instrument to finance projects. If implemented properly it can pave the way for a paradigm change in the future.
We must adjust the Europe 2020 strategy! In the framework of the mid-term review of the Europe 2020 strategy, an indicator relating to the rate of non-residential investment should be included to the macroeconomic imbalances scoreboard. This would help focus policies on closing the current gap in productive investment.
We must help countries facing massive unemployment! The European Semester should involve systematic monitoring, recommendations and support for countries facing the greatest employment and social challenges. This should build on the scoreboard of key employment and social indicators. The Macroeconomic Imbalance Procedure should also involve deeper analysis of the interplay between social, employment, macroeconomic and financial indicators. This could involve looking at the links between inequality and indebtedness, labour cost-cutting and deflationary pressures, or fiscal consolidation and unemployment.
We must make EU economic governance more democratic! There has to be stronger accountability for the economic decisions taken by the EU. Early publication of country reports in the European Semester would allow for deeper dialogue between the Commission, European Parliament, national parliaments and social partners as well as regional and local authorities in preparation of National Reform Programmes and Country-Specific Recommendations. This would reinforce national ownership on the reforms to be made.
We must have a stronger employment and social policy council! The role of the Employment, Social Policy, Health and Consumer Affairs Council in the European Semester and the debate on EMU completion must be upgraded and cooperation with the Economic and Financial Affairs Council improved. A social Eurogroup should be established to coordinate ways of addressing key employment and social challenges in the Eurozone.
We must have a European pact for minimum wages! Decent wages are important not only for social cohesion, but also for maintaining a strong recovery and a productive economy. A European pact for minimum wages, established at national level either by law or collective bargaining, would help address the challenge of low wages. It should ensure that all workers and employees receive a wage of at least 60% of the respective national median wage.
We must ensure that the EU respects collective bargaining! The European Commission must be held to account. We need to make sure that it respects and promotes collective bargaining and its coverage in all of its recommendations and policy instruments, including in the European Semester.
We must ensure every European has equal access to essential help! The worrying trend of growing poverty, its potential for self-perpetuation and for increasing divergence in European living standards make it crucial to put the fight against poverty and inequality back on the agenda. A European legal framework guaranteeing every European universal to health care, income support and subsistence security would be a considerable step towards less poverty and renewed upward social mobility.
We must create an incentive mechanism to ensure the financing of reforms! Reaching social and employment objectives might strongly depend on the economic situation of a country and require immediate reforms with only long term impact. To ensure that Member States can act and finance such reforms, an incentive mechanism could be created, supported by a common Eurozone budgetary capacity and a workable democratic decision-making mechanism at the Euro area level. Such a Eurozone budget should not be detrimental to the existence of the regular EU budget. It would act as an automatic stabilizer for countries going through an economic contraction, and help to absorb negative shocks.
We must have organized debt management! Many Member States’ room of manoeuvre in the fiscal sphere is restricted as they struggle to repay old debts. Higher growth would make it easier to reduce the debt burden, but a high debt burden can itself be a drag on growth. Organised debt management is therefore essential in order to pave the way for growth-oriented policies. A redemption scheme that Member States could join by subscribing to a debt sustainability plan could address such challenges.
We must explore a complementary European unemployment benefit scheme within the Economic and Monetary Union. This would reinforce the power of national economic stabilisers by spreading the cost of cyclical unemployment among Member States and by reinforcing both the EU’s cohesion and link with its citizens.
We must beef up the European Globalization Adjustment Fund! Equipping the European Globalization adjustment Fund with more financial means would help better support workers affected by layoffs.
We must complete the banking union! Ensuring the stability of the euro and the European financial sector is essential. The completion of the Banking Union, including a robust Deposit Guarantee Scheme and separation of risky investment banking from retail and banking activities would further increase the credibility of the Union in safeguarding citizens’ deposits and would also restore the flow of credit to the real economy.

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