EN Official Journal of the European Union C 133/81

Opinion of the European Economic and Social Committee on the ‘Communication from the Commission: Annual Growth Survey 2013’

COM(2012) 750 final

2013/C 133/15

Rapporteur-general: Mr Xavier VERBOVEN

On 19 December 2012 the Commission decided to consult the European Economic and Social Committee, under Article 304 of the Treaty on the Functioning of the European Union, on the

Communication from the Commission - Annual Growth Survey 2013

COM(2012) 750 final.

On 13 November 2012 the Committee Bureau instructed the Europe 2020 Steering Committee to prepare the Committee's work on the subject.

Given the urgent nature of the work, the European Economic and Social Committee appointed Mr Xavier VERBOVEN as rapporteur-general at its 487th plenary session, held on 13 and 14 February 2013 (meeting of 13 February 2013), and adopted the following opinion by 180 votes to 4 with 7 abstentions.

1. Conclusions and recommendations

1.1 The Committee draws attention to the fact that this year's AGS is issued in a context of bleak economic and employment prospects but also at a time of new measures and commitments, such as the Compact for Growth and Jobs or the major overhaul of the economic governance of the EU. The Committee urges that the Compact for Growth and Jobs and the measures to break the link between banks and sovereigns including a Banking Union and the ECB's new programme (Outright Monetary Transactions) are speedily and in a balanced way implemented as they will be an essential part of the path to recovery and restoring confidence.

1.2 While there are doubts about the EU's ability to reach the Europe 2020 goals on time, the EESC regrets that the 2013 AGS fails to provide analysis of the causes of the lack of progress towards these goals.

1.3 Considering the dire state of the economy, the negative consequences on social cohesion, the high and rising unemployment and the increase in poverty, the Committee warns against the continuation of the current policy of austerity and of the severe consequences of a deep and prolonged recession, which can structurally weaken the economy and jeopardise its transition towards an environmentally sustainable model. Similar concerns about the state of Europe and about the impact of austerity on economic growth are expressed by many other international policy actors.

1.4 Regarding the idea of ‘growth-friendly’ consolidation, the Committee has already called in the past (1) for consolidating public finances over a period as flexible as possible in order not to break growth dynamics as well as for a ‘smart’ equilibrium between revenue and expenditure, supply and demand. The Committee also reiterates its warning about the danger of undermining systems of public services and collective solidarity, in order not to weaken social insurance against the big risks in society (unemployment, sickness, ageing) and to avoid increasing of precautionary savings.

1.5 Regarding the concept of ‘differentiated’ consolidation, and the proposal that Member States facing financial turmoil should even adopt ‘a rapid pace of fiscal adjustment’, while other Member States would be allowed to let their automatic stabilizers play, the Committee doubts this type of policy mix would work. This can still have an outspoken negative impact on the euro zone as a whole and, in particular on those Member States that are already going through a deep, austerity-induced recession. At the same time, it is clear that in emerging from this crisis, some economies have a much greater effort to make in restoring stability and growth than others.

1.6 The Committee is concerned about unbalanced economic policies and about the heavy weight that has been given to austerity. The Committee considers that fiscal consolidation to correct severe fiscal imbalances needs a longer-term time frame and urges to balance the time frame of fiscal consolidation against a substantially strengthened and tangible Compact for Growth and Jobs.

1.7 The 2013 AGS seems to justify fiscal consolidation by the need for confidence, in particular the confidence of financial markets. While the EESC recognises the importance of access to credit and of fixing the financial markets sector, the Committee wishes to draw attention to the fact that the confidence of households and businesses is equally important and that a climate of confidence cannot exist if companies are worried about demand and people are worried about their jobs, wages or social security. Financial markets confidence and consumer and producer confidence must go hand in hand.

1.8 The Committee calls for decisive action to restore growth, jobs and competitiveness to the European economy and invites the current Presidency to lead a determined growth agenda. There is a need for ambitious growth and employment measures and an investment policy focusing on both a re-launch in the short run and a structural transformation of the European economy to respond to the fundamental challenges of sustainability, more and better jobs, upwards social convergence and innovation based competitiveness.

