# IMMC.EESC-2022-06030-AC.ENG.xhtml.EESC-2022-06030-00-00-AC-TRA-EN.docx

| OPINION |
| --- |
| European Economic and Social Committee |
| Social Imbalances Procedure |
| _____________ |
| Social Imbalances Procedure

  (Exploratory opinion at the request of the Spanish Presidency) |
| |
| SOC/748 |
| |
| Rapporteur: Justyna Kalina OCHĘDZAN |
| |

OPINION

European Economic and Social Committee

Social Imbalances Procedure

_____________

Social Imbalances Procedure

  (Exploratory opinion at the request of the Spanish Presidency)

SOC/748

Rapporteur: Justyna Kalina OCHĘDZAN

EN

Request from the Spanish Presidency of the Council

| Request from the Spanish Presidency of the Council | Letter, 27/07/2022 |
| --- | --- |
| Legal basis | Article 304 of the Treaty on the Functioning of the European Union |
| Section responsible | Section for Employment, Social Affairs and Citizenship |
| Adopted in section | 03/04/2023 |
| Adopted at plenary | 27/04/2023 |
| Plenary session No | 578 |
| Outcome of vote
  (for/against/abstentions) | 234/7/5 |

Request from the Spanish Presidency of the Council

Letter, 27/07/2022

Letter, 27/07/2022

Legal basis

Legal basis

Article 304 of the Treaty on the Functioning of the European Union

Article 304 of the Treaty on the Functioning of the European Union

Section responsible

Section responsible

Section for Employment, Social Affairs and Citizenship

Section for Employment, Social Affairs and Citizenship

Adopted in section

Adopted in section

03/04/2023

03/04/2023

Adopted at plenary

Adopted at plenary

27/04/2023

27/04/2023

Plenary session No

Plenary session No

578

578

Outcome of vote
  (for/against/abstentions)

Outcome of vote
  (for/against/abstentions)

234/7/5

234/7/5

1.Conclusions and recommendations

1.

Conclusions and recommendations

1.1The EESC believes that the European Union and the Member States should develop in an economically, socially and environmentally sustainable way in order to achieve upward convergence in these three areas, with a high level of respect for human rights. Developing these areas simultaneously poses a number of challenges.

1.1

The EESC believes that the European Union and the Member States should develop in an economically, socially and environmentally sustainable way in order to achieve upward convergence in these three areas, with a high level of respect for human rights. Developing these areas simultaneously poses a number of challenges.

1.2The EESC notes that in a context of multiple crises and potential future crises, it is necessary to rethink the EU social governance toolbox to achieve upward social convergence and reduce inequalities.

1.2

The EESC notes that in a context of multiple crises and potential future crises, it is necessary to rethink the EU social governance toolbox to achieve upward social convergence and reduce inequalities.

1.3Multiple crises and their long-term effects are putting upward social convergence at risk in the EU, with fiscal and macroeconomic governance and environmental governance being more developed and better coordinated than social governance. The EESC perceives the Social Imbalance Procedure (SIP) as an opportunity to improve the coordination of national efforts to achieve upward social convergence. It should also lead to better use of the current governance architecture in the EU.

1.3

Multiple crises and their long-term effects are putting upward social convergence at risk in the EU, with fiscal and macroeconomic governance and environmental governance being more developed and better coordinated than social governance. The EESC perceives the Social Imbalance Procedure (SIP) as an opportunity to improve the coordination of national efforts to achieve upward social convergence. It should also lead to better use of the current governance architecture in the EU.

1.4The EESC recommends implementing the SIP and further developing it as part of the EU and Member States' integrated policy coordination system under the European Semester. It is important that the SIP complements existing monitoring processes and tools, and adds clear added value in terms of facilitating upward social convergence.

1.4

The EESC recommends implementing the SIP and further developing it as part of the EU and Member States' integrated policy coordination system under the European Semester. It is important that the SIP complements existing monitoring processes and tools, and adds clear added value in terms of facilitating upward social convergence.

1.5The best way to implement the SIP is a step-by-step approach that, whenever appropriate, builds on and is embedded in existing procedures and systems for monitoring social outcomes based on the European Pillar of Social Rights and its Action Plan.

1.5

The best way to implement the SIP is a step-by-step approach that, whenever appropriate, builds on and is embedded in existing procedures and systems for monitoring social outcomes based on the European Pillar of Social Rights and its Action Plan.

1.6The EESC proposes that social imbalances be defined as the critical situations identified by the social scoreboard and clear deviations from the path towards achieving the EPSR Action Plan targets. The quality of the methodology for measuring social outcomes should be improved so that full account can be taken of the EPSR principles and multi-year trends.

