A4-0133/98

Resolution on the communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on 'Growth and employment in the stability-oriented framework of EMU - Economic policy reflections in view of the forthcoming 1998 broad guidelines¨ (COM(98)0103 - C4-0135/98) (annual economic report)

The European Parliament,

- having regard to the communication from the Commission, COM(98)0103- C4-0135/98,

- having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies ((OJ L 209, 2.8.1997, p. 1.)),

- having regard to Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit procedure ((OJ L 209, 2.8.1997, p. 6.)),

- having regard to the resolution of the European Council on the Stability and Growth Pact adopted in Amsterdam on 17 June 1997 ((OJ C 236, 2.8.1997, p. 1.)),

- having regard to the resolution of the European Council on growth and employment adopted in Amsterdam on 16 June 1997 ((OJ C 236, 2.8.1997, p. 3.)),

- having regard the Presidency's conclusions of the Extraordinary Summit of Luxembourg on 20-21 November 1997,

- having regard to the resolution of the European Council of 13 December 1997 on the coordination of economic policies during stage three of EMU and to Articles 109 and 109b of the EC Treaty ((OJ C 35, 2.2.1998, p. 1.)),

- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy and the opinions of the Committee on Employment and Social Affairs and the Committee on Regional Policy (A4-0133/98),

A. whereas the Commission's annual economic report could be considered as the Commission's preparatory work for the forthcoming 1998 broad guidelines for the economic policies of the Member States and the Community in accordance with Article 103 of the EC Treaty,

B. whereas the Commission's annual economic report for 1998 reaches the conclusion that an economic recovery in the context of a longer-term perspective has set in, referring to buoyant exports and increased competitiveness due to a favourable exchange rate with the US dollar, moderate wage developments and on-going increases in productivity,

C. whereas the Commission's annual economic report for 1998 expects a significant growth in investment due to low long-term interest rates and generally favourable monetary conditions, assisted by a forecast rise in domestic demand and private consumption, to become the driving force for turning the present recovery into self-sustaining long-term economic recovery,

D. whereas a large number of Member States have managed to reduce inflation, interest rates and budget deficits to achieve monetary stability, and whereas substantial convergence has taken place towards fulfilling the conditions for the adoption of the single currency set out in the Treaty on European Union,

E. whereas the introduction of the single currency is well on track, with the third stage of EMU due to start on 1 January 1999,

F. whereas a dramatically high level of unemployment in the European Union remains the most challenging and pressing problem to be tackled,

G. whereas the European Council decided that, with the advanced entry into force of the Employment Title of the Amsterdam Treaty, it was necessary to secure the effective coordination and monitoring of economic and employment policies,

1. Welcomes the adoption of a new format for the annual economic report in the light of the special circumstances in 1998, i.e. the advent of EMU, but urges that a more detailed analysis of the salient aspects of the economic situation is required if the medium-term (5 years) prospects are to be fully examined;

2. Suggests that a scenario analysis be included in the annual economic report in order to examine better the risks and take appropriate counter-measures should the central forecast be invalidated;

3. States that the central forecast development set out in the annual economic report is not without risks: future movements in the US dollar, indirect impacts on the European economy of the Asian crisis, and possible stock market crises are all potential risk factors requiring some consideration;

4. Agrees with the Commission's view that a stability-oriented policy aimed at the creation of new employment through economic growth and more efficient labour markets is of paramount importance and that the framework of EMU is well suited to attain this goal;

5. Underlines the importance of close and consistent coordination between macroeconomic policies and structural measures in the field of employment and asks Member States to target their policies better in order to benefit from the stable economic environment by strengthening internal demand through appropriate non-inflationary policies and measures that lead to a slow-down in capital-labour substitution in order to increase the current employment rate and, in addition, to take measures to create new jobs as referred to in the European employment initiative;

6. Agrees with the Commission's assessment of factors which will be favourable for economic expansion, namely sound economic fundamentals, unprecedentedly low long-term interest rates, a high level of profitability of investments, productivity gains and low inflation;

7. Considers that a level of economic growth, sustained by public and private investments, which exceeds the level of growth in productivity may effectively help to create new jobs and combat poverty;

8. Supports the Commission's view that an investment-led growth well in excess of the level of productivity growth, assisted by structural measures in the product and labour markets, will be essential in creating sufficient new jobs and counteracting the rise in poverty;

