For a European Semester that addresses inequalities

The European Semester will play a key role in the implementation of the National Recovery Plans, to be submitted by mid-October. The reform of the Semester process was already in the pipeline but it is now essential to raise expectations and transform this coordination tool into a useful instrument able to grasp the changes affecting vital aspects of our daily life: health, education and work, writes Maria João Rodrigues and others.

Maria João Rodriguesis the president of FEP; László Andor is secretary-general of FEPS; Mikael Leyi is secretary-general of Solidar; Mojca Kleva Kekuš is president of Društva Progresiva; Kaisa Vatanen is director of the Kalevi Sorsa Foundation; Romano Bellissima is president of Fondazione Pietro Nenni.

The key recommendation we give is to start monitoring inequalities in the framework of the European Semester. At present, the statistics solely focus on absolute poverty and that does not offer information about the trends affecting the European middle class.

Formulating country-specific recommendations improving the life of the “squeezed middle class” can only be done if the indices of the Semester are upgraded.

Monitoring work precariousness, households’ financial insecurities and access to key services like child and elderly care has to be part of the European toolkit for the coordination of the recovery.

Introduced exactly a decade ago, the European Semester process soon became the pivotal tool for economic coordination in Europe and in essence it epitomizes the way to steer an economic doctrine across the EU.

Initially anchored to the jointly agreed targets of the Europe 2020 Strategy, it soon abandoned the shared goals to focus on the priorities set by the Barroso Commission. It has been used, at least for the first few years, almost uniquely to serve the objective of fiscal consolidation.

There is no need here to stress how much that has compromised the ability of the European public sector to counteract the different socio-economic emergencies and fueled disaffection to the European project and to politics.

Indeed, the Semester has evolved and thanks to the political agenda and Social Scoreboard enshrined in the European Pillar of Social Rights, we have started to see Country Specific Recommendations promoting social investment and social dialogue.

Finally, green and climate concerns have become more central, for an Annual Growth Survey that now addresses Sustainability as the backbone of a Growth Strategy.

That is however not enough, particularly in view of the dire consequences of the pandemic; with 6 million new unemployed (Eurostat NewsRelease) and 20% of youth out of work due to COVID-19 (ILO Monitor), European Institutions need to go beyond the provision of funds.

The Next Generation EU and SURE are good novelties but we must dare to change the economic paradigm once for all. So that forward-looking investment, protection of incomes and quality in public services, such as health, are not the immediate response to a crisis but the norm: the goal of the European public sector.

The EU is able to be a beacon of wellbeing and prosperity for this continent and the European Semester is the focal policy through which such a new course shall be established.

In line with the European Parliament Report on ‘Combating Inequalities as a lever to boost job creation and growth’ we also believe that “inequalities threaten the future of the European project, erode its legitimacy and can damage trust in the EU as an engine of social progress”.

All too often, Europe has prioritised macroeconomic stability and failed to understand that social stability and cohesion are essential for economic and political stability. It is no longer possible to ignore the distributional effects of macroeconomic policy and EU recommendations.

There is by now overwhelming evidence that socio-economic well-being is a prerequisite for sustainable and inclusive growth and political stability.

We have learned to admit that too much inequality is bad for growth; it is now time to go one step further and recognise that equality is the foundation of the type of growth we want for Europe and for the Europeans.

It is no surprise that the Covid-19 outbreak has not affected countries and communities evenly. The pandemic, as well as its economic consequences, jeopardise vulnerable groups and people experiencing poverty and social exclusion too.

A special effort is necessary if we do not want to see Europe emerging from this crisis more unequal than before.

To this end, we recommend a strong refocusing of the European Semester toward the fight against inequality; for a healthier society that delivers healthier economic outcomes.

The Policy Study on Inequalities and the European Semester offers an operational definition of inequality that could and should serve as a prism to rethink the European Semester.

The first consequence of this new approach would be to revise the indicators of the Semester to correctly monitor inequality. This would imply considering indicators of precarity, job and financial insecurity, and access to opportunities – such as childcare and social or health services.

A second consequence would be to start using the European Semester framework to steer the other side of national public finances, not the expenditure, but the revenue side.

Personal income taxation, corporate taxation, wealth and inheritance taxes and environmental taxes are instead central mechanisms to address inequality and secure opportunities for all.

As the authors explain, by expanding the focus from poverty to inequality, from the bottom of the income distribution to the whole distribution of incomes and opportunities, our Union would be better equipped to address the sharp decline in socio-economic conditions that the European middle class is facing.

The economic governance of the European Union has changed fast to adapt to the unexpected pandemic and its effects; now, a serious reflection has to be done to re-define the goals of the interventionism and coordination carried out by the EU via the European Semester.

If we are serious about leaving to the next generation of Europeans a more sustainable, socially equitable and economically stronger Union, a full-fledged strategy to fight inequalities is the way to go.