1.9 Sequencing of policies to re-launch the economy with policies tightening the fiscal reins is of the utmost importance (2). The new policy approach for the future of Europe needs to be based on several principles. Rather than having Member States compete against each other, there needs to be a highly integrated European supranational and multiannual approach. Market forces, in particular financial markets, need to be checked and steered by democratically decided policy priorities. Finance needs to be robust but also fair and distributed equitably. Stronger regions need to support weaker regions, assisting the latter to catch up in terms of a more productive, innovative and strong economy. In return, Member States that find themselves in a position to generate additional tax revenue, need to use this to reduce debt loads.

1.10 The Committee welcomes the Compact for Growth and Jobs and invites the Commission and the European Council to rapidly implement it and to go further, transforming it into a vast European investment programme. The EESC therefore reiterates its calls for a strengthened budget in line with the ambitions of the EU and the challenges it is facing, a fast agreement on the next Multiannual Financial Framework and giving a strong role to the EIB, which works on high employment projects (e.g. projects for SMEs, key infrastructure, energy and climate).

1.11 The EESC also restates the importance of cohesion policy for the achievement of convergence across the EU.

1.12 In re-launching growth, the Committee reiterates the potential of the single market and the need for innovation for the competitiveness of the European economy. It highlights the important role of businesses, in particular the SMEs, of entrepreneurship and business creation, of social enterprises and cooperatives in the process of recovery.

1.13 Given the link between the financial, economic, social and environmental aspects of the crisis, the EESC considers that the greening of the economy and of the European semester should receive more attention and calls for further involvement of civil society in those areas.

1.14 Regarding employment and upgrading of skills, the EESC restates the need for investing in education, training and life-long learning (including on-the-job training, the dual systems of apprenticeships), addressing the skills bottlenecks and mismatches. The Committee reiterates its calls for facilitating labour market participation, improving public employment services, stepping up active labour market measures and supporting entrepreneurship and self-employment. Every effort must be made to mobilise investment with a high employment impact. The EESC refers to its recent opinions on those topics and is currently preparing specific opinions on the Youth Employment Package (3) and on the future Guidelines for the employment policies of the Member States (4). The Committee observes that the 2013 AGS promotes flexibility in the labour market without much or any consideration of the dimension of security. It recalls its past opinions referring to the idea that a balance between flexibility and security needs to be struck and that, regarding flexicurity, there is a need for ‘a strong and vital social dialogue where the social partners actively participate and are able to negotiate, influence and take responsibility’ (5). Regarding wages, the Committee is concerned about the danger of structural reforms triggering a downwards competition between Member States. It reiterates that reforms regarding wage setting require negotiations at the national level between the social partners and asks to the Commission to clarify its view on wages, inflation and productivity.

1.15 The Committee considers that more attention should be paid to the question of fairness and social justice. The costs and benefits of reforms need to be fairly shared by all (workers, households, businesses).

1.16 The Committee calls for additional efforts to ensure the effectiveness of social protection systems in countering the effects of the crisis, to promote social inclusion and to implement an ‘Active inclusion strategy’ to ensure an inclusive labour market and to tackle poverty.

1.17 Finally, the EESC reiterates the need to improve the democratic accountability and legitimacy of the various processes of the European Semester and the coordination of national economic policies. Social and civil dialogue is essential to properly shaping and implementing policies and reforms. Therefore, close collaboration and concertation is needed with social partners. The Committee calls for a stronger role for the social partners and organised civil society at EU level and especially at national level. More involvement from the social partners should result in greater implementation.

2. Introduction

2.1 The Commission's Annual Growth Survey (AGS) 2013 communication, which opens the European Semester, sets out what the Commission believes should be the overall budgetary, economic and social priorities for 2013. The European semester process aims to improve the coordination of economic and social policies in Europe so that the core objectives of the Europe 2020 strategy for smart, sustainable and inclusive growth can be effectively achieved.

2.2 The Annual Growth Survey should feed into national economic and budgetary decisions, which Member States will set out in Stability and Convergence Programmes and National Reform Programmes.

2.3 The Commission considered, given the need to sustain recovery and restore confidence that the five priorities identified in 2012 remain valid for 2013: pursuing differentiated, growth-friendly fiscal consolidation; restoring normal lending to the economy; promoting growth and competitiveness for today and tomorrow; tackling unemployment and the social consequences of the crisis; and modernising public administration.

