Opinion of the European Economic and Social Committee on the communication from the Commission to the European Parliament, the European Council, the Council, the European Central Bank, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank: Annual Sustainable Growth Strategy 2021

(COM(2020) 575 final)

(additional opinion)

(2022/C 105/27)

Rapporteur: Gonçalo LOBO XAVIER

Committee Bureau decision 26.4.2021 Legal basis Rule 32(1) of the Rules of Procedure and Rule 29(a) of the Implementing Provisions of the Rules of Procedure Section responsible Economic and Monetary Union and Economic and Social Cohesion Adoption in section 5.10.2021 Adoption at plenary 20.10.2021 Plenary session No 564 Outcome of vote (for/against/abstentions) 168/0/1

1. Conclusions and recommendations

1.1. The European Economic and Social Committee (EESC) is still concerned about the fact that there is insufficient clarity in most Member States on the National Recovery and Resilience Plans (NRRP) governance systems and the distribution of responsibilities for their implementation between the central, regional and local levels. Nor, of course, is there sufficient clarity on the appropriate mechanisms for involving Civil Society Organisations (CSOs) and social partners in the implementation, monitoring and adjustment phases of the NRRPs. This was mentioned in the EESC February resolution ( 1 ) and the situation remains the same in spite of the Commission's efforts. The EESC strongly calls for more scrutiny on these crucial aspects for the Union's recovery.

1.2. The EESC draws attention to the need to measure the progress of the implementation of the RRPs. Good monitoring indicators are needed, as they will be the compass for the direction for how to continue to develop and recover. Member States need to react properly to this challenge and courage is needed to make citizens aware of the huge difficulties ahead.

1.3. The EESC believes strongly in the importance of the next Semester cycle for the Union as a key instrument for implementing the Recovery and Resilience Facility (RRF). There are two kinds of tools in the National Plans: the Member States can implement and make radical structural changes on the one hand with a dual transition and on the other hand with investment and reforms for citizens (family, workers, entrepreneurs, etc.) that are suffering more directly from this crisis. For the EESC, both these options must be taken into consideration. They require different tools and sometimes these cannot coincide. Recovery is needed to make the economic system resilient.

1.4. The COVID-19 crisis has highlighted some of Europe’s most dangerous weaknesses: the lack of a coordination policy for industry and dependence on other economic areas for many products and services. The EESC understands that it is difficult to change habits and policies, and also that it takes a number of years for the real effects of new policies to be felt. However, time is precious if the Union wants to change and recover. The increase in raw material prices (and difficulties in its distribution), the lack of semiconductors and high energy prices also show the Union's dependence on critical assets. The EESC wants to see real action from all Member States on investment in education, infrastructure and industrial policy that can raise employment and encourage citizens to boost European industry.

1.5. The EESC supports investments in high-quality education, lifelong learning and R&D, which are essential to drive and complement the economic and social changes that NextGenerationEU promotes. It is clear that investment that strengthens the health systems and public health policies of societies hit hard by the COVID-19 pandemic is essential. It must be combined with a really strong industrial policy that can promote the production and development of products and services in Europe in order to avoid a complete dependence on other economic areas.

1.6. The EESC believes that this is the time for a thorough and deep reform of the pact. A strong recommendation is needed in this new revised Semester and a new pact that includes some binding proceedings and rules for the consultations of CSOs and local authorities. This calls for action. It is time to formulate binding rules for involvement in all stages from preparation to implementation to avoid structural problems in the future.

1.7. In the EESC’s view, a brief analysis of the main priorities of the RRPs shows a clear focus on the goals of the Green Deal. For the EESC, this is obviously important but there are concerns regarding the implementation and the impact of some measures that seem to be not very well founded. Citizens, workers and companies must be supported in making this transition and the targets must be defined clearly and reasonably to avoid a situation in which we have impressive political rhetoric but bad practical implementation, with tremendous side effects ‘below the surface’.

1.8. The EESC calls attention to the fact that one of the most valuable outputs of the Semester process has been ignored through the years. In fact, Country Specific Recommendations are an opportunity for improvement, and are based on consistent data. The MS should re-evaluate their attitude towards this tool, particularly after the COVID-19 crisis and in light of the opportunity that the RRF brings to implement structural reforms (on education, on fiscal policies, on labour market, on social protection under the Social Pillar and the Porto Summit recommendations) that are essential for most of the MS. The EESC strongly recommends a change of attitude from the MS perspective, and Civil Society Organisations should be very active and act as supervisors in the process.

