EN Official Journal of the European Union C 133/37

Opinion of the European Economic and Social Committee on the Annual Growth Survey 2016

(COM(2015) 690 final)

and the ‘Draft Joint Employment Report accompanying the Communication from the Commission on the Annual Growth Survey 2016’

(COM(2015) 700 final)

(2016/C 133/08)

Rapporteur: Juan MENDOZA CASTRO

On 22 December 2015, the European 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

Annual Growth Survey 2016 and Draft Joint Employment Report accompanying the Communication from the Commission on the Annual Growth Survey 2016

(COM(2015) 690 final, COM(2015) 700 final).

The Subcommittee on the Annual Growth Survey 2016, set up under Rule 19 of the Rules of Procedure, which was responsible for preparing the Committee’s work on the subject, adopted its draft opinion on 12 January 2016.

At its 514th plenary session, held on 17 and 18 February 2016 (meeting of 17 February), the European Economic and Social Committee adopted the following opinion by 139 votes to 8, with 11 abstentions.

1. Conclusions and recommendations

1.1 High unemployment levels persist. 7 years since the start of the crisis, the Committee expresses its concern over high unemployment, which is an issue in certain Member States in particular. Levels of long-term and youth unemployment are also high, as is the number of ‘NEETs’, young people who are not in employment, education or training.

1.2 The 2016 AGS contains much more in the way of social analysis, objectives and goals, but for this new approach to be effective, it should not be based on the reiteration of the policy recommendations of previous years. As well as the boost to private investment that the Commission refers to, the stagnant economy and labour market also require an increase in domestic demand and significant public investment.

1.3 European semester. The EESC welcomes the decision to strengthen follow-up of the Europe 2020 targets and to divide the semester into European and national phases as it will enable better determination of who is responsible for achieving the set objectives. Greater coherence between the policies of European governance and the aims of the Europe 2020 strategy is also essential.

1.4 The European semester should take into account the achievement of the 17 sustainable development goals (SDGs) derived from the United Nations’ 2030 sustainable development strategy.

1.5 The economy. The European Union is experiencing moderate recovery, although it is benefiting from temporary positive factors. The euro area’s record surplus in exports reflects, among other things, the effects of euro depreciation. At the same time, excessive national saving as compared with investment reflects the uncertainties that still weigh upon economic recovery and growth.

1.6 Faced with the significant drop in investment, Ecofin has pointed out the urgent need to improve the overall investment climate to support the economic recovery, and to increase productivity and growth potential. The EESC, for its part, considers it necessary to change the direction of the so-called austerity policy towards a greater commitment to growth policies (1).

1.7 The large number of people at risk of poverty or exclusion raises questions about the fulfilment of one of the Europe 2020 strategy’s major objectives.

1.8 In view of the large influx of refugees and asylum seekers, the EESC proposes measures based on joint action and solidarity, respect for international law and values, equal treatment and the need to prioritise life over any other considerations primarily based upon ‘security’ policies. Furthermore, it confirms that the Schengen agreement is a fundamental pillar of the EU’s architecture.

2. EESC recommendations

2.1 The 2016 AGS emphasises the importance of investment in employment and social policies, as the EESC had already proposed. This requires an ambitious approach on the part of the Commission.

2.2 The 2016 AGS must place more emphasis on strengthening governance in order to effectively carry out the major European policies on market integration and modernising the economy, highlighting, in this regard, the EU’s Economic Governance Package. For their part, the effective national governance frameworks must build confidence, restore the necessary fiscal buffers, and avoid pro-cyclical fiscal policies.

2.3 It is essential to improve the synergies of investment and development strategies between national economies and the European economy.

2.4 The EESC suggests that, amongst the political priorities, efforts should focus on two areas in particular: investment and employment.

2.5 The Multiannual Financial Framework instruments and the Connecting Europe Facility are fundamental for dealing with the crisis and getting back on the road to growth. The EESC welcomes the positive start made by the Investment Plan for Europe, and has in this regard put forward the idea of attracting a greater number of institutional investors and disseminating funding opportunities more widely.

2.6 ‘Immediate action’ is needed to confront long-term unemployment (which accounts for 50 % of the total) and youth unemployment. Furthermore, the Commission should put forward a general strategy on gender equality in the labour market.

2.7 Investments to bring about energy transition (Paris Agreement) must become a source of job creation and economic development.