2.4 The present draft opinion provides analysis, comments and proposals on the AGS 2013: — Part 3 contains some general comments related to the context in which this year's AGS is published. — Part 4 proposes specific comments and proposals: given that Europe does not seem to be on the right track to reach the Europe 2020 objectives, the opinion raises the issue of the choice of fiscal austerity policy and its consequences on the economy, jobs and social cohesion. The opinion considers then that priority should now be given to the real economy, to growth and employment measures. It calls upon European policy makers, in particular in view of the March 2013 European Council, to shift their policy approach and re-centre policies on a Europe-driven investment approach, focusing on a relaunch of the economy, jobs and the challenge of sustainable development. Finally, the opinion reiterates the importance of the implication of organised civil society and social partners at both EU and national level policy making.

3. General comments

3.1 This year's AGS was published in a difficult context, with bleak employment and growth forecasts. The Committee shares the AGS's concerns that the duration of the crisis has not helped Member States to press ahead with meeting their targets on employment, R&D, climate/energy, education and the fight against poverty and there is growing scepticism about the ability of the EU to achieve those goals. The Committee also notes that the AGS 2013 is written against a background of unprecedented developments. On one side, a Compact for Growth and Jobs (6) was adopted by the European Council of June 2012. On the other side, fundamental changes were brought to the architecture of governance of the Union (in particular enhanced mutual surveillance of fiscal policies), resulting from the inability of the existing structure to deal with the economic crisis and prevent contagion, which threatens the very existence of the euro and the European Union and has prolonged the recession causing high unemployment. The Committee urges that these measures are speedily and in a balanced way implemented as they will be an essential part of the path to recovery and restoring the confidence of investors, business and consumers.

3.2 The EESC notes the recent publication of two important documents: ‘Towards a Genuine Economic and Monetary Union’ (7) and ‘Blueprint for a deep and genuine economic and monetary union’ (8), on which the Committee is currently preparing an opinion. The Committee welcomed the affirmation of the imperative to break the link between banks and sovereigns and the first moves taken towards a Banking Union (9). There was a commitment to do ‘what is necessary’ to ensure financial stability and the ECB has committed itself to undertaking significant actions to calm Europe's distressed sovereign debt markets. A Banking Union would contribute to an equal access to credit for households and business in all parts of the EU and would enable the single market to regain competitiveness in order to meet the Europe 2020 objectives.

4. Specific comments and proposals

4.1 Europe is not on the right track to attain the Europe 2020 objectives and policy makers urgently need to recognise this

4.1.1 The Committee observes with regret that, apart from a brief footnote reference to a Eurostat report (10), the Commission's AGS is largely silent on the Europe 2020 strategy. The communication simply states that ‘overall, Europe is lagging behind its objectives’. However, there is no adequate analysis in the AGS of the exact causes of the lack of progress in meeting the Europe 2020 goals and the document does not even raise the question whether current policy choices are responsible for moving the EU further away from the Europe 2020 strategy. The Committee calls for a radical review of the Europe 2020 process and reallocation of structural funds to meet these targets, thereby rebalancing competitiveness and austerity policies with growth, jobs and social policies.

4.1.2 The Committee expresses its concerns about the steady decline of the employment rate of the population aged between 20 and 64 years. This rate has been falling from 70.3 % in 2008 to 68.6 % in 2011, while according to the Europe 2020 target, 75 % of the population aged 20-64 should be employed. In absolute terms, Europe has lost 5 million jobs over this period (11). The effects of this are showing up in rising unemployment rates, now reaching 10.7 % in the EU 27 and even 11.8 % in the euro zone (12). The crisis has brought high unemployment and in combination with the austerity cuts in public social expenditure, has added from 2009 to 2011 an extra 5.9 million to the 113.8 million people at risk of poverty and social exclusion in the EU (24.2 % of the population) (13). It is hard to see how the Europe 2020 goals relating to employment and to lifting 20 million people out of poverty can be reached if these trends were to continue.

4.1.3 The European economy, in stark contrast with other major economies of the world, has fallen back into recession in 2012, with economic forecasts predicting extremely weak growth in 2013 and an uncertain but equally weak recovery in 2014. This implies that, if the orientation of fiscal policy is unchanged and additional policies to boost growth and employment are not implemented, the unemployment and social situation is set to worsen further.

