# IMMC.EESC-2017-05429-AC.ENG.xhtml.EESC-2017-05429-00-01-AC-TRA-EN.docx

EN

European Economic and Social Committee

European Economic and Social Committee

SC/50

SC/50

Annual Growth Survey 2018

Annual Growth Survey 2018

OPINION


  European Economic and Social Committee


  Communication from the Commission to the European Parliament, the Council, the European Central Bank, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank
  Annual Growth Survey 2018

  [COM(2017) 690]

OPINION

European Economic and Social Committee

Communication from the Commission to the European Parliament, the Council, the European Central Bank, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank
  Annual Growth Survey 2018

[COM(2017) 690]

Rapporteur: Dimitris DIMITRIADIS

Rapporteur: Dimitris DIMITRIADIS

Consultation

| Consultation | European Commission, 18/01/2018 |
| --- | --- |
| Legal basis | Article 304 of the Treaty on the Functioning of the European Union |
| | |
| Subcommittee responsible | Subcommittee on the Annual Growth Survey 2018 |
| Adopted at plenary | 14/02/2018 |
| Plenary session No | 532 |
| Outcome of vote

  (for/against/abstentions) | 194/2/3 |

Consultation

European Commission, 18/01/2018

European Commission, 18/01/2018

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

Subcommittee responsible

Subcommittee responsible

Subcommittee on the Annual Growth Survey 2018

Subcommittee on the Annual Growth Survey 2018

Adopted at plenary

Adopted at plenary

14/02/2018

14/02/2018

Plenary session No

Plenary session No

532

532

Outcome of vote

  (for/against/abstentions)

Outcome of vote

(for/against/abstentions)

194/2/3

194/2/3

1.Conclusions and recommendations

1.

Conclusions and recommendations

1.1The EESC considers the framework of the European Semester to be of strategic importance and it is committed to continuing to contribute in the most effective way possible. At the same time the EESC reiterates the need to increase the role of organised civil society in the European Semester cycle and specifically in the preparation of the Annual Growth Survey (AGS). The EESC can bring added value to this process. In addition, the European Semester should involve in particular the social partners and the national Economic and Social Councils in a more structured manner.

1.1

The EESC considers the framework of the European Semester to be of strategic importance and it is committed to continuing to contribute in the most effective way possible. At the same time the EESC reiterates the need to increase the role of organised civil society in the European Semester cycle and specifically in the preparation of the Annual Growth Survey (AGS). The EESC can bring added value to this process. In addition, the European Semester should involve in particular the social partners and the national Economic and Social Councils in a more structured manner.

1.2The EESC recognises that the social dimension of the European Semester has been increased with the introduction of social indicators (Social Scoreboard) in the Joint Employment Report
  1
  . Nevertheless, the Committee is convinced that the focus on increasing investment, structural reforms and strengthening macroeconomic balance
  2
  , declared by the Commission, needs to be accompanied by extending the Semester cycle to other areas "beyond GDP" indicators (social, environmental and sustainability targets). The EESC is in favour of making the Semester support the European Social Pillar so that it becomes a tool of better living and working conditions for citizens. The EESC would like to see the EPSR objectives mainstreamed into the policies and
     decisions taken.

1.2

The EESC recognises that the social dimension of the European Semester has been increased with the introduction of social indicators (Social Scoreboard) in the Joint Employment Report

1

. Nevertheless, the Committee is convinced that the focus on increasing investment, structural reforms and strengthening macroeconomic balance

2

, declared by the Commission, needs to be accompanied by extending the Semester cycle to other areas "beyond GDP" indicators (social, environmental and sustainability targets). The EESC is in favour of making the Semester support the European Social Pillar so that it becomes a tool of better living and working conditions for citizens. The EESC would like to see the EPSR objectives mainstreamed into the policies and

1.3The EESC supports the view that the key to increasing long-term growth is investment, innovation and knowledge, education and lifelong learning, particularly in green technologies and the circular economy but also in more traditional sectors. The Committee emphasises that private investment rates will be high only if proper motivation is created, sound domestic demand is ensured and a favourable investment climate is maintained.