2.8 The EESC calls for a greater coordinated effort to combat aggressive tax planning, fraud and tax evasion.

2.9 The EESC advocates the full participation of social partners and other representative organisations of civil society in social policies and national reform plans, e.g. via economic and social councils and similar organisations. Concerning the Commission’s proposal to establish national competitiveness boards in the euro area the EECS will adopt a separate opinion in March 2016. In any case, they must be fully compatible with free collective bargaining and the social partners’ existing mechanisms for participation and dialogue in each Member State.

2.10 Democratic legitimacy. In view of the democratic deficit, there is a need for the principles of social justice that underlie the European Union architecture to be entrenched and for a Social Europe dedicated to the struggle against social exclusion and the maintenance of solidarity to be reinforced.

3. Introduction

3.1 According to the 2016 AGS: — the European Union’s economy is experiencing moderate recovery, although it is benefiting from temporary positive factors, including low oil prices, a relatively weak euro and accommodating monetary policies, — therefore, policies should be directed at consolidating the recovery and fostering convergence towards the best performers, — the pace of activity is expected to increase gradually, — economic performance and social conditions, as well as implementation of reforms, remain uneven across the EU.

3.2 There has been no change to the previous political priorities, which seek to strike a balance between structural changes, the robustness of public budgets and investment. The 2016 AGS puts forward more specific considerations regarding, inter alia, the labour market, undeclared work, integration into working life, the gender gap, and youth employment.

3.3 It calls for modern and efficient public administration, which is necessary to ensure fast, high-quality services for businesses and the general public.

3.4 The focus has also shifted towards improving the quality, independence and effectiveness of the justice system in Member States, as a prerequisite for fostering an environment that favours investment and economic activity.

3.5 The main conclusions of the Draft Joint Employment Report (Draft JER) are that there is considerable disparity between Member States and that improvement in the social and employment situation is slow. Other conclusions include: — continuity of labour market reforms, — tax systems that are more favourable to job creation, — investment in human capital via education and training, which has focused mainly on young people, — continued wage moderation, and — efforts to promote youth employment and for the high numbers of ‘NEETs’ (people who are not in employment, education or training).

4. High unemployment levels persist

4.1 7 years since the start of the crisis, the EESC reiterates its concern about the employment situation affecting certain euro area Member States in particular. 22,5 million people in the EU are unemployed (17,2 million in the euro area) and no noticeable improvement is expected in the next 2 years. In addition to social and economic consequences, this is another factor contributing to the disaffection felt by members of the public towards the European project.

4.2 The 2016 AGS contains much more in the way of social analysis, objectives and goals. For this new approach to be effective and not remain mere rhetoric, it must be based not on the reiteration of the policy recommendations of previous years — mainly structural reforms in the labour market — but on a real coordinated impetus for growth and employment.

4.3 The 2016 AGS emphasises the importance of investment in employment and social policies, as the EESC had already proposed. This requires an ambitious approach on the part of the Commission.

4.4 Aside from the boost to private investment, which forms the basis of the Commission’s proposals, the stagnant economy and employment need a boost from significant public investment.

5. The European semester: strengthening governance

5.1 The 2016 AGS must place more emphasis on strengthening governance in order to effectively carry out the major European policies on market integration and modernising the economy.

5.2 The European semester also needs to make progress in developing the Economic Governance Package revised in October 2015. For their part, the effective national governance frameworks must build confidence, restore the necessary fiscal buffers, and avoid pro-cyclical fiscal policies (2). The EU’s financial instruments and national budgets must contribute to these targets.

5.3 The EESC welcomes the decision to reinforce the pursuit of the Europe 2020 targets in the context of the European semester as had been proposed by the five presidents (3). As well as improving the implementation and monitoring of the existing strategy, a process has been announced with the aim of developing a long-term vision that goes beyond the 2020 horizon, partly in light of the new SDGs agreed by the United Nations for 2030. The Committee welcomes this planned initiative since it confirms its view that the EU will have to extend its planning horizon to at least 2030 in order to implement the SDGs by introducing an integrated strategy for a sustainable Europe in a globalised world.

5.4 The division of the semester into two phases — the European phase (from November to February) and the national phase (from February to June) — better identifies the different areas of responsibility and enables European social partners to take part in in-depth consultations on reform processes in Europe.

6. Development of the economy

6.1 The EU registered real GDP growth of 1,9 % in 2015 and is forecast to grow by 2,0 % in 2016 and 2,1 % in 2017 (4), but there is significant variation between Member States.