4.1.4 The Committee observes that similar concerns on the state of Europe are expressed by many other international policy actors. The ILO has warned that the eurozone could lose another 4.5 million jobs without a concerted shift away from the strategy of austerity (14). The United Nations' global outlook on the ‘World economic situation and prospects 2013 (15)’ warns that the 2012 recession would continue and would intensify deep into 2015 (16) if Greece, Italy, Portugal and Spain were to take even deeper fiscal cuts in 2013. Together with the United States ‘fiscal cliff’ and the hard landing of China, the European strategy of fiscal consolidation is seen as a risk to global economic activity. Even the IMF, in its World Economic Outlook (17) has deep doubts and has admitted that the impact of austerity on economic growth has been seriously underestimated and has called into question the magnitude of fiscal multipliers that have been used.

4.1.5 The Committee warns policy makers in Europe that a prolonged recession can structurally weaken the economy as well as compromise the transition to another environmental and energy model. Long term unemployment can lead to loss of skills, disillusion, discrimination in new hiring and exit of the labour market, thus having a long lasting adverse structural impact on the productivity and the growth potential. Lack of public and private investment (firms having poor demand perspectives) can affect the economy's growth potential since the incorporation of technical progress and innovation is deficient. To counter this, it is then urgent to review macro-economic policy-making and promote reform measures such as active labour market policies, investment incentives and social inclusion policies.

Differentiated and growth friendly fiscal consolidation

4.1.6 Whereas the AGS 2013 does recognise that fiscal consolidation can have a short term adverse impact on the economy, it immediately puts forward two other arguments that minimise such an impact. The Committee wishes to address both arguments. 1) The AGS 2013 refers to the concept of ‘growth friendly consolidation’ by which it means that expenditure cuts are more ‘supportive’ to growth than further increases in taxation revenue in countries where the tax burden is already high. Besides observing that the Commission does not specify what would constitute a ‘high’ tax burden, the Committee recalls its 2011 opinion on smart ways to consolidate public finances (18) where it has pleaded in favour of consolidating public finances over a period as flexible as possible in order not to break growth dynamics as well as for a ‘smart’ equilibrium between revenue and expenditure and between aggregate supply and demand. In the same opinion, the Committee also warned of the danger of undermining systems of public services and collective solidarity. Indeed, if, as is the case now in several Member States, social insurance against the big risks in society (unemployment, sickness, ageing) is seriously weakened, then it is logical for households to react to this generalisation of insecurity by increasing precautionary savings – which is the last thing an economy in recession needs. 2) The other argument is that Member States facing financial turmoil should continue with austerity and even adopt ‘a rapid pace of fiscal adjustment’, while other Member States would be allowed to let their automatic stabilizers come into play. While it is clear that in emerging from this crisis, some economies have a much greater effort to make in restoring stability and growth than others, the Committee doubts this type of policy mix would work. The combination of severe restrictive fiscal policy in many Member States with a neutral fiscal policy stance in a few Member States will still have an outspoken negative impact for the euro zone as a whole and, in particular on those Member States who are already going through a deep, austerity induced recession.

4.1.7 To summarise, the Committee is concerned about economic policies that are unbalanced. Too heavy a weight has been given to austerity and the fiscal consolidation to correct severe fiscal imbalances needs a longer timeframe. Recent figures from the IMF Fiscal Monitor (19) confirm this. In a short period of time (2011–2012), 3 % GDP (20) has been taken out of the euro zone economy through cutting expenditure and raising taxes, thereby triggering a new recession. This is three times the pace of consolidation that European policy makers had set previously in the reformed Stability Pact (which mentions a reduction of the structural deficit by at least 0.5 % of GDP per year). To avoid having the same causes produce the same consequences, the Committee urges to balance the time frame of fiscal consolidation with a substantially strengthened and tangible Compact for Growth and Jobs.

4.1.8 The 2013 AGS report is based on the idea that it is of the upmost importance to restore and maintain confidence, in particular the confidence of financial markets as these markets have the capacity to squeeze the provision of finance in Member States. It is on the basis of this idea that the AGS 2013 continues to pursue the course of austerity policy.

