Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions - Strengthening the social dimension of the Lisbon strategy: Streamlining open coordination in the field of social protection
Date: 2003-05-27
Institutions: European Commission
Subjects: European Employment Strategy, European social policy, deepening of the European Union, political cooperation, social security

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 27.5.2003
COM(2003) 261 final

COMMUNICATION FROM THE COMMISSION
TO THE COUNCIL, THE EUROPEAN PARLIAMENT,
THE ECONOMIC AND SOCIAL COMMITTEE
AND THE COMMITTEE OF THE REGIONS

Strengthening the social dimension of the Lisbon strategy: Streamlining open
coordination in the field of social protection

TABLE OF CONTENTS

1.

2.

2.1.

2.2.

2.3.

Introduction: Social Protection in the EU Political Agenda ........................................ 4

Streamlining in order to strengthen the social dimension of the Lisbon Strategy. ...... 5

Contributing to socio-economic governance in the wake of the streamlining of the
BEPGS and the EES. ................................................................................................... 5

Streamlining: creating an integrated framework for the cooperation on social
protection. .................................................................................................................... 6

Working Methods: the Open Method of Coordination and its role within the overall
strategy. ........................................................................................................................ 8

OMC: a complementary method ................................................................................................ 8

Flexibility and full respect for subsidiarity ................................................................................ 8

Openness: the involvement of actors ......................................................................................... 9

The link with existing processes and instruments ...................................................................... 9

Role of the Commission........................................................................................................... 10

Association of the European Parliament .................................................................................. 10

3.

3.1.

3.2.

3.3.

3.4.

Creating the strengthened and simplified coordiation process. ................................. 10

Common objectives.................................................................................................... 10

Reporting mechanisms: a new annual joint report on social protection .................... 11

Indicators: an important underpinning of streamlining.............................................. 12

The Transition to Streamlining 2003-2006 ................................................................ 12

Social inclusion ........................................................................................................................ 13

Pensions.................................................................................................................................... 13

Healthcare................................................................................................................................. 14

Joint Report on Social Protection............................................................................................. 14

ANNEX 1................................................................................................................................. 15

ANNEX 2................................................................................................................................. 17

ANNEX 3................................................................................................................................. 18

2

1. 

INTRODUCTION: SOCIAL PROTECTION IN THE EU POLITICAL AGENDA

Social  Protection  is  a  fundamental  component  of  the  European  model  of  society.  It  can  be
defined as the set of collective transfer systems which are designed to protect people against
social risks 1. It currently accounts, on average, for about 27.5% of GDP (down from a peak
of 29% in 1993).2 Member States retain full responsibility for the financing and organisation
of their systems. EU legislation in the area has been mainly concerned with how fundamental
Treaty principles are applied within national systems.3

The  Amsterdam  and  Nice  Treaties  outlined  a  role  for  the  Community  to  "support  and
complement  the  activities  of  the  Member  States"  in  a  range  of  objectives  relevant  to  social
protection:  the  "social  security  and  social  protection  of  workers",  "combating  of  social
exclusion" and "modernisation of social protection systems". This is the basis for processes of
policy  Cooperation  and  coordination  which  have  developed  over  recent  years  involving
exchanges  of information, the  evaluation of ongoing policy developments and identification
of best practices. They are founded on an explicit acknowledgement of subsidiarity and of the
diversity  of  national  systems.  There  is  a  shared  recognition  that  systems  face  common
challenges  (for  example,  regarding  the  ageing  of  the  population;  the  persistence  of  poverty
and social exclusion and the threat of growing inequalities; changes in the structure of society,
families and the world of work; the challenge of contributing to growth and job creation) and
need to reform and modernise in the face of such challenges.

The scope of this cooperation took a huge step forward when the European Council of Lisbon
in March 2000 outlined its vision of an integrated socio-economic strategy for Europe for the
decade  to  2010.  The  Lisbon  conclusions  saw  modernised  and  improved  social  protection
systems  as  an  important  building  block  towards  achievement  of  the  overall  strategic  goal.
This  view  that  social  protection  has  an  important  contribution  to  make  to  overall  socio-
economic  policy  was  further  reinforced  in  the  Social  Policy  Agenda  adopted  by  the  Nice
European  Council.  At  its  heart  was  the  idea  of  a  policy  triangle  involving  the  positive
interaction between economic, employment and social protection policies.

Thus, on the one hand macroeconomic policy goals and market liberalisation have important
social  implications,  including  on  the  organisation  of  social  protection  systems;  on  the  other
hand,  economic  and  employment  policies,  for  example  for  promoting  the  increased  labour
force  participation  of  older  workers,  need  to  be  supported  by  reforms  in  social  protection
domains such as pensions, healthcare and care systems. Increasingly, social protection is seen
as having the potential to playan important role as a productive factor, ensuring that efficient,
dynamic, modern economies, are built on solid foundations and on social justice.

