A4-0255/97

Resolution on the convergence criteria for EMU and the funding of the social security systems in the Member States of the European Union

The European Parliament,

- having regard to the motion for a resolution by Mr Garriga Polledo on the convergence criteria, the third stage of EMU and the various social security systems, B4-0589/95,

- having regard to Rule 45 of its Rules of Procedure,

- having regard to the 1993 and 1995 Commission reports on social security in the Union ((cial security in Europe - 1993, Office for Official Publications, Luxembourg, 1194 and COM(95)0457.)),

- having regard to the Commission communication on the future of social protection: a framework for a European debate, COM(95)0466,

- having regard to the Commission communication on modernizing and improving social protection in the European Union, COM(97)0102,

- having regard to its resolutions of 7 April 1992 on the results of the intergovernmental conferences and 10 March 1994 on the social policy implications of the EMU process ((OJ C 125, 18.5.1992, p. 81. and OJ C 91, 28.3.1994, p. 230.)),

- having regard to its resolution of 13 July 1995 on a coherent employment strategy for the European Union ((OJ C 249, 25.9.1995, p. 143.)),

- having regard to its resolution of 29 November 1995 on the Commission's annual report 'Employment in Europe - 1995" ((OJ C 339, 18.12.1995, p. 28.)),

- having regard to its resolution of 19 February 1997 on the Commission communication - The Future of Social Protection: A Framework for a European Debate and the report from the Commission on social protection in Europe 1995 ((OJ C 85, 17.3.1997, p. 63.)),

- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy and the opinion of the Committee on Employment and Social Affairs (A4-0255/97),

A. whereas social protection in most Member States has ensured a decent standard of living and has reduced poverty and whereas this social model must continue to be a cornerstone of the European Union,

B. whereas high unemployment, the risk of social exclusion of an increasing proportion of the population and the ageing of the population are major challenges for the future,

C. whereas all Member States of the European Union are having problems funding their social security systems,

D. whereas the convergence criteria restrict the leeway that Member States have in their budgets to fulfil their social responsibilities, and at the same time noting that the public debate on the future of social security cannot be divorced from the need for social cohesion and further European political integration,

E. whereas the funding of the social security system varies from one Member State to another, with systems funded either primarily through social security contributions, as in Belgium, France and Germany or mainly through tax revenue, as in Ireland and Scandinavia,

F. whereas employers' social contributions should be limited in order to lower the cost of the labour production factor; whereas this cannot be done, however, without providing for alternative funding,

G. whereas creating more jobs is crucial for the future of social security and whereas for this very reason the Council and Commission must, through a proactive employment policy, offer Member States a more appropriate framework for their fight against unemployment,

H. whereas Article 2 of the EC Treaty makes it a specific task of the Community to promote a high level of employment and of social protection, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States,

I. whereas, pursuant to Article 117 of the Treaty, 'Member States agree upon the need to promote improved working conditions and an improved standard of living for workers, so as to make possible their harmonization while the improvement is being maintained',

1. Affirms that the provisions on economic and monetary union must be implemented in full as laid down in the Treaty, so that lower interest rates, lower exchange costs and a reduced exchange risk create an effective framework for higher growth and more jobs;

2. Recalls that budgetary discipline and the achievement of monetary union are compatible with sustainable growth and job-creation policies but that neither compliance with the convergence criteria nor the date for stage three should serve as a pretext to reduce the efforts which are required of the Union and the Member States to create jobs and to maintain a high degree of social security;

3. Considers that the creation of new jobs and maintaining and consolidating a good social security system are not incompatible with economic development but must be concurrent policy objectives;

4. Notes that demographic trends within the social security systems will in the medium and long term give rise to substantial additional expenditure on pensions and sickness insurance which in some Member States will be offset by reduced expenditure on child allowance and unemployment benefit;

5. Notes that some countries use pre-funding systems and others pay-as-you-go schemes to fund pensions; stresses that the two systems have evolved historically with their own advantages and disadvantages; is of the opinion that in countries with pre-funding systems there are fewer problems of funding, partly because of the low inflation rate; concludes that in countries with the more socially equitable pay-as-you-go schemes greater efforts will be needed to reduce the debt ratio in order to release more funds to finance statutory pensions; subscribes to the Commission's view that because of the enormous transitional costs involved a radical change from public pay-as-you-go systems to pre-funding is not realistic;