4.1.9 The Committee recognises that financial markets play a crucial role in the crisis and that fixing that sector is a crucial element in recovery. Indeed, access to credit is the lifeblood of any economy, as without it businesses cannot invest or trade and consumers cannot purchase goods or houses. However, the Committee believes that the confidence of other economic actors (households and businesses) is equally important. Even if improved access to credit would allow companies to trade and grow, lower interest rates and abundance of credit do not have the same effect if people are worried about their job, their wage and/or their social security and if business has serious doubts about demand perspectives. The Committee wishes to stress the fact that financial market confidence and consumer and producer confidence do not necessarily contradict each other. As more businesses, especially SMEs can resume normal trading because access to finance has been restored, confidence will gradually return to consumers. Moreover, if markets are concerned about sovereign debt, they are even more worried when the economy is in danger of collapsing. The Committee reiterates one key idea it put forward in its opinion on the 2012 AGS: ‘Without a sufficient rate of growth, the sovereign debt crisis cannot be resolved (21)’. Low priority to growth would imply a high risk of driving the economy into recession, which in turn immediately weakens debt sustainability.

4.2 Crisis measures must give way and priority should now be given to the real economy, to growth and employment measures

Transforming the Compact for Growth and Jobs into a vast European investment programme for sustainable growth

4.2.1 The Committee calls for decisive action to restore growth, jobs and competitiveness to the European economy and invites the current Presidency to lead an ambitious growth agenda. Too often the European Council has backed minimalist actions to exit this crisis and has been driven only when market pressures have threatened to overthrow the Euro project. There is a need to be more genuinely persistent in pursuing sound and balanced economic governance together with reforms that will boost structural competitiveness across the Union and bring the implementation of the Europe 2020 agenda to the fore of the European Semester process. Any fiscal corrective action will bring contraction, but if it is achieved by maintaining expenditures that promote growth potential (education, training for the unemployed, R&D, support for SMEs) and is accompanied by tangible progress to eliminate the fragmentation of the financial sector, the medium and long term prospects for growth and employment could be preserved.

4.2.2 The Committee welcomes the Compact for Growth and Jobs, which is an important first step to recognise that growth is an essential element in exiting the crisis, and invites the Commission and the European Council to rapidly implement it and to go further, transforming it into a tangible and vast European investment programme.

4.2.3 Priority has to be given to ‘growth-enhancing expenditure’ such as education and skills, innovation - which is key for the competitiveness of the European economy, the greening of the economy - which must become a driving force for the next industrial revolution, large networks, e.g. high-speed internet, energy and transport interconnections. Tapping the potential of job-rich sectors is crucial: healthcare, green economy, silver economy, construction, business services, tourism, etc.

4.2.4 The single market still offers potential to deliver directly-felt benefits to businesses, consumers, citizens but further developments are needed, e.g. in the field of services, mobility, e-commerce, Digital Agenda, e-procurement, micro- and family businesses, measures to support the formation of new companies, alongside with measures for consumer protection and the social dimension of the single market. More transparency and civil society awareness, participation and ownership are needed (22).

4.2.5 The Committee stresses the important role of businesses, in particular the SMEs, of entrepreneurship and business creation in the process of recovery and in driving economic growth, innovation, skills and job creation. Harnessing the potential of SMEs includes various measures, such as facilitating their internationalisation, removing administrative burden, cutting start-up costs as well as facilitating their access to credit, capital markets, SME-targeted bond platforms, structural funds, loan guarantees.

4.2.6 The Committee also points out that social enterprises are key elements of the European social model and the single market. They deserve strong recognition and promotion, especially during the current harsh economic climate and their specificities need to be taken into account when designing European policies.

4.2.7 The role of cooperatives has also to be mentioned, since they contribute to social and territorial cohesion, develop new entrepreneurial initiatives and are more stable and resilient than other forms of enterprises, protecting jobs even in times of crisis (23).

4.2.8 The Committee welcomes the fact that the AGS 2013 underlines the importance of advancing towards sustainable development, renewable energy and energy efficiency, in order to reach the Europe 2020 climate change/energy goals (24). Promoting a resource-efficient and low-carbon ‘green’ economy is essential to maintaining economic competitiveness and boosting employment. Wide scale renovation of buildings in terms of energy efficiency is also necessary as are investments in environmental friendly transport services, in waste management and in water management. This is to be accompanied by enhanced energy transmission networks to facilitate large volume transportation and electricity exchange across Europe. To strengthen European competitiveness further, this should be topped up by investing in high performance Trans-European transport networks and expanding the infrastructure for broadband networks.

4.2.9 Industrial policy, efficient use of natural resources and innovation must work together to create sustainable growth.