6.2 The EESC draws attention to the fact that exports — with a record surplus of 3,5 % of GDP in the euro area (1,9 % of GDP in the EU-28) — have been the driving force for recovery. In aggregate terms, the euro area’s current account surplus is one of the largest in the world and is expected to rise again in 2015. Although weaker commodity prices and depreciation in the euro exchange rate have helped to boost the balance of trade, this surplus reflects to a large extent excessive national savings over investments at the euro area level (5). This also reflects the uncertainties that still weigh upon economic recovery and growth.

6.3 Wage moderation, falling oil prices, low interest rates and exchange rate trends help make the European economy more competitive. Economic recovery increasingly depends upon internal demand, but this in turn is affected by budgetary restrictions, a rise in temporary employment, low wages and the insufficient availability of credit for households and businesses, especially SMEs.

7. Comments on the Draft JER

7.1 According to the Draft JER, a number of reforms have reinforced wage-setting mechanisms with the aim of fostering convergence between wage changes and productivity and supporting households’ disposable income, paying particular attention to minimum wages. However, the EESC warns that between 2008 and 2015 wage growth has been less than productivity in at least eighteen Member States (6).

7.2 In 2014, unit labour costs (ULC) fell in several euro area countries that had been particularly affected by the crisis. Moreover, in countries where the labour market is improving, the number of hours worked has started to contribute positively to the evolution of ULCs (7).

7.3 The EESC agrees that modernisation, a better match between skills and labour market requirements, and continuing investment in education and training — including digital skills — are crucial to the future of employment, economic growth and competitiveness in the EU.

7.4 Long-term unemployment still accounts for half of the unemployment pool. ‘Immediate action’ on this issue is needed, with priority being given to employment policies. The high level of youth unemployment and the situation of young people not in employment, education or training (NEETs) also urgently need attention.

7.5 It is significant that recent analyses of the skills mismatch indicate that although less than half of recruitment difficulties reflect real skills shortages, almost a third can be attributed to unattractive pay.

7.6 The high number of people at risk of poverty or exclusion registered in 2014 (24,4 % or 122 million people — EU-28) and the trend of recent years raise serious questions about the fulfilment of one of the fundamental objectives of the Europe 2020 strategy.

7.7 Women continue to be under-represented in the labour market despite their improving qualifications and even when superior to men in terms of their formal education. The gender gap of 40 % in pensions is the result of their shorter careers and lower wages. The Committee regrets that in the 2016 AGS no proposals in this regard are provided. It likewise stresses that the Commission has still not put forward a general strategy for gender equality, involving specific measures and taking into account existing political compromises and requests from organised civil society (8).

8. The political priorities for 2016

8.1 Expectations of recovery from the crisis have not yet been met.

8.2 The significant socioeconomic differences within the EU mean that increased convergence is needed with regard to Member States’ fulfilment of the targets set in this field. It is essential to improve the synergies of investment and development strategies between national economies and the European economy.

8.3 Amongst the political priorities, the EESC highlights two areas in particular: investment and employment.

8.4 Relaunching investment: an urgent need

8.4.1 Faced with the significant drop in investment there is an urgent need to improve the overall investment climate to support the economic recovery, and increase productivity and growth potential (9). The EESC, for its part, considers it necessary to change the direction of the so-called austerity policy towards a greater commitment to growth policies.

8.4.2 The Multiannual Financial Framework instruments (structural and investment funds, among others) are fundamental for dealing with the crisis and returning to a path of growth, particularly the Connecting Europe Facility to strengthen trans-European transport, telecommunications and energy networks.

8.4.3 The Investment Plan for Europe — a step in the right direction that must be complemented by other measures — has made a good start in that, according to the EIB, the total amount of investment promoted during 2015 will reach EUR 50 000 million, and 71 000 SMEs and mid-cap companies can benefit from the EFSI’s investment projects. In order to reach EUR 315 000 million in investments by 2017 it is necessary to: — attract more institutional investors (both from within and outside the EU). So far, only nine Member States have pledged contributions, and this does not include some of the Member States that most need to modernise their economic structure, — publicise the ESFI’s funding opportunities more widely, given that in some cases they are not yet sufficiently well known by public authorities and private investors.

8.4.4 More than half of ESFI projects relate to energy efficiency, renewable energy and innovation. Implementing the Paris Agreement on the transition from fossil resource and energy-intensive economies to low-carbon and low-footprint patterns is a huge challenge for the EU, which must substantially reduce its emissions. Investments into energy transition are a source of job creation and economic development. Moreover, they are a key driver for reducing the price of energy with positive social and economic effects.

