At European level, March is an important month, with policymakers taking crucial decisions in many key areas. As a part of the reform of the Stability and Growth Pact (economic governance package), ministers of finance agreed that the net cost of implementing pension reform would be considered before taking a decision to subject a country to the excessive deficit procedure.
All four Visegrad countries were among nine member states that tabled this request in October 2010. Do you think this is a good motivation to speed up pension reforms in the EU?
Well, in the European Union there has been a wide-ranging pension debate based on the Commission's Green Paper and there will be a White Paper as well which we already started to work on in order to address a variety of issues about the pension system. It is about the adequacy, the sustainability but also the safety of pensions. This particular point which was made by nine member states including the Visegrad states addressed one aspect – which is sustainability and its connection with the Stability and Growth Pact - how the deficit should be calculated.
Unfortunately, this initiative comes at a time when Europe really has to take care of financial stability in the wake of the so-called euro crisis last year. We all experience very tough constraints.
Nevertheless, I believe that we also have to give a kind of stimulus so that member states, even if the dominant pension scheme is the so-called pay-as-you-go state pension, develop supplementary private pillars because that can be more tailor-made, it can respond to individual carriers better, and just to have several of pillars can also enhance the stability of the whole system.
Moving ahead with the proposals to secure adequate pension systems for the long-term is one of your priorities during your mandate. When you were presenting the above mentioned Green Paper on EU pension reform in July, you said that the European way of life in its current form would have to change, but you also claimed that the Commission was not going to push member states to immediately increase the average retiring age.
Then German Chancellor Angela Merkel and French President Nicolas Sarkozy came up with the Competitiveness Pact, later renamed the Pact for the Euro, which obliges countries to align the effective retirement age with life expectancy. How do you perceive this development of the discussion?
The Commission in its Annual Growth Survey in January already said that there should be a link between the statutory retirement age and the life expectancy in the given country. This is not going to lead us to a uniform retirement age in the European Union because there is such diversity in the demographic reality of the various member states.
In this Green Paper we underline the importance of the demographic trends in driving the pension reforms in various member states and, for example, Sweden has a much higher life expectancy for men than the European average, while Latvia has much lower.
It is impossible to suggest that it should be the same, but when member states consider their own reforms and they arrive at the conclusion that there is a need to adjust the retirement age, they should take into account the life expectancy in the given country.
Do you think that countries have now realised that if they don't address the demographic crisis, they will go bankrupt?
The pension system will be less sustainable in the long run and the imbalances in the social security system can contribute to an overall problem of the public finances, that is the way I would put it.
After the Green Paper, the next step is the White Paper on pensions you mentioned, scheduled for the third quarter of 2011. At this point, could you sketch the basic outline of this White Paper?
It is too early to say. It will arrive at conclusions in a way to suggest certain types of solution to typical problems. There is one typical problem, for example, which is in the countries where the pension system is predominantly private, like the UK and the Netherlands. There is a need for a specific focus on how to regulate better the pension funds. There is ongoing work on that.
We will have to take the initiative on the aspects of the pension systems which are connected with European labour market integration. That will lead to an initiative on the portability of pensions which will be, I believe, an important initiative of the Commission. It is also connected with the Single Market Act, because it helps the European labour market and the European single market to work better.
But we will also have to address some aspects more deeply in the White Paper compared to the Green Paper, and the gender dimension is one of those aspects. It was not really dealt with in depth because we concentrated on adequate, sustainable and safe pensions. But it is true that there is an important gender dimension here, the gender gap in terms of the amount of pensions which is in a way a consequence of the gender wage gap, but there are additional elements, too, so we will have to address this also in the White Paper.
This year the member states will start the discussion on the EU financial framework from 2014. The Commission is due to present its proposal in summer. The important tool to tackle the social issues in the EU is the ESF, but its effectiveness was often questioned. What is its future in the new budget? The main challenges at the moment are unemployment, especially youth unemployment, and also poverty. Can we expect a stronger ESF to help the EU to react?
Since the first minute when I entered office last year I have been working for the reinforcement of the European Social Fund – it means in a way overall capacity, but also the elimination of the weaknesses which have been exposed in previous years. Indeed, we have to learn some of the lessons about how well or with how much difficulty some countries used the ESF, and there are various conclusions to draw.
It is for example important to try to simplify the use of the ESF but it should also be connected with better identification of the mission – what the ESF is exactly for. Since we have more employment and social problems now than before the crisis, I believe that we have to make room for more social inclusion measures with ESF funding.