1.9. The EESC also calls attention to the fund absorption capacity of certain Member States, bearing in mind their ‘track record’. Half of the 2014-2020 Multiannual Financial Framework (MFF) structural funds had not been used by end-2020, and should be spent in the years to come. The Commission's experience and data should provide warnings for the MS and help them better reallocate the funds in terms of distribution and timeline. It is very important to warn the MS that their political choices must not undermine the recovery process and some measures need to be taken to avoid problems in the system. This includes not only the need to avoid bureaucracy, but also the need to provide the right political support for efficiency.

1.10. The EESC believes that the unavoidable digitalisation process, especially in connection with public services in health or social systems, will eliminate a number of jobs. This digitalisation may also create problems to elderly citizens with less ability to deal with the digitalisation process. The EESC calls attention to the need to design programmes that may really support citizens and facilitate the transition. Members states must allocate investment funds to reskill people affected by this change, and political courage is needed to face the challenge, as is good communication with citizens to clarify policies and goals.

1.11. The EESC welcomes the ‘Recovery and Resilience Scoreboard’ initiative. The EESC believes that this will be a very important tool that is able to boost the investment process and bring about mechanisms that could be of crucial importance for the Union. The EESC also supports the timeline proposed, with expected adoption by the Commission by the end of September ( 2 ) . However, the EESC insists on CSOs’ participation also in this process. It is not a question of visibility. It is a question of vigilance, and the EESC also calls attention to the need to empower and prepare CSOs for this challenge. It is useless to call for action by the CSOs if they are not prepared or do not have the resources to be active. This represents a huge responsibility and opportunity for the CSOs.

2. General comments

2.1. The EESC welcomes the launch of the Commission communication on Economic policy coordination in 2021: overcoming COVID-19, supporting the recovery and modernising our economy ( 3 ) . The world is facing a major crisis that seems to undermine all the recovery plans and strategies. The resilience and the strength of Europe must, however, prevail if we are to sustain our Union.

2.2. It is a fact that the European Union has taken unprecedented action to fight the COVID-19 pandemic, cushion the impact of the crisis and put our economy on a path of robust, sustainable and inclusive growth. However, there is still a lot of uncertainty about the effectiveness of the health policies as the crisis has had a tremendous impact on citizens’ confidence, essential for the economic and social recovery. The goal of having more than 70 % of the European population vaccinated will have a tremendous impact on people's confidence and the EESC salutes the coordination effected between Member States to achieve this goal. The EESC also calls attention to the need to clarify to the citizens the fact that these achievements are important but caution is still needed because these measures might not be sufficient to completely stop the health crisis.

2.3. The opportunity that has been given to Member States to present the National Recovery and Resilience Plans is a huge factor that must be a priority. The EESC strongly believes that civil society organisations can play a critical role in the implementation and monitoring of these plans. This must be clear to all Member States. In the words of the EESC’s Resolution: ‘The EESC considers that all reforms in the restructuring process must be based on the principles underpinning the EU: the protection of human and social rights, democratic values and the rule of law. Investments under the RRF must aim to unlock the full potential of the single market, strengthen the EU's economic resilience, meet the United Nations Sustainable Development Goals (SDGs), create a circular economy, achieve climate neutrality in the EU by 2050 at the latest, encourage innovation and modernisation related to the digitalisation of the economy and society, and secure effective implementation of the European Pillar of Social Rights to ensure social cohesion, eradicate poverty and reduce inequalities’ ( 4 )

2.4. NextGenerationEU, worth EUR 750 billion (500 billion applied now), is a key tool for the EU to foster investment and recovery in order to emerge stronger and more resilient from the current crisis.

2.5. The EESC believes that the European Pillar of Social Rights Action Plan sets out concrete actions to strengthen the social dimension across all policies of the Union and will help ensure an inclusive recovery.

2.6. The EESC also affirms its position that environmental sustainability, productivity, equitable and fair distribution and macroeconomic stability remain the guiding principles of the EU’s economic agenda. In spite of all the challenges, the Green Deal remains a long-term priority and Europe must take the opportunity to lead on this issue.

2.7. The EESC strongly believes that ensuring an effective policy coordination under the European Semester remains crucial to set the EU economy on a stronger, sustainable and inclusive growth path after the pandemic. This has been stated by the EESC in the past months and remains a priority.

2.8. The EESC is of the view that overall, the participation of organised civil society is still low in the Member States. Organisations have been informed and in many cases heard; however, this has brought about only a few tangible results. In a majority of Member States, there have been no effective consultations leading to significant modifications to the initial government proposals, with just a few exceptions.

3. Specific comments

3.1. Thanks to the measures taken at EU and national level, the impact of the pandemic on European labour markets has been contained. However, there are still different views and situations within the Union. The EESC believes that differentiated approaches must be taken in order to ensure the recovery of the Member States that are suffering from the crisis more than others.

