WRITTEN QUESTION E-0798/00

by Sami Naïr (PSE) to the Commission

(16 March 2000)

Subject: Commission communication on its strategic objectives 2000-20005 and work programme for the year 2000 (COM(2000) 154 final)

1. In its introduction the Commission speaks about modernising our social model.

(a) Why does it consider that is essential to reform the Welfare State?

(b) How is the Welfare State to be modernised in a way that it will remain based on solidarity and fair, caring and inclusive in a climate of more cautious public spending?

2. In relation to the Stability Pact, the Commission says that it is ready to present proposals to deepen and broaden the scope of monitoring in the area of public finances.

(a) What does it mean by deepening and widening its monitoring?

(b) What measures does it envisage taking?

Answer given by Mr Prodi on behalf of the Commission

(13 June 2000)

1. (a) The Commission presented the reasons why it considers it necessary to modernise social protection systems in a communication dated 14 July 1999 and entitled A concerted strategy for modernising social protection(1).

(b) Although the need for reform and the detailed arrangements vary from one Member State to another, the Commission considers that the fundamental challenges facing social protection systems are very similar in all the Member States. It would therefore be helpful to establish closer cooperation in the area of social protection, based on exchanges of experience, concertation and assessment of recent political developments with a view to identifying best practice. The Commission does not propose to advocate a single pattern of modernisation applicable to all Member States. It considers, however, that reforms should promote a high level of employment and of social protection (EC Treaty, Article 2), which is one of the Community's fundamental objectives.

2. (a) The Commission and Council are close to completing assessment of the updated stability and convergence programmes. These confirm that nearly all Member States are on course to meet the core objective of the stability and growth pact by 2002, namely to have budget balances of close to balance or in surplus. This progress underlines the effectiveness of the framework, and as such the Commission has no intention to make a proposal calling for a modification of the stability and growth pact.

None the less the Commission considers that there is a need for close monitoring of Member States' budgets. With favourable growth prospects, close attention must be paid to underlying budgetary developments to ensure that there is no pro-cyclical loosening of the budgetary stance. In addition, as budgets approach positions of balance, there will be more scope for cutting taxes. The Commission recognises the importance of reducing the tax burden in the Community, especially on labour at the lower end of the wage scale. However, the Commission and Council, when assessing proposals to cut taxes submitted in future stability and convergence programmes, must ensure that stability and growth pact commitments are always respected.

Further, as called for by the recent special European Council in Lisbon, more account needs to be taken of the quality and sustainability of public finances. A start has been made on the issue of sustainability. The Commission is actively working with the Economic Policy Committee on developing comparable pension projections up to 2050.

(b) The Commission has published a report on public finances in EMU(2). This provides a thorough analysis of the budget performance in 1999 and the short-term outlook for 2000. It also provides an overview assessment of medium-term targets and budget strategies contained in the updated stability and convergence programmes. Moreover, the report provides a detailed examination of the functioning of the stability and growth pact during its first year. Finally, it contains an in-depth assessment of tax systems and effective tax rates in the Community, a key element of the quality of public finances.

(1) COM(1999) 347 final.

(2) SEC(2000) 849.