Opinion of the Committee of the Regions on the "EU Economy: 2000 Review"
Date: 2001-04-05
Institutions: European Committee of the Regions
Subjects: European Union, balance sheet, economic policy

12.9.2001

EN

Official Journal of the European Communities

C 253/29

Opinion of the Committee of the Regions on the ‘EU Economy: 2000 Review’

(2001/C 253/09)

THE COMMITTEE OF THE REGIONS,

having regard to the document ‘EU Economy: 2000 Review’ (ECFIN/674/00/EN);

having regard to the decision taken by its Bureau on 13 June 2000 under the fifth paragraph of
Article 265 of the Treaty establishing the European Community, to draw up an opinion on this matter
and to instruct Commission 6 for Employment, Economic Policy, Single Market, Industry and SMEs to
undertake the preparatory work;

having regard to the Draft Opinion (CdR 469/2000 rev.) adopted unanimously by Commission 6 on
19 February 2001 (rapporteur: Mrs Kaija-Maija Perkkiö, FIN-ELDR),

at its 38th plenary session of 4 and 5 April 2001 (meeting of 5 April) adopted unanimously the following
opinion.

THE VIEWS AND RECOMMENDATIONS OF THE COMMITTEE OF
THE REGIONS

1. The basis for economic policy

1.1.
The Committee of the Regions feels it is important that
the issues of importance to local and regional authorities are
taken into account in the review of the EU economy in 2000
and that they have an influence on the EU’s economic policy
guidelines both in the short and long term.

1.2.
The Committee of the Regions supports an economic
policy aimed at stable growth and the proposed guidelines.
However, it wishes to emphasise the diversity of national and
regional circumstances. The Committee of the Regions also
wishes to highlight the particular importance of balanced
development throughout the EU, as well as the objective of a
more social Europe. The Committee of the Regions notes that
Europe has many different strengths, and that it must draw on
these to achieve its common objectives and to ensure that the
Member States and regions identify with them.

The EU’s economy is considered currently to be facing
1.3.
four main challenges, namely: the return to full employment,
the transition to a knowledge-based society, the consequences
of a rapidly ageing population, and the improvement of social
cohesion. It might be possible to address these four challenges
simultaneously, but only if coordination is improved. How-
ever, closer attention must also be paid to the structural
differences between countries’ economies, development levels,
regional differences within countries and the economic cycle.

2. Employment

2.1.
The Committee of the Regions considers that, with a
consistent policy of active modernisation and structural change

in European economies, a return to full employment
is
possible. A recommended level of full employment should
be set for each country individually, taking into account
their previous history, employment rate and any structural
unemployment. The unemployment rate does not provide
an exact reflection of
labour-market efficiency, as labour
shortages and high levels of structural unemployment can
co-exist (for example, the concentration of high technology
in the Oulu region in Finland).
It is therefore of crucial
importance that the indicators employed also apply to the
regional level.

2.2.
It is also important to recognise the link between ageing
and unemployment. As a result of the ageing population, the
labour force is shrinking, resulting in a fall in the supply of
labour. This is especially true of the older industries and the
service sector. New jobs are being created largely in the new
economy, in sectors which require specialist know-how and
skills. Indeed many countries and regions are faced with an
unusual situation, namely a vicious circle of unemployment
and a shortage of skilled workers. Particular attention also
needs to be paid to ensuring that workers have the opportunity
to acquire new skills throughout their working lives, and that
sufficient labour will be available in the future in the care and
nursing sectors.

2.3.
In the EU context it has often been argued that a
comprehensive social safety net weakens economic dynamism
and hinders employment creation. However,
there are
countries in Europe with a high level of social protection, high
taxation but also with strong economic growth. Targeted
social protection against the basic risks of unemployment is
also needed to foster entrepreneurial ventures and a dynamic
of business start-ups in Europe. Such protection must go hand
in hand with an activating social policy aimed at reintegrating
people into working life as quickly as possible. The aim should
be to avoid the risk of increasing poverty while promoting

C 253/30

EN

Official Journal of the European Communities

12.9.2001

labour mobility and encouraging the unemployed to take on
different kinds of work if necessary. This is particularly
important given that only small numbers of those who have
fallen into the spiral of structural unemployment manage to
find work in the information-based sectors.

2.4.
The Committee of the Regions welcomes the strong
emphasis of the European employment strategy on the local
and regional level. Local and regional partnership, combined
with the effective use of
the Structural Funds, creates a
favourable environment for employment promotion. This
must be pursued further and efforts must be stepped up in all
the Member States.