3.2. The EESC agrees with the view that economic policy needs to remain supportive throughout 2021 and 2022. Member States are facing a huge battle that is far from over. The Union must prevail and realise that the recovery plans will take time to have an effect and that resilience is needed in order to get results. The EESC calls emphatically for short-term and medium-term strategies to properly address the negative effects of the crisis and have a strong and sustainable growth through the years.

3.3. There is an interesting trend for Europe’s citizens to save more. This trend should also be a positive opportunity to boost a combination of private and public investment that can make a difference to the recovery of the economy and social conditions. The EESC calls for specific action in this matter and believes that the Commission should encourage all Member States to adopt a strong fiscal policy. Creativity is needed to adopt strategies to turn these savings into smart investment and the responsibility of this must be shared with governments, stakeholders and financial institutions.

3.4. The EESC, under the active support and work of the European Semester Group (ESG) intends to work on its next resolution during the next months, with contributions from our 27 ESG 3-member delegations set up for this purpose, and follow the participation of civil society in the implementing process while analysing the policy content from a civil society perspective. For the moment, only a small improvement has been registered, mainly as regards formal information meetings, with very limited possibilities to influence the plans.

3.5. CSOs are more positive about the prospects of governments using the funds to drive investment than to boost growth-enhancing reforms, with many members feeling that their countries’ national recovery and resilience plans lack ambition or commitment regarding reforms while others criticise the lack of additional investment that was not already envisaged before the COVID-19 crisis.

3.6. Europe faced a huge difficulty with the COVID-19 crisis and it showed a dangerous weakness of the Union: the lack of a coordination policy for industry and dependence on other economic areas for many products and services. This fact needs to be addressed in a coordinated way to facilitate recovery. A proper industrial policy is needed more than ever and to time to act is now. The increase in raw material prices also shows the Union’s dependence on critical assets. The EESC wants to see real action from all Member States on investment in education, infrastructure and industrial policy that can raise employment and encourage citizens to boost European industry.

3.7. A large majority of the CSOs (71 %) consider that their involvement in the design of their countries’ national recovery and resilience plans ranged from somewhat insufficient all the way to extremely limited.

3.8. The EESC believes that the digitalisation process is fundamental to boost economy and society but there is a real need for Member States to design programmes and allocate resources to eliminate barriers to this process, especially for some parts of the population — elderly and less skilled people. The need to develop IT programmes with impact aligned with software that can benefit all citizens is therefore a priority. Digitalisation yes. But not at any price.

3.9. The EESC is very satisfied with the Commission’s initiative for a ‘Recovery and Resilience Scoreboard’. It is an important step to monitor the implementation of the RRPs and the EESC thinks it is an opportunity to boost the investment process and bring about mechanisms that could be of crucial importance for the Union. Once again, CSOs can play a critical role on this process and are ready to cooperate.

4. The recovery plans and the different approaches

4.1. The EESC believes that, as far as the existing framework is concerned, policy regarding Member States' sustainable and inclusive growth and fiscal balances must be a priority. The need for adaptation to a new phase — once the danger to health caused by the COVID-19 pandemic has been overcome — is obvious. There should be an alternative to excessive imbalance as the only prospect following the enormous growth in debt and deficit in the Member States. The EESC believes that this is the time for a radical and deep reform of the fiscal governance framework and strongly warns against a return to the ‘old’ fiscal rules. We need a strong recommendation for this new revised Semester and a new pact including some binding proceedings and rules for the consultation of CSOs and local authorities and this calls for action. It is time to formulate binding rules for involvement in all stages, from preparation to implementation and Member States need to look at new targets for deficit reduction with a focus on growth and also on governance.

4.2. There is an urgent need to modernise the fiscal and economic framework, to implement a prosperity-focused stance and to implement a golden rule. The Commission also is now looking at the spending side but also — very rightly — at the revenue side. The EESC recommends shifting labour taxation towards environmental taxes while also taking care of a regressive approach and not burdening low income households. The EESC also demands the combatting of aggressive tax planning and fraud, because that could undermine the economic and fiscal recovery of Member States and the EU as a whole. A smart approach is needed here and also greater convergence in the Union to move forward. Monetary and fiscal policy, maybe with progressive environmental taxes, with gradual tax cuts must also be an option. It is clear that tax competition with third countries instead of within the EU can make a difference.

4.3. The EESC stresses the fact that, in addition to the pandemic, there is pressure on the price of raw materials. Great care is needed in addressing this. The EESC believes in fair competition and supports the need for a level playing field, but points out that the situation is becoming serious, risking severe damage to the entire Union. Prices of raw material have increased by between 30 % and 120 % in recent months and the pressure continues.