4.2.10 Much investment is needed to promote structural change and to put the EU's economy on the path to smart, sustainable and inclusive growth. The Committee takes note of the agreement reached by heads of state and government on the next Multiannual Financial Framework (MFF) and reiterates the importance of having a MFF that allows achieving the Europe 2020 goals. The EESC refers to its recent opinions on the EU budget (25) in which it has consistently argued that the EU needs a strengthened budget to tackle current challenges. The EU budget should not be seen as a burden but as a smart means to realise economies of scale, to reduce costs and leverage-up competitiveness, growth and employment. Moreover, further resources could be mobilised through additional sources of funding. The EESC supports the action of the EIB, which makes long-term finance available for investment into the real economy and attracts additional private financing. The Committee welcomes the focus on projects with the greatest impact on sustainable growth and employment potential (such as projects for SMEs, the knowledge economy, human capital, energy efficiency and climate change) and urges that the increased funding given to the EIB be rapidly channelled to the SME sector. The Committee also welcomes the use of EIB guarantees for private investments in energy efficient building renovations. The EESC also supports the introduction of project bonds to stimulate the financing of key infrastructure projects in the areas of transport, energy and ICT. This constitutes an important first step towards a much needed EU investment programme for the years to come.

4.2.11 The EESC draws attention to the importance of cohesion policy for the achievement of economic, social and territorial convergence across the EU, in line with the Europe 2020 strategy. The EESC reiterates its calls for a single and unified cohesion policy actively involving civil society, more focused on real sustainable results and which can support the less developed EU Member States and the ones hit hardest by the crisis (26).

4.2.12 The Committee welcomes the importance attached by the AGS to the modernisation of public administration. According to the Committee, this implies, amongst others, using public procurement to drive innovation forward, fighting corruption, enhancing the efficiency of tax collection, ensuring adequate financial resources and stepping up the capacity to absorb structural funds.

Creating jobs and upgrading skills

4.2.13 The 2013 AGS acknowledges that ‘after several years of weak growth, the crisis is having severe social consequences’ and that ‘unemployment has increased substantially and hardship and poverty are on the rise’. Certain groups are hit harder than average: young people, the low-skilled, the long-term unemployed, single parents, the people with an immigrant background (27). Every effort must be made to mobilise both public and private investment to promote employment. The EESC has repeatedly called for a European stimulus package with a comprehensive impact on the labour market policy, amounting to 2 % GDP (28). The EESC has also called for a ‘social investment pact’ to sustainably tackle the crisis and invest in the future (29). The Committee reiterates its calls for raising labour market participation, improving skill levels, facilitating mobility, improving public employment services, stepping up active labour market measures and supporting entrepreneurship and self-employment. For certain regions or sectors, the Committee agrees with the Commissions’ description of the gap between high unemployment rates on the one hand and an evidence of skills bottlenecks and mismatches. It further suggests measures to promote social dialogue at the appropriate level on the distribution of working time. The Committee welcomes the Commission's recently published ‘Youth Employment Package’ (30). Its proposals, amongst others the implementation of a Youth Guarantee, should be timely and binding and should be backed up by appropriate resources. All Member States should have the possibility to adopt these proposals.

4.2.14 The Committee continues to call for investment in education, training and life-long learning (including on-the-job training, the dual systems of apprenticeships), addressing the skills bottlenecks and mismatches (31).

4.2.15 The European Social Fund, complemented by the European Globalisation Adjustment Fund must focus on protecting disadvantaged categories of people from the effects of the crisis (32) and a specific Youth solidarity fund should be created (33).

Need for a balanced approach to labour market reforms

4.2.16 The Committee observes that the 2013 AGS promotes flexibility in the labour market without much or any consideration of the dimension of security. The Committee takes note that avoiding segregation at the labour market by reducing the gaps in employment protection between different types of work contracts may contribute to higher employment levels. The Committee, however, recalls its past opinion (34) referring to the idea that a balance between flexibility and security needs to be struck. ‘The flexicurity concept does not mean unilateral and illegitimate reduction of workers' rights’. The Committee has on several occasions underlined the need for ‘a strong and vital social dialogue where the social partners actively participate and are able to negotiate, influence and take responsibility for the definition and components of flexicurity and evaluation of its outcomes’ (35). The EESC also reiterates that in order to tackle segmented markets, ‘adequate security for workers under all forms of contracts’ needs to be provided (36). The Committee stresses that flexibility cannot correct the mistakes made in macroeconomic demand and can make matters worse if stable and quality jobs are replaced by insecure employment relationships; moreover, the removal of ‘shock absorbers’ (job protection, unemployment benefits) can make the economy much more vulnerable to negative economic shocks.