3. A knowledge-based economy

3.1.
Particularly rapid progress has been made in the
transition to a skills-based society. The Committee of the
Regions stresses that government measures can also be used
to promote this process, provided they respect the competition
and efficiency improvement requirements. In many countries,
some of the necessary measures, notably in the training
field, must ultimately be implemented by local and regional
authorities. Realistic consideration should be given to how the
necessary public investment can be financed.

3.2.
In the euro-zone in particular the economy is monito-
red in accordance with strictly defined indicators. These
indicators are appropriate for short-term assessments, but their
suitability from a longer-term perspective is debatable. To
ensure sustainable growth, the use of new criteria should also
be considered, such as the contribution of the new economy
to the national economy, the openness of the economy and
the ability to finance old-age pensions.

National and regional differences considerably restrict
3.3.
the opportunities presented by the new electronic economy.
The Committee of the Regions considers it important for these
differences to be evened out and for Member States and the
European Community to do all they can to promote the shift
to the new economy and to reap the benefits of the growth it
brings. The most concrete expression of this is the e-Europe
project initiated by the Commission, and the Committee of
the Regions supports its further development. From the
perspective of the regions, a knowledge-based economy creates
new opportunities as distances are becoming less important
and older manufacturing industries are being replaced by new
jobs based on knowledge and its manipulation. The Committee
of the Regions feels that, irrespective of this, every effort must
be made to boost the competitiveness of established industry,
trade and craft sectors. The business services sector in particular
is dependent on an effective economic base in these areas.

4. The ageing population

4.1.
The consequences of an ageing population on society
and its development will prove to be considerable. Indeed
the Committee of
the Regions feels that although the
development process in each country is different, it would
make sense to coordinate strategy in this field, particularly
with regard to future labour needs and the extent to which
Europe may need to rely on external
labour in order to
maintain prosperity. The establishment of a common set of
evaluation criteria would help to predict future developments
in each country.

4.2.
Efforts should be made right away to prepare for the
services and benefits required by an ageing population and to
ensure that the resources exist to fund them. This is also why
any public sector surplus resulting from economic growth,
should be channelled — taking account of each country’s
individual circumstances — into reducing the public debt and
the objective of lowering taxation rates, and preparing for
future challenges, e.g. by promoting new kinds of supplemen-
tary pension provision.

4.3.
An ageing population requires increasing amounts of
care and health services for the old and demand for these
will inevitably rise. As Member States’ arrangements vary, so
too will the solutions necessary to address the issue. In a
more social Europe older people must be treated with
respect, their income must be safeguarded and services need
to be well-organised. To achieve a sustainable economy we
must
funding solutions, and
address their impact on the entire economy, and not just on
public finances.

turn to different kinds of

4.4.
The Committee of the Regions proposes that infor-
mation on pension arrangements and pension-related deficits
should be taken into account when assessing the long-term
sustainability of economic policy and if new criteria are drawn
up.

4.5.
The challenges presented by the ageing population and
the opportunities presented by the new economy are also
important factors for regional prosperity and ensuring bal-
the
anced development. The operation and objectives of
Structural Funds should therefore be managed in accordance
with the principle of sustainable development and a sustainable
economy.

4.6.
In many countries, many of the services for older
people are provided by local authorities. The increased demand
for services will have a significant impact on the finances and
operations of these authorities. Provision should be made in
good time to supplement local authority services with a variety

12.9.2001

EN

Official Journal of the European Communities

C 253/31

of equivalent services. The quality and regional availability of
services must also be ensured. Tax policy must take account of
the public’s growing demands on local authority essential
services when distributing the national tax burden.

In more sparsely populated regions, welfare services
4.7.
are not subject to competition, instead publicly funded support
will continue to be necessary in the future for providing basic
services to the public. The Committee of the Regions stresses
that remote regions will continue to need extensive common
support in the future.

5. Social cohesion

Local and regional authorities have a particularly
5.1.
important role to play in improving social cohesion. The
internalisation of European values and Europeanness varies
from country to country partly for historical reasons. As the
economic outlook is now good, determined efforts need to be
made in this respect. Furthermore, differences between the
pace of progress on issues should be noted — for example,
progress on economic policy coordination and cohesion is
relatively fast, while progress in the field of social Europe,
where the differences between systems will also need to be
respected in the future, is slower.

The need for further cuts in public finances and, for
5.2.
example,
the options and need for the reform of social
benefits must be evaluated individually by country and by
region to ensure that the objectives for a more social Europe
can be achieved and that poverty does not increase.

