COMMUNICATION FROM THE COMMISSION strengthening the implementation of the European Employment Strategy

Heightening the political debate through more focused and forceful EU recommendations to the Member States

Europe needs more and better jobs. The European Council of March 2004 has underlined the urgency for Europe to take effective action.

The European Employment Strategy (EES) has this role. In line with the Lisbon strategy the new European employment guidelines established by the Council in 2003 have set three overarching objectives: full employment; quality and productivity at work and strengthened social cohesion and inclusion. They include ten specific guidelines and guidance on improving governance of employment policies.

Reforms carried out under the Employment Guidelines in many Member States have proved their worth in improving labour market performance as confirmed by the employment growth of earlier years and by the resilience of employment in the recent economic slowdown. However, EU progress towards the Lisbon 2010 target of a 70% overall employment rate has come to a standstill and, at 64.3%, it is now clear that the EU will miss the intermediate employment rate target for 2005 of 67%. Without further action the 2010 target will also be missed. [1] Labour productivity growth has continued to slow down and quality in work and inclusive labour markets remain important challenges in many Member States.

[1] This implies creating more than 15 million jobs in the EU 15 and more than 20 million in the EU 25.

Against the background of economic slowdown and at the request from Heads of State and Government at the Spring Council of 2003, the Commission established a European Employment Taskforce headed by Wim Kok, former Prime Minister of the Netherlands. The Taskforce identified [2] priorities for action of general relevance for Member States and specific reforms needed. The Employment Taskforce's assessment and policy messages are shared by the Commission and the Council. They are fully consistent with the European Employment Strategy and have been closely integrated in the 2004 Joint Council and Commission Employment Report (JER) to the European Council.

[2] "Jobs, Jobs, jobs - Creating more Employment in Europe", Report of the Employment Taskforce chaired by Wim Kok.

If Europe is to meet its employment objectives in 2010 and increase its competitiveness and growth potential in the global economy, a trend break will be needed: both employment and productivity growth must accelerate strongly. A narrow approach to labour market reforms will not suffice. Sound macro economic policies are necessary to secure confidence and stability. Structural reforms are needed in the goods, services and capital markets to support competitiveness and job creation. Progress on all fronts of the Lisbon agenda, as completed by the environmental dimension at Göteborg, notably in terms of research [3] and innovation, education and training, the development of the employment potential of environmental policies, in particular in the environmental goods and services sector, and the reform of social protection systems including pension arrangements, must go hand in hand. Policies in these areas, including the recent Growth Initiative, should boost business investment both in human and physical capital, and create better conditions for job creation and productivity growth by strengthening Europe's capacity to manage change.

[3] In this context, it should be noted that the Barcelona European Council of March 2002 has set an objective to increase R&D investment to 3% of GDP, two third to be financed by the private sector, whereas in 2002 this ratio was close to 2%.

The reform of the Employment Strategy in 2003 placed the emphasis on medium-term orientation and on establishing a policy framework that takes account of increased diversity in the enlarged EU. Member States must vigorously pursue the full range of policies defined in the Employment Guidelines and the Union must give more attention to the follow-up and increase peer pressure. The Employment Taskforce has confirmed the need to put emphasis on an intensive monitoring of reforms undertaken by the Member States, rather than engaging in a process of further change of the guidelines.

The existing overall policy framework is therefore adequate and appropriate to confront today's employment challenges in an EU of 25 Member States. The medium-term character of the new employment guidelines and the streamlining with the Broad Economic Policy Guidelines (BEPGs) justify stability at least until the mid term assessment in 2006. The current and new Member States must pursue their employment policies in 2004 within the same stable framework.

The Commission highlights the need to support and stimulate a real policy debate at the highest political level on the implementation of the EES. In this context, the recommendations should become more forceful and succinct. This direction must be seen together with reinforced dissemination and mutual learning through exchange of experiences. The European Council has confirmed the four key areas for action identified by the Employment Taskforce and in the 2004 JER:

* increasing adaptability of workers and enterprises;

* attracting more people to the labour market and making work a real option for all;

* investing more and more effectively in human capital;

* ensuring effective implementation of reforms through better governance.

These constitute four common recommendations to all Member States and the 2005 JER will need to look critically at their implementation.

Since they were first used in 2000, the country-specific employment recommendations have contributed to steering Member States' policy reforms. The recommendations allow for a differentiation in policy guidance between Member States according to their respective situation and progress in implementation. With an increasing diversity of labour market situations within the EU after enlargement, they assume even greater importance. The 2004 recommendations are, therefore, designed to play this role in a strengthened way. They are sharper and more focused. They address those issues needing priority attention. Many pertain to areas already highlighted in previous years but still not yet resolved. Other recommendations address new issues which require immediate attention.

The new Member States have been introduced to the EES via the Joint Assessment Papers (JAPs) that were agreed with the Commission before membership. They will be submitting NAPs for the first time in 2004 within the framework of the employment guidelines and the BEPGs. They must pay special attention to the common employment recommendations directed at all Member States. They are also invited to address the particular issues and policy messages identified for each country in the Employment Taskforce Report and the Commission's report [4] on the implementation of the JAPs.

[4] "Progress in implementing the Joint Assessment Papers on employment policies in acceding countries" COM(2003) 663 of 6.11.2003

More needs to be done by the EU and national authorities to support the exchange of experience between all stakeholders concerned. This requires a culture change to create an environment where governments and enterprises see themselves as learning organisations open to good ideas from others and keen on sharing experiences. In 2004 the Commission will launch a new ambitious programme of mutual learning centred on the exchange of good practice and the dissemination, including at regional level, of the experience of the EES.

The EU mobilises considerable financial resources especially to promote the development and structural adjustment of Member States and regions that are lagging behind. The next generation of EU funding needs to be more closely linked to the implementation of the employment guidelines, targets and recommendations to Member States [5]. Active labour market measures should be enhanced and public and private investment in human capital should be increased [6]. In this respect the Commission encourages Member States to make full use of the possibilities deriving from the Block exemption regulations on Employment aid and on Training aid designed to correct market failures and to support the implementation of the employment strategy.

[5] "Building our common Future - Policy challenges and Budgetary means of the Enlarged Union 2007-2013" COM(2004) 101 final/2 of 26.2.2004

[6] "Third Report on Economic and Social Cohesion", 18.2.2004

The four common recommendations to all Member States and the country-specific recommendations form a powerful package. Governance will be brought more to the fore of the European Employment Strategy. The shorter, more concentrated, and strengthened recommendations should ensure that Member States are better able to focus action on the main impediments.

Combined with a reinforced exchange of good practices and mutual learning and a better link with the use of EU financial resources, the stronger EU recommendations can give a new dynamic to the European Employment Strategy; a strategy fully involving national parliaments, the social partners, other stakeholders and promoting reform partnerships; one that will form a key component of the Partnership for Change recently announced by the European Social Partners.

The NAPs should respond to the strengthened recommendations and themselves be tighter policy documents without being superficial or incomplete. The implementation of the recommendations will provide the main basis for the JER to be drawn up in late 2004/early 2005. Such improvements should bring about a more hard-hitting and effective European Employment Strategy, one that can contribute to taking the Lisbon process forward with more and better jobs.