1.4The Committee points out that public investment is relatively low and is lagging behind. It insists on the need to increase public investment in order to safeguard the fragile growth, which includes boosting social investment in measures aimed at developing human capital through education and training and at better public services, care infrastructure, innovation and social cohesion across different countries and regions. The EESC calls, once again, to this end, for approval of the adoption of what is referred to as the "golden rule of public investment" to stimulate public investment.

1.5The EESC takes note of the establishment of the Structural Reform Support Programme
  3
  . While it is seen as a much needed tool which could help Member States carry out institutional, administrative and structural reforms by making resources available for capacity-building and technical assistance, such reforms should in the view of the EESC not end in mere labour market deregulation and product market liberalisation. At the same time, the Committee warns that, because of the relatively small budget and the lack of experience of cooperation with Member States in implementing structural reforms, the programme may not deliver the expected results.

1.6The Committee shares the Commission's view that economically and socially reasonable and well-balanced structural reforms in well-functioning labour markets and product markets are essential for the adaptation of the European economy to long-term structural changes and possible economic and environmental shocks. However, the EESC insists on a non-systemic approach, and reforms should be carried out only when necessary and with respect for national law, social dialogue and collective agreements.

1.7The EESC welcomes the greater emphasis placed by the Commission in the AGS on the composition and efficiency of public spending, as well as on responsible fiscal policy and appropriate and efficient spending. The Committee believes that reforms in public administration targeted at e-government initiatives, efficiency of public procurement
  4
  and more transparency of public funds can achieve a lot of cost saving and increase public investment. These measures should be one of the first choices when it comes to budgetary consolidation.

1.8The EESC stresses that efforts to mitigate the negative effects of ageing challenge Member States' budgets. The importance of training and re-training, the preventive role played by the health sector, the efficiency of spending for the health sector and the need to safeguard the efficiency of the social protection system should be emphasised once again.

2.General comments

2.1The EESC reiterates its views regarding the fact that the AGS does not cover other relevant policy areas such as environmental policy or other relevant issues such as the quality of employment. The EESC considers it is possible to expand the Semester to ensure that EU macroeconomic policies are sustainable, not only economically and socially, but also environmentally. The Semester must address the economic, social and environmental challenges on the same footing.

2.2In this regard, the European Semester should include a comprehensive system of indicators which factor in social and environmental ramifications. The introduction of the Social Scoreboard in the 2018 AGS is a first step in this direction, which should be supplemented with indicators relating to wage developments and the coverage rate of collective bargaining where possible. The current macroeconomic and social analysis could be complemented by adding resource and energy efficiency indicators, progress on national climate and energy targets and changes in national environmental tax ratios.

2.3The AGS should place stronger emphasis on long term demographic issues, particularly in the context of population ageing and, worker migration. At this juncture when the immediate threats to economic and fiscal stability appear to be averted, there is an urgent need to focus on these longer-term issues.

2.4The EESC has discussed that the European Semester should be further developed to ensure coordination of the implementation of the Sustainable Development Goals
  5
  .

2.5The development of the European Semester should take into consideration the post-Brexit period and assume that it will be essential to revise financial capacity upwards.

2.6Additionally, the European Semester will need to be adapted to a future post-2020 strategy. This strategy should be based on the priorities of the Juncker Commission as well as the 2030 targets, based on the Europe 2020 strategy and its objectives (which are still relevant for the coming years) and the Paris Climate Agreement.

3.Specific comments

3.1Investment

3.1.1Productivity growth is one of the principal sources of improvement in economic well-being. It is of crucial importance for the EU to maintain a high and sustainable rate of productivity growth, given the fact that the EU is now lagging behind its major competitors, particularly in crucial industry branches and the development of low-carbon technology. A continuously improving economy is a crucial basis for financing social security and healthcare benefits at the level desired by European citizens. Indeed, advancing well-being, cohesion and social justice is fully compatible with economic and productivity growth
  6
  .