9. Stresses the particular importance it attaches to the prompt transposition of the employment guidelines into national action plans and the strategic priority that should be given to preventive measures focusing, in particular, on enhancing the employability of both the unemployed and the employed; urges the Employment and Labour Market Committee (ELMC) to hasten the development of appropriate benchmarks for the monitoring of labour market reform;

10. Takes the view that some of the major obstacles to sustainable economic and employment growth are:

i. an insufficient level of investment,

ii. a still rather low level of domestic demand and private consumption,

iii. excessive non-wage labour costs,

iv. a lack of adaptability in the human resources and training areas to the needs of increasingly fast technological change,

v. over-regulation which causes high administrative costs for businesses and presents strong disincentives and obstacles for setting up new, innovative companies and which does not foster entrepreneurial spirit in the Member States;

vi. inadequate resources and organization for European research;

11. Calls for a stepping-up of efforts to combat unemployment at Community level in order to complement the efforts made by the Member States, based on, and implementing, the conclusions of the Luxembourg Employment Summit;

12. Takes the view that the EU level policy mix, advocated in all earlier global guidelines, namely budgetary consolidation, strict monetary policy and continued wage moderation, needs some adaptation in order to deliver a sufficient level of growth above productivity improvements throughout the EU;

13. Emphasizes that sufficient job-creating growth can only be combined with the required continued budgetary consolidation in the relatively closed EU when at the same time monetary policy is not overly restrictive and wage moderation not too rigid;

14. Stresses the absolute importance of closer Community surveillance of the policy mix under EMU and significantly tighter coordination of economic policies in accordance with the Luxembourg European Council resolution on economic policy coordination in stage 3 of EMU; calls on the Commission to submit proposals on ways in which, under the new conditions of EMU, the economic policy of the EU and its Member States can be harmonized so that it does not result in a downward spiral of taxes and expenditure, but in a European added value for employment;

15. Supports the establishment of EMU, with the European Central Bank committed to maintaining price stability as its primary objective, and hence low interest rates, to enable levels of savings and investment leading to sustainable economic and employment growth;

16. Regards the reduction of the average budget deficit from 6.1% of GDP in 1993 to 2.6% in 1997 as a good result and considers that continued budgetary consolidation should be reached principally through targeted government expenditure cuts rather than through across-the-board tax increases;

17. Notes with regret that achieving the rapid reduction in deficits in many countries has been reached by lowering expenditure on easy targets such as investment spending, research and development, and education: and hence there will be a need to re-balance budgets to promote this physical and human capital expenditure, while continuing to reduce other budgetary elements;

18. Takes the view, therefore, that - although continued reduction in debt levels is an appropriate and necessary medium-term objective - an extremely restrictive budgetary discipline at this time carries with it the danger of causing adverse effects on economic activity, and that budgetary discipline does not automatically lead to 'virtuous cycle¨ effects as portrayed in the Commission's annual economic report and therefore has to be closely monitored;

19. Stresses the need to introduce an EU-wide system of benchmarking for investment and employment and to highlight the relevance to employment of private and public investment, taking account of the fact that public investment can provide an incentive for private investment, particularly in the area of infrastructure investment;

20. Considers that the level of public and private investment in the EU is totally inadequate to enhance the EU 's capacity to innovate and adapt for the future;

21. Stresses that both private and public investment are necessary to enable the Community economy to achieve an appropriate rate of growth; calls for a policy mix which makes it easier to achieve this end; stresses that public investment encourages private investment because of the lower costs which accompany them; calls for public investment showing an appropriate level of social and economic profitability;

22. Calls on the Member States to comply with the resolutions of the European Council on tax competition between Member States;

23. Stresses the need to reduce the tax burden on labour costs and to agree on an EU-wide minimum level of taxation on business;

24. Accepts the conclusion of the annual report that nominal wage increases must be consistent with price stability, and that real wage increases should take into account the need to maintain the profitability of investment and should support the purchasing power of wage earners without threatening overall profitability, and stresses the responsibility of the social partners in this respect; looks in vain for initiatives to stimulate domestic demand, without which no lasting contribution to growth and employment can be achieved; calls therefore on the Commission and the Member States to amend their economic policy accordingly and to transform the emerging economic recovery into investment-led long-term growth which can lead to higher employment levels; stresses the need for a coordinated economic policy which is geared towards both supply and demand in the best possible combination in the interests of employment, and which can thus support concerted action by the state and by the two sides of industry in a European alliance for employment;