5.3.
The structural performance indicators agreed at the
Lisbon Summit, which help to provide an overview of the
achievements so far, represent an important step forward.
The similar work being done on social cohesion is also
significant. Progress has been made in drawing up social
development
introduction must be
viewed as a priority.

indicators, and their

6. Taxation

6.1.
The differences between systems funded by taxation
and those funded by insurance, as well as the knock-on effects
of these differences, have not been examined closely enough
in the EU debate. As a result of
the
consequences of e.g. lowering income tax vary from Member
State to Member State. Countries with a high tax rate may be
perfectly competitive economically and have low unemploy-
ment. In addition to the income tax rate, other indicators

these differences,

— which take account of the tax structure as a whole and
economic dynamism — should be developed to reflect the
conditions for employing people and the competitiveness of
employers. The impartial treatment of different employers in
labour markets should therefore also be ensured. In so doing,
suitable importance should be attached to the effect of private
employment on the economy as a whole inasmuch as it
enhances performance and efficiency.

6.2.
Studies of the structure, targeting and impact of public
support on economic dynamism must be continued and
pursued in greater depth. A more socially united Europe also
requires shared responsibility and solidarity with regard to
funding benefits and services to ensure that poverty does not
increase. More detailed studies should be undertaken on the
impact of the tax rate, the tax structure and the targeting of
public support on economic dynamism and employment in
the various Member States, while paying particular attention
to differences in the structure of Member States’ public finances
and distribution of responsibilities. Particular attention must
be paid to the institutional differences between Member
States as regards economic policy and to differences in their
economic development.

6.3. Many countries are witnessing structural change as
population density rises in growth regions. As a consequence,
the gap in development levels between regions within the
same country is growing. This population concentration
means that many countries are in need of new kinds of
regional policy measures in order to manage this trend.
Although the EU’s Structural Funds are a significant resource,
additional national efforts are also necessary.

6.4.
The EU’s draft tax strategy is not limited to capital
movements, applying also to indirect taxation, company and
corporation tax with a view to preventing harmful
tax
competition. For the time being, more general proposals on
taxation, responding in particular to demands to
direct
harmonise income tax, have not been put forward. Achieving
extensive tax harmonisation will be difficult, unless Member
States perceive it to be in their self-interest. In the Nordic
model, funding through taxation is considered to be the
guarantee of shared responsibility, whereby the better-off
bear some of the risk for the less well-off. Public opinion
surveys indicate that the public prefers to maintain quite
high tax levels in order to benefit from common services
rather than to reduce taxation and weaken the communal
sector.
taxation considered
extortionate by the public in many cases leads to evasion
via the black economy or the decision not
to take up
tax cuts and structural
In such countries,
employment.
reforms of social security systems are desirable for greater
growth and employment.

In other countries a level of

C 253/32

EN

Official Journal of the European Communities

12.9.2001

7. The open coordination method

7.1.
In accordance with the principles of open coordination,
guidelines are set at the EU level which are then implemented
by the Member States and regions, taking into account their
special characteristics. This is the correct approach, but it must
be ensured that it does not end up becoming excessively top-
heavy from an administrative point of view. To develop this
approach further and to strengthen the process, quantitative
and qualitative indicators could also, if necessary, be set in
accordance with national and sectoral needs. In so doing, the
basic principles of subsidiarity in the relationship between EU,
national governments and regions must be given the highest
priority. Decision-making powers at
level must be
respected and promoted under the division of powers between
the EU and individual states.

local

7.2.
As open coordination is also making headway in the
field of social protection, it is important to take Member States’
and regions’ different traditions and history into account.
Europe’s different regions can learn from each other, and there
is no need to apply a single model throughout the EU to find
solutions to, for example, the needs of an ageing population.
Nevertheless, measures which have proved to be effective and
have responded to the challenges of the new economy and
ensured economic stability over the longer-term, could be
recommended for different regions.

7.3.
Open coordination must be applied in as decentralised
a way as possible, which allows the EU, its Member States,

Brussels, 5 April 2001.

local and regional authorities, the social partners and civil
society organisations to play an active role with regard to any
relevant topical issue in a spirit of partnership. The local and
regional
level will have an important role to play in this
process.

7.4. With regard to these new procedures and the increasing
the
it
coordination taking place,
intention is not to abandon the solidarity-based welfare model,
but to adapt it to new circumstances. Economic efficiency
and competitiveness must be improved while respecting the
subsidiarity principle and social cohesion.

is worth stressing that

8. The introduction of competition to the public sector

8.1. Within the EU it has been recommended that compe-
tition should be increased and particular attention has been
paid to restructuring health care and stressing the consumer
perspective. Health-care funding and cost-benefit evaluations
of this are highly contradictory. Many Member States, includ-
ing the Nordic states, have also begun to develop different
kinds of quality and benchmarking criteria to promote compe-
tition and consumer interests within the publicly financed
health-care system. This trend should be promoted and further
study carried out on the functioning and efficiency of different
health-care systems and other care services from the perspec-
tive of the consumer, public finances and the economy as a
whole.

The President

of the Committee of the Regions

Jos CHABERT