Mr Juncker has forgotten the social dimension in the EMU paper

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

The Commission must counterbalance the one-sided Economic Governance approach and put solidarity back at the heart of it, writes Conny Reuter.

Conny Reuter is the Secretary General of SOLIDAR.

The question of the social dimension of the EMU and the implications the crisis had on our European social model are completely ignored by the paper presented last week at the EU Summit.

The words “social” or “solidarity” are absent from the Analytical Note on the Economic and Monetary Union (EMU) – as they seem to be in the thinking of these EU leaders.

Although European Commission President Jean-Claude Juncker was the President of the Eurogroup, when he co-authored a previous EMU paper in 2012, elements such as the creation of a shock-absorption function at EU level that would ensure a form of fiscal solidarity have completely disappeared from the new report.

That balancing measures are needed has been shown again by the report on Employment and Social Developments 2014 which again gave evidence that the economic and social divergences in and between European member states and regions are increasing and so are inequality and poverty.

On 12 February,  Juncker presented an Analytical Note to the Heads of state at the Informal European Council, taking stock of the current state of the Economic and Monetary Union (EMU) and outlining his vision for the further reform of the EMU. The paper serves as preparation of the next 4-Presidents-Report, foreseen for June 2015, which will replace the first 4-Presidents-Report presented by former Council President Van Rompuy in December 2012.

The paper, which has been co-authored by European Council President Donald Tusk, Eurogroup leader Jeroen Dijsselbloem and the head of the ECB Mario Draghi, clearly carries the signature of the current neo-liberal political approach to the EU’s economy and pretended solutions imposed on countries under the corrective arm of the Stability and Growth Pact: austerity, often sold as fiscal discipline, excessive market liberalisation and increased ‘flexibilisation’ of the labour market, which leads to lowering protection standards for workers and employees.

This approach has not worked but instead has driven whole populations of EU member states into distress. That is obvious, but the paper turns a blind eye on the fact. On the contrary, the authors of the paper want to prescribe even more of the above mentioned “medicine” to the EMU.

The question of the social dimension of the EMU and the implications the crisis had on our European social model are completely ignored by the paper. The words “social” or “solidarity” are absent – as they seem to be in the thinking of these EU leaders. Although Juncker, then President of the Eurogroup, was co-author of the 4-Presidents-Paper in 2012, elements such as the creation of a shock-absorption function at EU level that would ensure a form of fiscal solidarity have completely disappeared from the new report.

As shown again by the report on Employment and Social Developments 2014, the economic and social divergences in and between European member states and regions are increasing and so are inequality and poverty. 

The false assumption that competitiveness alone is the key element to boost growth and prosperity in the EU is being repeated throughout the paper. Instead of blaming some member states for an increase of their labour costs, thereby making their products more expensive and lowering their competitiveness like it is said in the paper, we need a holistic approach.

A monetary union with member states competing against each other by cutting wages and reducing social expenditure is not sustainable. A common fiscal capacity at EU level that takes away the burden of adjustment from the decrease of wages and working conditions, is therefore needed.

Besides competitiveness, the paper speaks of the “virtuous triangle” of structural reforms, investment and fiscal responsibility. The EU-internal competition for the lowest corporate tax rates and the granting of vast tax exemptions to big companies in various member states are clearly not fiscally responsible and need to be tackled by a common EU approach. The need for improving the single market cannot mean free mobility of goods and workers without establishing EU-wide minimum standards to safeguard our social model such as a minimum wages and income.

The EU likes to orient itself towards the US, especially when it comes to growth and free market competition. The effects of complete market liberalisation and the lack of comprehensive social protection systems are visible in the social picture of the US comprises of high rates of precarious employment, in-work-poverty and low levels of social security (health care, pensions etc.).

We need to counterbalance the one-sided Economic Governance approach and put solidarity back at the heart of it. The better use of the social indicators would be a step in the right direction.

Although the ECOFIN Council on 13 February acknowledged “the Commission’s intention to consider further the role of social indicators”, it also stresses that “the use of social indicators in the Macroeconomic Imbalance Procedure should remain limited to allowing for a broader understanding of social developments linked to the adjustment of macroeconomic imbalances.”

This lack of willingness to give the social dimension of the European Economic Governance more importance, like stipulated 2 years ago by former President Van Rompuy, but to rather purely focus on economic objectives and performances is not only counterproductive to reaching the headlines targets of the EU 2020 strategy (whose review has just been postponed with saying) such as an decrease of poverty and the creation of quality employment. Prescribed austerity measures infringe on the EU’s social objectives and fundamental rights, especially the EU’s horizontal social clause which in Art. 9 TFEU clearly states that all Union activities need to take into account the requirements linked to the promotion of high level of employment, adequate social protection and fight against social exclusion.

If some member states are prospering at the cost of other member states without sharing the burden of rebalancing our common currency, the EU leadership needs to intervene, otherwise it is a clear violation of Art. 3 TEU which states “[The Union] … shall promote economic, social and territorial cohesion, and solidarity among Member States.” The rule of Law also means sticking to the Treaties!

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