1.6

The EESC proposes that social imbalances be defined as the critical situations identified by the social scoreboard and clear deviations from the path towards achieving the EPSR Action Plan targets. The quality of the methodology for measuring social outcomes should be improved so that full account can be taken of the EPSR principles and multi-year trends.

1.7The EESC recommends that the SIP be integrated into the European Semester, throughout its different phases. The Commission and the Council should use the Joint Employment Report, the Country Reports and ad hoc in-depth reviews to identify and address the social imbalances. The country-specific recommendations, in a separate point in the preamble and in the recommendations themselves, should address the social imbalances described in the country report. The recommendations should encourage Member States to implement specific reforms which, according to the Commission's analysis and to Member States', national social partners' and civil society organisations' assessments, are most likely to improve the situation in the areas identified as critical. In response, after consultation with social partners and civil society organisations, the Member State concerned should propose the initiatives and reforms to be implemented with a view to improving the critical situations identified. Such a plan could also include an assessment of the consistency between the initiatives included and the macro-economic and budgetary policies followed by the Member State in question, so as to ensure the right balance between the economic, social and budgetary dimensions.

1.7

The EESC recommends that the SIP be integrated into the European Semester, throughout its different phases. The Commission and the Council should use the Joint Employment Report, the Country Reports and ad hoc in-depth reviews to identify and address the social imbalances. The country-specific recommendations, in a separate point in the preamble and in the recommendations themselves, should address the social imbalances described in the country report. The recommendations should encourage Member States to implement specific reforms which, according to the Commission's analysis and to Member States', national social partners' and civil society organisations' assessments, are most likely to improve the situation in the areas identified as critical. In response, after consultation with social partners and civil society organisations, the Member State concerned should propose the initiatives and reforms to be implemented with a view to improving the critical situations identified. Such a plan could also include an assessment of the consistency between the initiatives included and the macro-economic and budgetary policies followed by the Member State in question, so as to ensure the right balance between the economic, social and budgetary dimensions.

1.8The European Commission and the Member States should consider making existing rules for funds allocation (including the ESIF, RRF and others) more flexible so that they can be quickly adapted to current societal challenges and critical situations identified in the implementation of the SIP.

2.General comments

2.1This opinion is a response to the Spanish Presidency's request for an exploratory opinion by the EESC on the Social Imbalances Procedure (SIP). The EESC's task is to answer the questions: (i) What does the EESC believe is the best way to develop the SIP as a specific mechanism for detecting and monitoring the growing social inequalities in the European Union? (ii) What is the best way to embed the SIP in the current institutional structure and schema of the European Semester while reducing the administrative burden caused by its possible introduction? (iii) How can the European Pillar of Social Rights be linked to the monitoring system resulting from the creation of the SIP? (iv) How can the current economic governance process be used to strengthen coherence and harmony between macroeconomic and social aspects of the European Semester?

2.2In order to achieve a just green and digital transition and to mitigate the negative impact of the COVID-19 pandemic, the European Union and its Member States should pay particular attention to the causes of social inequalities and aim to balance economic and social development, which favour social inclusion, on the basis of the European Pillar of Social Rights (EPSR)
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2.3At the Porto Social Summit in May 2021, Belgium and Spain proposed expanding the revised social scoreboard with an alert mechanism that could trigger follow-up actions and discussions at Commission and ministerial level, building on the approach to macroeconomic imbalances contained in the Alert Mechanism Report (AMR)
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2.4The discussion aiming to strengthen the social dimension of the European Semester by introducing a social imbalances procedure (SIP) continued in the EPSCO Council in October and December 2021, and the French Presidency included it in the debate and agenda for the first half of 2022. The conclusions of the discussions were mentioned at the EPSCO Council on June 2022.

2.5In the context of implementing the EPSR, the EU and Member States have agreed on an EPSR Action Plan with three headline targets and secondary targets. Each Member State also set its own targets in this respect. Additionally, implementation of the EPSR in Member States is monitored using the social scoreboard
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  methodology with headline and secondary indicators. On the basis of this monitoring, Member States' positions in relation to the average are determined in the fields covered by the indicators. This allows the areas of the EPSR that require action in specific countries (socially critical situations) to be identified.

2.6The European Semester
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  is the process of coordinating EU and Member States' policies on instruments for achieving economic, social and environmental objectives. The Semester also takes into account the EPSR, the plan for implementing it and the monitoring of social outcomes.

3.Towards upward social convergence

3.1The EESC believes that in a context of multiple crises, potential future crises as well as economic and social imbalances, it is necessary to rethink the EU social governance toolbox to achieve upward social convergence and reduce inequalities
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  . In 2022 more Europeans disagreed or strongly disagreed with the sentence that people get what they deserve in their country (37%) than agreed (35%)
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  .