3.1.2The key to productivity growth is investment, quality of employment, innovation and knowledge. With less capital investment, less new equipment is provided to workers, and, ceteris paribus, future productivity growth rates and levels are lower. This is especially true in times when labour force growth slows because of demographic changes and declining birth-rates as is the case in Europe. For work to become more productive, investments must be made in education, lifelong learning and training, in improving working conditions, in basic services such as childcare and out-of-school care, in modernised plants, equipment, and productive techniques, in new discoveries and innovations and in transportation, communications, and other infrastructure. Additionally, it must be taken into consideration that large-scale public investment, including social investment, operates on a far longer timescale. Therefore, giving further consideration to planning requirements should help increase public investment. To this end, the EESC reiterates its call to approve the adoption of what is referred to as the "golden rule of public investment" to stimulate public investment.

3.1.3In this regard the EESC considers it essential that EU and national budget opportunities should be used to full effect and that cohesion policy should remain the EU's main investment tool. The Committee emphasises that its governance and its interactions with the European Semester should be improved to further increase its contribution to sustainable and inclusive development. The Structural Funds can be used more than at present to support education and training in needed skills in close cooperation with social partners. In this sense the Committee agrees with the Commission's opinion that EFSI is "far from reaching its full potential in boosting human capital development".

3.1.4For modernising plants and production technologies a proper business climate and social environment need to be created in order for companies to be motivated to invest. The EESC believes that it is extremely important for Member States to develop stronger and more efficient institutions capable of fighting corruption and delivering on the rule of law. Otherwise, investment rates cannot be high.

3.1.5The EESC reiterates the need for investments in Just Transition measures accompanying transformative investments, notably in energy and manufacturing sectors. Such investments, for which an adequate financing fund should be available, should also support workers from regions transitioning from high- to low-carbon industries, which need to be well managed to contribute to the goals of decent work for all, social inclusion and the eradication of poverty.

3.1.6Besides the favourable climate, it is also important for investment that well-functioning financial markets exist in Europe. The EESC is concerned that the integration of financial markets is still lagging behind. Further development of the Banking Union and the Capital Markets Union (CMU) should proceed without any delay.

3.1.7The EESC agrees that it is vitally important to establish a CMU and other framework conditions, so as to improve funding conditions, spread risk and make credit more accessible for all companies and to put the principle of equal opportunities into practice.

3.1.8The conditions for access to finance are still very unequal and access to finance is still very difficult and a major challenge for SMEs, small family and traditional businesses, start-ups and scale-ups. This is why the Committee welcomes measures such as the Pan-European Venture Capital Fund of Funds and calls on the Commission, in cooperation with local, regional and national authorities, to take further measures to leverage private and public investment and promote differentiation of funding sources.

3.1.9The development of the CMU – expansion of venture funds, private equity markets – including informal markets, business angels and crowdfunding, has improved access to venture capital for particular categories of SMEs. However, a very large proportion of SMEs are unlikely to be able to benefit much from these. Even for innovative companies, start-ups and mid-size companies, the new instruments are not easy to use and considerable differences persist between countries due to the level of development of the local capital markets and the lack of proper legislation. Therefore, attention should be paid to creating the relevant conditions for bank funding for these companies.

3.1.10The EESC calls on the Commission and the Member States to put all possible effort into removing the bottlenecks to investment and to creating a favourable investment climate. Besides the problems mentioned above, examples include the Regulation on venture capital funds and efforts to develop the Social Entrepreneurship Fund, a "second chance" for failing entrepreneurs, the improvement of insolvency proceedings and the implementation of preventive restructuring schemes. Stimulating the involvement of banks and improving their operational efficiency should form one pillar of efforts to boost investment activity.