25. Draws attention to the opportunities for creating new local jobs, particularly with a view to enhancing the provision of services for the care of children and dependent persons, although the pay for these jobs should not be discriminatory and should respect the principle of equality in women's and men's salaries and guarantee a decent standard of living;

26. Is not in favour of creating employment by dramatically lowering wages in the low-skilled labour market segment which would lead to new poverty, threaten social cohesion in the Union, and merely create employment which would not provide for a decent livelihood;considers that macroeconomic growth policy will not suffice to absorb unemployment and that it must therefore be complemented by a series of structural measures on the regulation of the labour market, the qualification of workers and the composition of labour costs;

27. Considers, however, that it is necessary to reduce labour costs for the least qualified workers in order to stimulate their recruitment and training;

28. Reiterates its support for the reduction of non-wage labour costs, which could be compensated by other fiscal reforms without curbing social benefits, targeted at specific labour force groups at the lower end of the wage scale, combined with active labour market measures in vocational training, retraining, education, and apprenticeship schemes, which could be financed partly through the activation of unemployment benefits and the fostering of local partnerships;

29. Welcomes in principle the Commission¨s proposal to reduce VAT rates on labour-intensive services, as an effective Community-level measure to stimulating business activity and reducing unemployment and regrets the delay in turning these proposals into action;

30. Stresses the importance of policies which focus on areas which are likely to have a marked effect on economic growth and employment, placing special emphasis on support for SMEs; vigorous promotion of research and development, and the development of trans-European networks to promote a better communications environment for European entrepreneurial initiatives;

31. Stresses the need to step up European and national funding for research and the promotion of the latest technology, and hopes that the Commission will submit a specific report defining the public and private resources to be mobilized with a view to speeding up job creation in these new areas;

32. Calls for further initiatives from the EU and the Member States to increase the number of self-employed and the businesses they establish and improve the availability of risk capital, particularly since small and medium-sized undertakings are the major employers in the EU;

33. Calls upon the Council and Member States to promote a series of measures in favour of SMEs alleviating administrative burdens, facilitating access to and availability of venture capital and fostering the creation of innovative SMEs which have strong employment potential; requests in this connection the development of appropriate benchmarks for assessing the job-creation impact of investment carried out by undertakings at sectoral and regional level;

34. Emphasizes the fact that any asymmetric shocks which may occur from time to time are likely to be centred on specific regions, a factor which could be exacerbated if the relatively diverse nature of European economies is reduced over time and that the best way of avoiding any such asymmetric shocks is to increase the harmonization of economic policies;

35. Requests careful monitoring of the impact on the sectoral and geographical concentrations of manufacturing industries, under the influence of real factors of competitiveness resulting from the single currency and the single market;

36. Strongly agrees, therefore, with the Commission's view of an enhanced need for structural adjustment - with the active and enhanced use of the European Structural Funds - after EMU; regions must be put in a better position to deal with asymmetric shocks after exchange rate adjustment is no longer available in the euro, via active regional guiding policies;

37. Calls upon the social partners to examine closely the consequences of the increased transparency of wages and costs between Member States due to the existence of the common currency in the third phase of EMU; calls also on the Commission to study the wage structure and the costs which affect it at Member State level with the aim of analysing the possible impact of the launch of EMU on wages and employment;

38. Recognizes that the proper competitive functioning of product and service markets can be enhanced by more price flexibility, the lifting of regulations, the fostering of entrepreneurship, the completion of the single market, the easing of market access and the liberalisation of public and private monopolies, while acknowledging the importance of large businesses and the need for some business concentrations;

39. Recognizes the need to strengthen occupational and sectoral mobility and equality of treatment and opportunity between men and women in labour markets;

40. Is not in favour of a compulsory reduction in working time throughout the Union as this would be contrary to the principle of subsidiarity;

41. Is, however, in favour of reductions in working time decided on at national or microeconomic level when suitable and of the maximum use of voluntary part-time work arrangements as called for in the Commission's annual economic report;

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