3.2In the EESC's view, simultaneously achieving economic, social and environmental objectives as part of comprehensive upward convergence poses a major challenge. In recent years, procedures have been developed for fiscal and macroeconomic governance and for environmental governance to cut greenhouse gas emissions, as has coordination between them. The social dimension of EU governance lags behind when it comes to the development of these areas and coordination between them.

3.3At a time of crisis relating to energy, migration, war, climate and the post-COVID period, Europe needs strong economic and social leadership, both at EU and at Member State level. The EESC therefore recommends implementing the SIP as a monitoring and coordination mechanism, which would help to meet better social and economic objectives while contributing to social convergence across the EU.

3.4The European Commission and the Member States should consider making existing rules for funds allocation (including the ESIF, RRF and others) more flexible so that they can be quickly adapted to current societal challenges and critical situations identified, inter alia, in the implementation of the SIP. COVID-19, the war in Ukraine, cost of living crises and climate and migration crises all call for better national and, whenever appropriate, EU responses to the long-term effects of crises and new types of exclusion. The rising cost of living is currently the most pressing concern for 93% of Europeans, with poverty and social exclusion the most pressing concern for 82%
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  . Another Eurobarometer survey shows that 78% of Europeans believe that overall public spending on key social policies should increase
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  .

4.Replies to questions from the Spanish Presidency

4.1The EESC proposes that social imbalances be defined as the critical situations identified by the social scoreboard and clear deviations from the path to achieving the EPSR Action Plan targets. The quality of the methodology for measuring social outcomes should be improved so that full account can be taken of the EPSR principles and multi-year trends. As regards measuring the progress to achieve the EPSR Action Plan Targets, only reliable and comparable indicators should be considered.

4.2The EESC recommends implementing the SIP and further developing it as part of the EU and Member States' integrated policy coordination system under the European Semester. It is important that the SIP complements existing monitoring processes and tools, and adds clear added value in terms of facilitating upward social convergence. At the same time, unnecessary administrative burdens must be avoided to ensure a sense of ownership and commitment in the Member States.

4.3The SIP aims to improve coordination between the EU and the Member States in achieving upward social convergence in accordance with the EPSR principles. The EESC assumes that it has already been partly implemented within the framework of the EPSR Action Plan and its 2030 targets and the monitoring of social outcomes. However, the EESC is concerned that the achievement of these objectives will be hampered by the lack of social investment and reforms in those Member States identified as being in a critical social situation by the Social Scoreboard. These situations put the achievement of the EPSR Action Plan targets and upward social convergence at risk and should therefore be given particular attention within the SIP.

4.4The EESC believes that the SIP should be given the same importance as the SGP or MIP. The SIP can further improve what has already been achieved in social governance by making more effective use of existing processes and ways to measure social convergence and, where appropriate, developing new ones. The MIP and the SIP should be coordinated and not overlap.

4.5The EESC points out that the European Union and the Member States have different competences for shaping social policy on work, education and health and social protection, which are covered by the EPSR. The main competences and responsibilities in this area are with the Member States, understood as governments and local and regional authorities as well as various stakeholders such as trade unions, employers' organisations and civil society organisations. As a result of the division of competencies between the EU and the Member States, the European Union is undertaking many initiatives in these areas relating to coordination, regulation and finance, within the framework of cohesion policy and its social priorities.

4.6In the EESC's view, implementation of the SIP is possible in the current legal situation in the EU. It follows that the EU has important social tasks to carry out, and can do this through declarations (EPSR and Action Plan), recommendations, financial instruments (e.g. social conditionality and social priorities of cohesion policy) and coordination instruments (the European Semester and monitoring of social outcomes based on the EPSR). This approach takes into account specific competences at different levels as well as the role of the various stakeholders, i.e. employers' organisations, trade unions and civil society organisations. SIP can support policy-makers in their efforts to achieve upward social convergence and reduce inequalities. It should take into account the relevant social dimensions defined jointly by Member States and the various stakeholders.

4.7If properly linked to existing mechanisms, such as the European Semester and in particular the social scoreboard, the SIP can help build on existing achievements, i.e. the European Pillar of Social Rights Action Plan and the monitoring of social outcomes based on the EPSR.

4.8Taking the above conditions into account, the EESC considers the introduction of changes in the principles guiding the European Commission when preparing the joint employment report (JER), country reports (CR) and country-specific recommendations (CSR) within the Semester should be the first step in the development of the SIP.

4.9The joint employment report and the country reports should include a separate sub-chapter on social imbalances that put upward social convergence at risk, mentioning the areas identified as critical in the social scoreboard monitoring. This will therefore only apply to Member States where such areas have been identified.