3.1.11The Committee has already emphasised in previous opinions that the completion of the Energy Union, the Digital Single Market Strategy and the Action Plan for the Circular Economy will open up ideal opportunities for investment. Additionally, new opportunities for green investment combating climate change need to be considered. Increased dynamism in these areas also depends on international trade agreements, some of which may be adversely affected by changing attitudes in global politics and how accessible markets are as a result.

3.2Pursuing structural reforms

3.2.1The EESC considers that structural reforms should be economically and socially well-balanced. The structural reforms to be carried out first should be those that promote productivity growth, but also those that enhance job security and the social protection system, while respecting collective bargaining and the autonomy of social partners. Structural reforms are essential for building integrity and transparency in public administration and for delivering high quality services to citizens and businesses.

3.2.2The EESC takes note of the initiatives proposed by the Commission in the Roadmap for deepening Europe's Economic and Monetary Union, and is currently drawing up a specific opinion on this package of initiatives
  7
  . The Committee will continue contributing to the EU leaders' discussion on the future development of the EMU as part of the debate on the future of Europe. However the Committee regrets that in the AGS most of the problems in enhancing convergence and inclusion of Member States concern almost entirely euro area countries. Convergence of countries which are not members of the Eurozone should be of equal concern and effort. A new strategy and action plan need to be promoted to ensure that lower productivity Member States can catch up by developing their own quality investment growth. Also, measures should be taken to foster the recovery of specific areas with revitalisation projects incorporating quality growth and investment.

3.2.3The social partners play a particularly important role in shaping, developing and implementing economically and socially reasonable and well-balanced structural reforms. This role must be rooted in a new start for social dialogue – one that is based on the current form of dialogue but with enhanced mechanisms for participation. Responsible social engagement depends a lot on clear and direct communication, and the EESC welcomes the intention announced by the Commission to involve the social partners in a deep and systematic way in the European semester cycle.

3.2.4The EESC agrees with the European Parliament's view that a well-functioning labour market is very important for a positive economic situation to develop
  8
  . This should be one of the priorities of the reforms. However, the EESC also believes that the social dimension of the European single market, including security systems, needs to be strengthened and the EPSR should be the basis for it.

3.2.5When addressing the structural labour market challenges facing Member States, the Commission should take into account the different stages of the Member States in terms of economic development and the proposed measures should be productive, inclusive, acceptable and implementable in their societies.

3.2.6Quality education and training must be accessible for everybody as a basic right. However, today it is of a vital importance for the development of the European economy to be able to rely on a well-educated, updated and skilful labour force. There are many signals from employers' organisations that the most significant factor hampering an increase of production and job creation is the lack of proper skills demanded by businesses. Trade unions, on the other hand, urgently demand the appropriate framework for all to remain updated with skills needed during their career (e.g. right to paid training leave) – challenging the responsibility of all: individuals, business (depending on the size of the business) and the public. All these have to be addressed without delay with proper measures suggested in the AGS in line with the New Skills Agenda for Europe
  9
  .

3.2.7According to the Joint Employment Report, "... wage growth remains subdued in most countries ... during the 2014-2016 period real wage growth lagged behind productivity growth. This is a long-term trend: in the EU, from 2000 to 2016, real productivity per person employed grew by 14.3%, while real compensation per employee grew by 10.2%"
  10
  . While in most countries wage growth rates are below productivity growth, in other countries they are higher. This heterogeneity gives leads the EESC to emphasise that real wage growth, including minimum wages where these exist, should be in line with productivity growth. In the EESC's view, a fair redistribution of income and wealth from productivity gains should increase equality and have a positive impact on domestic and global demand within the EU. This domestic demand needs to be stimulated as an essential condition for sustaining growth, overcoming the crisis and boosting employment. Increasing wages, in particular lower wages, is one of the most important instruments for achieving these objectives in European economy and society
  11
  .

