Social safety net key to EU recovery, say leaders

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This article is part of our special report European Business Summit.

EU leaders meeting in Brussels today (20 March) are rejecting pressure from the US to increase stimulus packages, and instead placing their hopes of economic recovery on European welfare and social spending.

As unemployment soars and social unrest continues to escalate across the EU – France yesterday experienced its second major strike in seven weeks – draft conclusions of the EU summit seen by EURACTIV argue that “building on solidarity and allowing social protection systems to play their full role as automatic stabilizers” will pave the way to European recovery. 

Leaders’ faith in the European model’s ability to sustain member states throughout the worst of the crisis were outlined by European Commission President José Manuel Barroso yesterday (19 March), comparing the situation of Europeans recently made jobless with that of their American counterparts. 

In Europe, he argued, welfare nets ensure that many jobless will keep half their old salaries, thus maintaining their ability to survive and consume, whereas in the US, no such security exists, leaving thousands to survive on food stamps. 

The summit conclusions also argue that in the current crisis, the renewed Lisbon Strategy remains the best way to foster sustainable growth and jobs. In other words, while stimulus packages offer short-term relief, they will only be effective if they are rooted within the long-term context of exisitng European job creation blueprints. 

Despite claims from leading US economists that Europe’s current response is “entirely inadequate” and the continent needs a “large and sustained stimulus package” (EURACTIV 19/03/09), leaders are holding firm, claiming that their stimulus package, originally calculated at 1-2 per cent of European GDP, will now be as high as 3.3% (over 400 bn euros), once automatic stabilisers – such as extra, recession-driven social security spending – are included. 

“Although it will take time for the positive effects to work their way through the economy, the size of the fiscal effort will generate new investments, boost demand, create jobs and help the EU move to a low-carbon economy,” read the draft conclusions. 

The EU will hold an employment summit on 7 May in Prague to assess the success of the recovery package and to identify additional innovative ways of restructuring the Union’s labour market for the future. 

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