4.10The EESC recommends that the SIP be integrated into the European Semester, throughout its different phases. The Commission and the Council should use the Joint Employment Report, the Country Reports, and ad hoc in-depth reviews to identify and address the social imbalances.

4.11The country-specific recommendations, in a separate point in the preamble and in the recommendations themselves, should address the social imbalances described in the country report. The recommendations should encourage Member States to implement specific reforms which, according to the Commission's analysis and Member States', national social partners' and civil society organisations' assessments, are most likely to improve the situation in the areas identified as critical. In response, the Member State concerned should propose, after consultation with social partners and civil society organisations, the initiatives and reforms to be implemented with a view to improving critical situations identified. Such plan for initiatives and reforms could also include an assessment of the consistency between the initiatives included and the macro-economic and budgetary policies followed by the Member State in question, so as to ensure the right balance between the economic, social and budgetary dimensions.

4.12The EU should implement new and better-financed instruments for communicating the SIP and the Semester recommendations directly to the populations of the Member States to create transparency and impact on the situations in the Member States.

4.13To prevent downward convergence, Member States subject to the excessive deficit procedure (EDP) should be required to adopt a reform and investment plan in the areas identified as critical. In this situation, the Member States in question should have the right to renegotiate the spending plans of other funds, including where appropriate the RRF, in agreement with the Commission.

4.14The first step in the development of the SIP, as proposed above, has the least possible burden in terms of additional analytical and administrative work for both the EU and the Member States. It does not propose additional reporting for all Member States, nor does it add new monitoring and reporting procedures to those already in place.

4.15The current social scoreboard monitoring system developed for the EPSR has already been established and is based on a complex methodology for interpreting a large set of indicators. They correspond to the main areas of the EPSR. Progress in achieving the EPSR Action Plan targets is also monitored. The SIP should be embedded in the existing European Semester process and make use of existing indicators (Social Scoreboard).

4.16In the next step in the implementation of the SIP, the scope of measurement and indicators should be developed in line with the definition of social imbalances adopted in the context of upward social convergence.

4.17The future analyses and consultations on the SIP should include answers as to the extent to which social scoreboard monitoring indicators correspond to all EPSR principles and the extent to which, and how, the areas identified as critical can hamper upward social convergence.

4.18The overall condition of Member States, including in the economic dimension, has a fundamental impact on the scale and dynamics of the social problems affecting their inhabitants and thus also upward social convergence. If good social performance requires good economic performance, then the coordination mechanisms that guarantee the latter (SGP and MIP) will be crucial for the former. The first step proposed by the EESC in the development of the SIP takes into account the above approach, which underpins the logic of fiscal and macroeconomic governance within the EU.

5.Challenges and priorities for SIP development

5.1Further development of the SIP as part of the EU and Member States' integrated policy coordination system under the European Semester, but also other EU instruments, should be analysed and discussed in greater depth by the Commission, the Council, Member States, social partners and civil society organisations, with the aim of rolling it out in parallel with the reform of fiscal and macroeconomic governance
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5.2The political, administrative and economic feasibility of implementing and developing the SIP should be examined in more detail. Care should be taken here not to duplicate procedures, so as to keeping bureaucracy to a minimum, and to genuinely involving the social partners and civil society organisations in this process.

5.3The EESC stresses that the role of EPSCO in the SIP should be enhanced in order to strengthen the political endorsement of the results of the instrument. The participation of EPSCO could be ensured through the adoption of Council conclusions on the SIP at the end of the process.

5.4The EESC stresses that it is crucial, for the implementation of the SIP, to draw specific practical conclusions from the monitoring of social outcomes and the extent to which the EU's social objectives have been achieved in the Member States.

(a)The first conclusion concerns coordination between fiscal and macroeconomic governance and the SIP. Member States subject to excessive deficit procedures and/or at risk of macroeconomic imbalances, and with critical areas in the social scoreboard and which have deviated from the path towards meeting social targets should receive a clear signal that the EU is supporting social reforms and investments in identified critical social areas. It is at the discretion of each Member State to propose the most appropriate solutions and approaches for remedying critical areas.

(b)The second practical conclusion concerns the application of the first conclusion in the context of the European Semester
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  . The European Commission should include, in a separate sub-section of the Country Reports, an analysis of social imbalances based on monitoring of social outcomes and progress towards social objectives. It should also take them into account in the country-specific recommendations, both in the preamble and in the recommendations themselves.

The role of EPSCO, social partners and civil society organisations should be secured in this process.

Brussels, 27 April 2023

Oliver RöpkeThe president of the European Economic and Social Committee

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