6. Believes it would be useful to have a more detailed discussion of demographic trends in relation to the different forms of existing pension insurance systems (e.g. pay-as-you-go basis, pre-funding etc.) and any adjustments to the social security systems that may be necessary, and calls on the Commission to submit a report accordingly;

7. Is of the opinion that the question of how to keep social security systems viable without, at the same time, weakening the social safety net is the one great challenge facing the Member States; stresses that sound public financing is the best guarantee for a properly functioning social security system; suggests therefore that Member States continue reorganization in a socially responsible way;

8. Considers that such reorganization must be achieved by increasing and/or maintaining the level of revenue on the one hand on the basis of contributions and taxation and reducing expenditure on the other, in terms of benefits and claimants, although steps must be taken to ensure that the competitive position of companies and the purchasing power of the population are not seriously impaired;

9. Points out that, because of the failings of the internal market, there is a risk that the response to differences in competitive conditions will lead to distortion of competition. For this reason the common internal market should be completed as rapidly and fully as possible;

10. Points out that the absence of adequate fiscal coordination is not only an obstacle to completion of the Internal Market, while leading to fiscal rivalry between the Member States, but that it also makes it possible to put pressure on various national social security systems and to increase the differences between the Member States, which is in violation of the fundamental principles of the Internal Market;

11. Calls therefore for better coordination of tax systems in respect of the taxable base and tax brackets, although it is important for the tax systems in the European Union to permit some flexibility and differences between the Member States. This is necessary because there are widely differing needs in the individual Member States and regions for social goods, and because there is a need to provide an opportunity to respond to external shocks and differences in cyclical movements, in order to afford compensation for the loss of the exchange rate mechanism in stage three of Economic and Monetary Union; calls on the Ecofin Council to reach a positive conclusion to discussion of the Commission proposals in this respect;

12. Considers therefore that the levying of tax must not undermine the basis of social security systems, but on the contrary must create the conditions for improving them in the medium term and should take account of the objective of increased employment;

13. Believes it is necessary to consider the possibility of shifting the burden of taxation from labour to consumption of non-renewable natural resources, capital and/or added value in connection with any increasing problems in the financing of social security and questions connected with fiscal competition between the regions, environmental policy and policy on natural resources; calls on the Commission to submit an appropriate proposal for reform of the taxation system, based on the Commission memorandum on taxation systems in the Union and the work of the High Level Group on taxation;

14. Calls on the Commission and Council to establish an economic and social framework and to pay greater attention to a sound employment policy; the discussion on activating the working of the labour market and increasing fiscal incentives in the search for employment must not jeopardize the maintenance of social security systems;

15. Points out that the White Paper on Growth, Competitiveness and Employment is a first step in this direction but that important measures relating to stimulating investment in innovative technologies, inter alia in the field of environment protection, have so far remained largely a dead letter; is of the opinion that economic growth which takes due account of the preservation of the environment is necessary for reviving the financing of social security systems, as is also expressed in the White Paper's proposals;

16. Calls for full implementation of the White Paper and in anticipation thereof supports the proposals made by the Commission President to review the Financial Perspective, particularly with a view to placing greater emphasis on employment in the budget;

17. Calls on the Member States and above all the European Union to pursue a job creation policy with objectives that include using the capital spent on unemployment payments and training job-seekers - at least in part - for job creation purposes;

18. Is aware that the convergence criteria support the Member States in striving for economic stability and sound budgetary policies, thereby increasing the prospect of lower interest rates, higher investment, growth and employment, and consequently improving social cohesion and also, through a higher tax basis, the bases of social security systems;

19. Calls on those involved in the European social dialogue to embark on a discussion of its place and function after the start of the third phase of EMU, not least in relation to wage policy; calls in this respect for SMEs to be involved as a separate body in order to achieve maximum representativeness;

20. Calls on the Commission to consider carefully and take due account of the views expressed by Parliament in its above-mentioned resolution of 19 February 1997 on the debate promoted by the communication on the future of social protection in Europe;

21. Instructs its President to forward this resolution to the Council, Commission and the parliaments of the Member States.