3.2.8The EESC has emphasised many times the need for support for SMEs,
  12
  which – in addition to the workers and employees concerned – suffer the most from market failures while having great potential for contributing to the European economy. For this reason, the Committee welcomes the intention expressed by the Commission to support the dissemination of new technologies among SMEs. At the same time it is important that the Commission also takes into account the problems of access to finance for SMEs, their heterogeneity as a group and the need to support small traditional and family businesses
  13
  .

3.2.9Implementing a system of incentives that creates a level playing field for competition, provides more support for growth and reduces the opportunities for abuse should be an integral part of the reform process. Particular attention should be paid to a better regulatory and administrative framework. The EESC shares the view expressed in the AGS that a single market in the defence sector could bring a lot of benefits for the European citizens, but also reiterates its view that EU budgetary funds could not be used to finance military instruments as well as operative actions.

3.2.10The EESC underlines the need to continue boosting Europe's competitiveness in a broad sense, much broader than mere company competitiveness. Europe's global economic stature needs to be reinforced and measures need to be taken to make it more prepared to compete with its global competitors.

3.3Responsible fiscal policies

3.3.1The observed recovery of the European economy is helping to improve the state of public finances, which were in distress during and after the financial and economic crisis. At the same time low interest rates and economic growth provide good opportunities for decreasing excessive debt levels where they exist. The government debt-to-GDP ratio is extremely unevenly distributed across the EU and this fact exposes countries with high levels of debt burdens to possible interest rate risk, leading to high funding costs if interest rates start to increase when monetary policy accommodation is reduced.

3.3.2Given this background the EESC appreciates the fact that one of the pillars on which the Commission builds its economic and social policy is the pillar of responsible fiscal policies. However, the Committee wishes to emphasise that a responsible government spending policy is not always measured just by an accounting result as deficit, but by the impact it has had on the real economy and society at large.

3.3.3The EESC fully supports the view that fiscal policy needs to be tailored to country-specific circumstances. The eternal dilemma between the need to secure long-term control over deficit and debt levels and "growth-friendly" public spending is always difficult to resolve and the balance may change according to specific country situations. The EESC is in favour of flexibility, particularly when this makes possible public investment to boost sectors that are also of long-term benefit (education, training and healthcare) or investment aimed at creating the conditions for economic transition to a sustainable economy tackling climate change or for supporting measures for companies suffering from market failures.

3.3.4The EESC calls strongly for a constant, well-coordinated fight against tax evasion and tax avoidance, to secure fair taxation of multinational companies and the digital economy. The EESC also points to the importance of combating tax evasion through greater transparency
  14
  , along with all forms of unfair tax competition between Member States
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  .

3.4European Pillar of Social Rights

3.4.1The EESC welcomes the interinstitutional consensus reached in the proclamation of the EPSR at the Gothenburg Social Summit in November 2017.

3.4.2The EPSR is primarily a political declaration, including legislative and non-legislative proposals. The unanimous support received by the Member States is an important signal encouraging its application. As a framework for both legislative and non-legislative initiatives, the EPSR should help to foster reforms and increase the focus on social progress within the European Semester.

3.4.3The EESC believes that the EPSR should be accompanied by a roadmap to detail its implementation and support achievement of its objectives at national level
  16
  .

3.4.4The EESC asks for a Semester that fully integrates the social dimension. The EESC would like to see the EPSR objectives mainstreamed into the policies and decisions taken.

3.4.5As the EESC has previously highlighted
  17
  , to ensure its future the EU needs to combine a sound economic basis with a strong social dimension. The EU needs to focus on providing balanced and inclusive economic growth, social progress and environmental integrity, which can lead to the increased well-being of citizens.

3.4.6The Commission's Autumn Package incorporates a Social Scoreboard as a new tool within the European Semester to monitor the implementation of the EPSR, and this should be part of the analysis made in the forthcoming country reports and country-specific recommendations.

Brussels, 14 February 2018

Georges DASSIS,

The president of the European Economic and Social Committee

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