Structural reform of the area of wages

4.2.17 The Committee recalls that reforms regarding wage setting require negotiations at the national level between the social partners. They need to strike the balance between achieving sufficient growth in demand, price stability, controlling for high and/or rising inequalities and retaining price competitiveness. The Committee is concerned that structural reforms in the area of wages trigger downwards competition between Member States, reducing internal demand in the EU and contributing, through an increasing euro area external surplus, to a more pronounced overvaluation of the euro. The ILO (37) confirms this trend and warns of the wide ranging economic and social implications. The AGS approach to minimum wages, stating that they ‘should strike the right balance between employment creation and adequate income’ reflects the general idea that there is a trade-off between job creation and various factors such as the quality of jobs and the willingness to accept a job-offer. The Committee wonders about the evidence on the existence of such a trade off, given that ILO research on the experiences with minimum wages in the EU found no evidence for the claim that minimum wages destroy jobs (38). The Committee recalls the ‘work must pay’ principle, which - although established before the crisis – still needs to be applied. The Committee urges the Commission to clarify its view on wages, inflation and productivity. Whereas the Commission's Employment Package communication (39) clarified that real wages should be aligned with productivity developments, the AGS 2013 fails to identify whether it wants to align nominal or real wages with productivity. The difference in these two approaches is crucial since in the latter case the possibility exists that nominal wages only take productivity but no longer inflation into account. Such a ‘rule’ would bring with it the risk of zero inflation leading to deflation in case of negative economic shocks.

Promoting social justice

4.2.18 In general, the Committee is of the opinion that more attention should be paid to the question of fairness and social justice. To build trust and ensure effective policy implementation, the costs and benefits of economic policy and structural reforms need to be fairly shared by all (workers, households, businesses). The Committee acknowledges the importance placed on transparency and fairness in the AGS in terms of impact on society and calls on the Commission to monitor whether national governments' policies take this into account in their reform programmes.

Promoting social inclusion and tackling poverty

4.2.19 The Committee supports the AGS's call for additional efforts to ensure the effectiveness of social protection systems in countering the effects of the crisis, to promote social inclusion, implement an ‘Active inclusion strategy’ to ensure inclusive labour market and to tackle poverty.

Promoting gender equality

4.2.20 The EESC considers that the gender equality perspective, which was not addressed in any of the seven flagship initiatives of the Europe 2020 strategy, has now to be integrated into the European Semester process (e.g. in the national reform programmes), as it is crucial to achieving the Europe 2020 headline targets (40).

4.3 Importance of the implication of organised civil society and social partners in the European Semester

4.3.1 The Committee reiterates the need to improve the democratic accountability and transparency of the various processes of the European Semester and the coordination of national economic policies. In the current context of loss of confidence in the ability of the European institutions to deliver results, it is crucial to give a stronger role to the institutions representing citizens, social partners and civil society, to improve legitimacy and ownership. The vertical and horizontal dialogue are crucial (41) and the provisions on participatory democracy of the Article 11 TEU have to be rapidly implemented (42). The Committee finds the language used in the AGS referring to the role of social dialogue insufficient. Structural reforms, if necessary, should be undertaken in close collaboration and concertation with social partners, not just in consultation. Dialogue with social partners and organised civil society, such as consumer organisations, are essential to properly shaping and implementing policies and reforms. They can improve the credibility and social acceptability of reforms, as consensus and confidence can contribute to commitment of stakeholders and success of reforms. Social partners and civil society organisations can make evaluations of policies' impacts and give timely warnings if necessary. In many fields, it is social organisations and in particular the social partners, who have to translate policy proposals into practice (43). The Committee calls for a stronger role for the social partners and organised civil society, at both EU and national level. They should be effectively and timely involved in the framework of the European semester, in the preparation of the Annual Growth Surveys, the employment guidelines, the broad economic policy guidelines (forming together ‘the EU 2020 integrated guidelines’) and the country specific recommendations. At the national level, the social partners and organised civil society should be better involved in the drafting of National Reform Programmes and the EESC will continue to closely work with its network of national ESCs/similar organisations in order to provide information to the European policy makers on the latter's involvement at the national level. More involvement from the social partners should result in greater implementation.