8.4.5 The Committee agrees that financing of the real economy has improved considerably, although differences between Member States persist. Nevertheless, this problem mainly affects SMEs, which rely heavily on bank loans. The Capital Markets Union, one of the major EU initiatives, should see the facilitation of SMEs’ access to finance as one of its key objectives (10).

8.4.6 Investing in Human Capital. The EESC is disappointed by the drop in public spending on education (11) because Europe needs a well-educated and skilled workforce in order to fulfil its economic potential. Reform measures should prioritise raising the level of knowledge, skills and competences as well as filling the growing gap between unqualified and highly-qualified people.

8.5 Promoting jobs, inclusive social policies and sustainable economic growth

8.5.1 Innovative sectors have great potential to create jobs. European policies on market integration and modernising the economy (Digital Agenda, Internal Energy Market, Framework for the Audiovisual Sector, Telecommunications Market) are aimed at these sectors.

8.5.2 Stable employment is fundamental for economic recovery, but profound labour market segmentation has been observed (12). It is necessary to reconcile the need for adaptation in a radically changing labour market with job security, the identification of employees with the company they work for and the development of their capabilities.

8.5.3 The EESC has already emphasised the fact that the ‘flexicurity’ concept — which the Commission has once more tabled in the 2016 AGS — does not mean unilateral and illegitimate reduction of workers’ rights but rather the design of labour law, job protection systems and, together with the social partners, collective bargaining practices, with a view to ensuring an optimal balance between flexibility and security for all employment relationships and providing adequate security for workers under all forms of contracts in order to tackle segmented labour markets (13).

8.5.4 The EESC takes a favourable view of: — the Eurogroup’s decision to evaluate the tax burden on labour with the aim of reducing obstacles to investment and job creation (14), stressing that greening tax systems, in particular by making sure that low-emission and low-footprint activities are rewarded compared to resource and energy-intensive ones, is crucial to make the European economy more sustainable, — proposals aimed at improving the products and services markets and the business environment and, in particular, proposals relating to the retail trade, — the proposals on public procurement, which accounts for 19 % of the EU’s GDP: increasing transparency, improving administrative effectiveness, increased use of e-procurement and the fight against corruption.

8.5.5 The Committee has supported the transition towards a green economy (15); it welcomes the principle of a circular economy and is currently assessing the pros and cons of the Package unveiled by the European Commission in December 2015.

8.5.6 The EESC emphasises the important role that the European semester and the annual growth survey should play in ensuring the monitoring of sustainable development policies. In recent years the Commission had started to include in the AGS and the country specific recommendations environmental issues as well. The Committee regrets that the Commission seems to have abandoned this approach (‘greening the European semester’) in the current AGS and calls on the Commission to resume considering in the European semester the transition to a low carbon and circular economy as a crucial factor for long-term economic prosperity, competitiveness and resilience.

9. Other measures

9.1 Responsible tax policies

9.1.1 In recent years, the EU and its Member States have adopted a broad range of measures (Banking Union, structural reforms, etc.) within the framework of the Stability and Growth Pact. As a result, they have made progress with regard to correcting macroeconomic imbalances. In a context of very low inflation (0 % in 2015 and 1,7 % forecast in 2017) there has been a significant reduction in the public deficit (2,5 % of GDP currently, forecast of 1,6 % GDP in 2017 (16)). Measures to reduce the high stock of public debt (86,8 % GDP) and private debt (households 57,9 %; non-financial corporations 79,5 %) entails constraints on investment and consumption.

9.1.2 Improving the efficiency and equity of taxation systems. The EESC is in favour of removing unjustified debt bias, as advised in the IMF Country Reports. This will facilitate alternative financing channels to bank credit, especially capital markets.

9.1.3 The EESC appreciates the Commission’s initiatives regarding the location of economic activity and the package on tax transparency. There should be more comprehensive and coordinated activity on the part of European and national authorities to eliminate tax havens and combat aggressive tax planning, tax evasion and fraud which lead to losses in the EU estimated at around a trillion euros (17).

9.2 Demographic change and its impact on pension and health systems.

9.2.1 EU Member States have adopted measures on public pension schemes aimed, on the one hand, at mitigating the social consequences of the crisis and, on the other, at increasing their long-term viability. The latter have consisted of austerity measures such as a higher retirement age and a strict link between contributions and benefits, among others. Private pension schemes play an important social role, as this Committee has stated (18), but should not be considered as mere financial instruments.