I also believe that there should be a capacity of the ESF to do more financial engineering in terms of leveraging other funds, non-EU funds, potentially private funds to help the policies we have in the EU. Simply because the challenges grew enormously while financial capacity will remain limited.
But having said that, I also believe that we can not continue with the trend which has been there in the last 20 years. 20 years ago the ESF was about 40 % of the Cohesion Funds altogether and now it is just about 22%. This cannot continue if we want to maintain the credibility of the Europe 2020 strategy, which aims to increase the level of employment in the European Union significantly and reduce poverty also at the same time.
The Commission claims that Roma issues are European issues. There are many projects and programmes aimed at integrating Roma, but they are being criticised for having only short-term effects and not solving anything in the long term. Is there any innovative approach planned to address Roma issues with a sustainable impact?
The Commission had a task force between September and December last year which analysed how the EU funds have been used and drew some conclusions. Indeed the experience is mixed.
There are some good projects but there are great difficulties, partly because there was no proper coordination between the various objectives of Roma integration policy and how they were funded, and also because of their temporary nature, especially in terms of employment but also in the area of housing.
There were many cases when EU funds were used but the result was not there or the result was just temporary. This also requires some simplification in order to make the ESF more accessible for the marginalised social groups including the Roma. We need to open up to new directions, like for example supporting early childhood education.
This is absolutely key, because without tackling early child education and strengthening the participation of Roma kids in schools we cannot break the vicious cycle of Roma exclusion, which is exclusion from the labour market, as well in terms of the lack of employment as the lack of employability.
During your first year as a commissioner for employment and social affairs, the Europe 2020 strategy and its seven flagship initiatives were launched. Member states are due to submit national reform programs with their national targets in April. Do you think member states are ambitious enough when setting national targets in the area of tackling unemployment and fighting poverty and social exclusion?
The picture is uneven. There are some member states that have been sufficiently ambitious and some that have been more cautious, and there are a few who are at this moment reluctant. We work with all of them because we have to ensure that those who are ambitious should also be realistic, those who have been too realistic should be made a little bit more ambitious and we also work with those few countries from where we have not yet received the targets.
We have to make sure that if we add up all the undertakings from the individual member states it will result in the overall European objective of a 75% employment rate and at least 20 million people lifted out of poverty. At this moment we are not yet there but I hope that this very direct engagement and dialogue with the member state governments will result in a good solution.
What are the means to persuade countries to set more ambitious targets?
There are obviously means and arguments. One of them is that the European Social Fund in the future will be fully aligned with the Europe 2020 objectives so where there is a serious commitment we will have a great capacity to finance the efforts of the governments.
But we also have to convince the governments, if necessary, that these are objectives that will eventually benefit the countries themselves. To have more employment and less unemployment will reduce the risk in a country, which is a social risk and very often can just hold unpredictable risks in terms of potential social exclusion if these issues are not tackled in time.
And by investing in the labour force in the employable population to extend the active working life, which we want specifically from the ESF also by using the European Year of Active Ageing and connect the general campaign on employment policies. With the focusing of the fund we will help them for example in a way that they can then reduce public spending on socially vulnerable groups, if those people find their way onto the labour market and into society in general.
Slovakia has one of the highest unemployment rates in the euro zone. You are an economist and you were a member of the board of directors of the European Bank for Reconstruction and Developmen,t where you represented Slovakia among other countries. You are familiar with our economic realities. What do you think are the best measures to tackle high unemployment in Slovakia?
What is specifically high in Slovakia is the youth unemployment rate. Unfortunately Slovakia is one of the few countries where the youth unemployment rate is more than one third of the age group under 25 years. And this is a very severe problem. It shows a disconnection between the education system and the training system on the one hand, and the labour market on the other hand.
And that is why a key measure should be to improve the performance and the capacity of the education and training systems which provide a foundation for the entry into the labour market for youth. It needs probably further development and a change of the substance of what is being taught, perhaps more entrepreneurship, more ICT, more foreign languages. It is all very important in a modern integrated European economy.
But it is also important that the way the labour market is organised is developed further, it may require the introduction new types of contracts. What we advocate, for example, in case the labour market is too segmented and excludes certain groups, especially the young, to introduce so-called open-ended contracts, which help young people to build their up their rights gradually and they will not need to interrupt their employment relation with an employer if they want to move forward towards a more permanent job after they started somewhere.
There are a variety of measures since the problem is large. It is not one type of solution or one policy which will help, but several policies.