4.4. The NRRPs reveal different views from the Member States regarding the recovery of each economy and each social situation. This also shows the inequalities in the Member States. The EESC asks for more coordinated policies capable of strengthening the Union. Cooperation between Member States is needed and ‘good practices’ could be shared in order to avoid missteps. Sectors such as tourism and manufacturing industry, among others, have suffered the most and getting them to another level should be a priority. This will be very important in creating jobs and adapting the workforce to the real needs of the economy and to involve the CSOs in the implementation process.

4.5. The EESC is concerned by the fact that the Country Specific Recommendations made by the Commission had been largely ignored by certain Member States until now, leading to a scepticism about a possible future change of attitude. In addition, the absorption capacity of certain Member States and the transformative effects of RRF investments is something to be questioned, and so there are doubts as to their potential efficiency and effectiveness. The EESC insists that close monitoring is therefore needed.

4.6. The EESC considers that the implementation of the NRRPs should not just be a tick-box exercise but ought to take place in the real spirit of this instrument: the role of the CSOs should be recognised and consultations should happen in public forums and not behind closed doors.

4.7. The COVID-19 crisis highlighted and exacerbated longstanding gaps in our societies and the most vulnerable often have been hit the most. The incidence of COVID-19 infections was highest for the most deprived people, and several parts of society often bear the brunt of the impact of the measures to fight the crisis. As a consequence of the crisis, low-skilled and/or young people disproportionately saw the largest fall in employment. In addition, education has been seriously disrupted for many. There are exacerbating risks of inequalities regarding the less skilled groups of citizens.

5. The single market as a strength of the European Way of Life

5.1. The COVID-19 crisis has been felt in all Member States but the impact has differed. A coordinated approach on vaccination enabled the Union to achieve very good results. The goal of having 70 % of the Union’s population vaccinated meant a huge task and the EU response was very positive. In spite of some problems (to be expected for such a project), this was a success and a good example of the ‘peace project’ that the Union has represented since its beginning.

5.2. More than ever, the single market and its integration must be a priority and political disputes should be avoided. Political rhetoric encountered in some MS that undermines the single market has been contradicted by the facts: only with a strong Union and a coordinated approach has it been possible to negotiate and draft the RRPs at such short notice. Communication is essential to promote European values and the single market is part of the process. All Europe's citizens should benefit from the internal market, so that they can be proud of Europe's ability to respond to the crisis, in spite of all the setbacks created by the challenge of mounting a coordinated response to the crisis.

5.3. The EESC understands that Member States took different approaches regarding the health situation, but it also underlines the fact that the coordination and good practices should be promoted more after the vaccination process. The Union must take advantage of its assets — specifically the free movement of citizens, products and the movement of capital. The EESC wants to support this freedom without undermining the Member States’ health systems and this is only possible with coordination of the single market. The Member States have shown several times in history that this is possible. The time for a good response is now.

5.4. The EESC stands for the Single Market and its opportunities combined with a strong social market that is essential and a ‘mark’ of the Union. This is an achievement that must be protected.

6. Civil society organisations on the recovery plans

6.1. The EESC insists that the involvement of CSOs is crucial for the recovery especially as we have to admit that the emergency recovery measures, both at national and EU level, could be made permanent.

6.2. CSOs support high-quality investments in education, lifelong learning and R&D that are essential to drive and complement the economic and social changes that NextGenerationEU promotes, as well as investments that strengthen the health systems and public health policies of societies that have been hit hard by the COVID-19 pandemic. More than ever, the organisations ‘on the ground’ have the ability and responsibility to indicate and propose ways to face the real challenges and Member States must have the courage to involve them in the decision-making process. The EESC asks for this kind of approach mainly because of the experience and knowledge gathered by decades of service to different causes with very good results.

6.3. In times of crisis the voice of CSOs is more important than ever, not only because of these organisations’ experience, but mainly because they benefit from a direct contact with reality that is essential to monitor and implement policies that have a real impact.

Brussels, 20 October 2021. The President of the European Economic and Social Committee Christa SCHWENG

(1) Involvement of Organised Civil Society in the National Recovery and Resilience Plans — What works and what does not? (OJ C 155, 30.4.2021, p. 1).

(2) Recovery and Resilience Scoreboard & common indicators, draft delegated act: Recovery and resilience scoreboard — common indicators and detailed elements.

(3) COM(2021) 500 final, 2.6.2021, Economic policy coordination in 2021: overcoming COVID-19, supporting the recovery and modernising our economy.

(4) Involvement of Organised Civil Society in the National Recovery and Resilience Plans — What works and what does not? (OJ C 155, 30.4.2021, p. 1).