Brussels, 13 February 2013. The President of the European Economic and Social Committee Staffan NILSSON

(1) OJ C 248, 25.8.2011, p. 8–15.

(2) ETUC/CES, BUSINESSEUROPE, UEAPME, CEEP, Joint statement on the Europe 2020 strategy, 4 June 2010.

(3) Opinion of the EESC on the Communication from the Commission Moving Youth into Employment, COM(2012)727 final, (not yet published in OJ).

(4) OJ C 143, 22.5.2012, p. 94-101.

(5) OJ C 211/48, 19.8.2008, p. 48-53.

(6) EUCO 76/12, p. 7-15.

(7) Report by President of the European Council Herman Van Rompuy, 5 December 2012.

(8) COM(2012) 777 final/2, 30.11.2012.

(9) OJ C 11, 15.1.2013, p. 34–38.

(10) Eurostat, Statistics in focus 39/2012, Europe 2020 strategy – towards a smarter, greener and more inclusive EU economy?

(11) COM(2012) 750 final.

(12) Eurostat, News release 4/2013, 8 January 2013.

(13) Eurostat table http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=0&language=en&pcode=t2020_50

(14) ILO 2012, Eurozone job crisis: trends and policy responses, e.g. page 11.

(15) United Nations, World economic situation and prospects 2013 – global outlook, issued in December 2012, page 28.

(16) – 0.9 % in 2013, – 2.1 % in 2014 and – 3.3 % in 2015.

(17) IMF 2012, World Economic outlook, Coping with High Debt and Sluggish Growth, October 2012, e.g. page 21 or box 1.1 at page 41.

(18) OJ C 248, 25.8.2011, p. 8–15.

(19) IMF Fiscal Monitor, Taking stock – a progress report on fiscal adjustment, October 2012.

(20) The 3 % corresponds to the change in structural deficit between 2010 and 2012; the structural deficit is calculated by taking out the effect of the business cycle. This deficit needs correction.

(21) OJ C 143, 22.5.2012, p. 51–68, point 16.

(22) OJ C 76, 14.3.2013, p. 24–30.

(23) OJ C 191, 29.6.2012, p. 24–29.

(24) Europe 2020 targets: greenhouse gas emissions lower by 20 % than in the 1990s, 20 % of energy from renewables by 2020 and 20 % increase in resource efficiency by 2020.

(25) OJ C 229, 31.7.2012, p. 32–38 and OJ C 248, 25.8.2011, p. 75–80.

(26) OJ C 44, 15.2.2013, p. 76–82.

(27) OJ C 143, 22.5.2012, p. 94–101.

(28) OJ C 11, 15.1.2013, p. 65–70.

(29) OJ C 143, 22.5.2012, p. 23–28.

(30) COM(2012) 727 final – on which the EESC is currently preparing an opinion (SOC/474 - CES2419-2012_00_00_TRA_APA).

(31) The EESC is currently preparing an opinion (SOC/476 - CES658-2013_00_00_TRA_APA) on the Commission’s communication Rethinking Education: Investing in skills for better socio-economic outcomes, COM(2012) 669 final.

(32) OJ C 143, 22.5.2012, p. 82–87.

(33) OJ C 11, 15.1.2013, p. 65–70.

(34) OJ C 211, 19.8.2008, p. 48–53.

(35) OJ C 256, 27.10.2007, p. 108–113, point 1.3.

(36) OJ C 211, 19.8.2008, p. 48–53, point 1.1.1.

(37) ILO 2012, Global wage report 2012/2013 – Wages and equitable growth.

(38) ILO 2010, The minimum wage revisited in the enlarged EU, page 26

(39) COM(2012) 173 final.

(40) OJ C 76, 14.3.2013, p. 8–14.

(41) OJ C 299, 4.10.2012, p. 122-127.

(42) EESC Opinion on Principles, procedures and action for the implementation of Articles 11(1) and 11(2) of the Lisbon Treat, OJ C 11, 15.1.2013, p. 8 .

(43) EESC Opinion on the Communication from the Commission Action for stability, growth and jobs, OJ C 44, 15.2.2013, p. 153 .