9.2.2 The Committee agrees that there is a need to establish a viable financial basis for health systems. In the interests of maximising the well-being of EU citizens, these systems need to be based on the principles and values of Europe’s social dimension, such as universality, accessibility, equity and solidarity (19).

9.3 Refugees and asylum seekers

9.3.1 In order to establish the necessary social consensus across Europe, it is essential to fully respect the equal treatment and social rights of both EU citizens and refugees in Europe, with a particular focus on those that are most vulnerable. Early investment in the integration of refugees into society and the labour market is important to help refugees rebuild their lives, while minimising potential conflicts with the local population and avoiding greater costs in the future.

9.3.2 The EESC hopes that the crisis relocation mechanism will help the EU move, on an agreed basis, towards a system that is robust and flexible enough to meet the challenges of migration in its different forms.

9.3.3 The European Commission and the other EU institutions must actively support the governments of the Member States so as to provide proper conditions and prospects for integrating the relocated asylum applicants. In this context, it should be clarified, inter alia, that expenditure incurred by the Member States in receiving and integrating asylum seekers and refugees is not long-term, structural expenditure and should not, therefore, be included in the calculation of structural budget deficits.

9.3.4 The EESC confirms that the Schengen agreement is a fundamental pillar of the EU’s architecture (20).

9.4 Civil society participation

9.4.1 The EESC considers it essential to involve civil society in social and economic policies as a precondition for making them more effective.

9.4.2 The national reform programmes (NRPs) must include forums for discussion, especially economic and social councils. However, such involvement is lacking in some Member States.

9.4.3 If national competitive boards are established as recommended by the Commission they must be fully compatible with free collective bargaining and the social partners’ existing mechanisms for participation and dialogue in each Member State. A corresponding EESC opinion will be adopted in March 2016.

9.5 Democratic legitimacy

9.5.1 The democratic deficit has resulted in a loss of confidence in the European ideal. The Committee stresses the need to restore people’s trust and rebuild the vision of a social Europe, one that will reinforce and sustain the social legitimacy of the European project.

9.5.2 The European Union, both in theory and practice, is still far from having enough social legitimacy. While the controversy about Europe’s ‘democratic deficit’ has continued unabated, there has been a semantic shift from a ‘democratic deficit’ to a ‘justice deficit’ and an overall ‘deficit of legitimacy’. There is a need to consolidate the principles of social justice that underpin the architecture of the European Union and strengthen the idea of a social Europe dedicated to combating social exclusion and maintaining solidarity.

Brussels, 17 February 2016. The President of the European Economic and Social Committee Georges DASSIS

(1) Ecofin, 15.1.2016.

(2) See footnote 1.

(3) Completing Europe’s Economic and Monetary Union, 22 June 2015. See also Steps towards Completing Economic and Monetary Union, COM(2015) 600 final.

(4) Autumn 2015 forecast.

(5) Alert Mechanism Report 2016, COM(2015) 691 final.

(6) See: https://www.etuc.org/sites/www.etuc.org/files/document/files/08-en_ags2015_annex_3_-_wages_as_an_engine_of_growth.pdf

(7) See footnote 5.

(8) See Monserrat Mir, Why is the Commission ignoring women? http://www.euractiv.com/sections/social-europe-jobs/why-commission-annoying-half-population-320379

(9) See footnote 1.

(10) See: http://www.savings-banks.com/press/positions/Pages/Common-position-on-Capital-Markets-Union-.aspx

(11) COM(2015) 700 final.

(12) See footnote 11.

(13) OJ C 211, 19.8.2008, p. 48.

(14) Eurogroup Statement on the structural reform agenda — thematic discussions on growth and jobs: benchmarking the tax burden on labour, 638/15, 12.9.2015.

(15) OJ C 230, 14.7.2015, p. 99.

(16) See footnote 4.

(17) http://ec.europa.eu/taxation_customs/taxation/tax_fraud_evasion/missing-part_en.htm

(18) OJ C 451, 16.12.2014, p. 106.

(19) OJ C 242, 23.7.2015, p. 48.

(20) V. CESE: Frontex (OJ C 44, 11.2.2011, p. 162); Migration (OJ C 248, 25.8.2011, p. 135); An Open and Secure Europe (OJ C 451, 16.12.2014, p. 96); Resolution 10.12.2015 (OJ C 71, 24.2.2016, p. 1).