1

2

3

Social  risks  typically  cover  old  age,  retirement  and  age-related  dependency,  the  death  of  a  provider,
disability, sickness, maternity, dependent children and unemployment, and, sometimes, the need to care
for the frail elderly and disabled or sick relatives. Social protection ensures that these social risks do not
result in poverty and that the lack of resources does not prevent the access to services that are essential a
human life in dignity.
Old-age  pensions  and  healthcare  are  by  far  the  largest  components  of  social  protection  in  the  Union,
together accounting for almost two thirds of total outlays. European Commission "Social Protection in
Europe 2001", published May 2002.
As a corollary of freedom of movement, there are coordinating mechanisms covering social security for
migrant  workers  in  Regulations  1408/71  and  574/72,  which  ensure  that  they  do  not  lose  entitlements
when  exercising  their  right  to  free  movement.  Similarly,  Directives  79/7/EEC  and  86/378/EEC  deal
with the application of the principle of equality between men and women in statutory and occupational
social security

3

                                                
This communication sets out concrete proposals with the goal of making the coordination of
Member States' policies in the field of social protection more effective, thereby  contributing
to  the  necessary  modernisation  of  social  protection  systems  and  strengthening  the  social
dimension  of  the  Lisbon  strategy.  The  key  instrument  for  this  goal  is  the  Open  Method  of
Coordination.  While  this  method  is  already  implemented  for  some  strands  of  social
protection,  it  needs  substantive  streamlining  and  simplification,  which  include  a  more  clear
definition of its scope.

Streamlining of policy coordination on  social protection should  enhance  the  quality  and  the
coherence  of  the  overall  socio-economic  governance  of  the  EU.  Therefore,  it  should  be
undertaken  in  coherence  with  the  Treaty-based  instruments  for  economic  and  employment
policy coordination in the EU –and thus to provide input for the Annual Spring Report which
prepares  each  Spring  European  Council.  Thus,  this  communication  addresses  how  the
streamlined  policy  coordination  process  can  complement  and  add  value  to  existing  Treaty-
based  methods  and  coordination  processes4.  Based  on  the  recently  established  three-yearly
cycle for the synchronisation of the economic and employment policy coordination processes
- two main pillars of the Lisbon strategy - it outlines a timetable for streamlining of the social
protection process which could be effected in 2006 and synchronised with the second round
of the  three-year  cycle  of  these  two  coordination  processes.  Accordingly  the  launch  of  new
streamlined  objectives  for  social  protection  would  be  simultaneous  and  consistent  with  the
second round of the synchronised economic/employment processes.

The communication also  addresses  how  Cooperation  on  social  protection,  which  has  grown
rapidly  since  Lisbon,  can  be  made  more  efficient  and  less  burdensome  on  the  actors
concerned  and  how  greater  synergies  between  the  various  strands  of  the  work  can  be
developed. It proposes a rationalisation and simplification of work and a greater emphasis on
implementation in the future.

This  opportunity  of  this  communication  is  justified  by  the  need  to  prepare  timely  the
involvement of the new Member States in the processes of policy coordination contributing to
the  Lisbon strategy,  as well  as  the  synchronisation  of  the  social  protection  process  with  the
economic and employment policy coordination processes in 2006. It had been announced in
the  Spring  Report  of  20035,  where  the  Commission  has  committed  itself  to  adopt  a
communication  on  "the  streamlining  of  current  disparate  actions  linked  to  social  inclusion
and pensions and, in time, cooperation in relation to healthcare and "making work pay" into
a  single  Open  Method  of  Coordination".  It  also  responds  to  the  invitation  addressed  by  the
Brussels  European  Council  to  the  Commission  "to  report  on  the  advisability  of  simplifying
and streamlining the various strands of work on social protection into a coherent framework
within the Open Method of Coordination".

4

5

The role of the Open Method of Coordination relative to the Treaty-based processes has been defined
by  the  Social  Protection  Committee  and  the  Economic  Policy  Committee  in  the  context  of  the
application of this method in the area of pensions in the Joint Report to the Laeken European Council..
It  says  that  the  Open  Method  of  Coordination  complements  the  Treaty-based  processes  and  takes  its
place  alongside  these  existing  processes  which,  as  part  of  their  wider  remit,  continue  to  deal  with
aspects of policies concerned and calls for a coherence with these processes. Cf. "Quality and viability
of pensions – Joint report on objectives and working methods in the area of pensions, 10672/01 ECFIN
198 SOC 272.
COM (2003) 5

4

                                                
2. 

2.1. 

STREAMLINING IN ORDER TO STRENGTHEN THE SOCIAL DIMENSION OF THE LISBON
STRATEGY.

Contributing  to  socio-economic  governance  in  the  wake  of  the  streamlining  of
the economic and employment policy coordination processes.

Streamlining  the  economic  and  employment  policy  coordination  processes  has  involved  the
creation of a new unified timetable for the work both before and after each Spring European
Council,  within  a  framework  of  a  three-yearly  cycle  (2003-2005).  Guidelines  and
recommendations  should  be  kept  broadly  unchanged  for  these  three  years,  thus  allowing
Member  States  and  the  Commission  to  focus  on  implementation  during  the  intermediate
years.  Economic  policy  coordination  is  organised  within  the  framework  of  the  Broad
the
Economic  Guidelines 
implementation of the BEPGs and the Stability  and Growth Pact. Pensions are dealt with in
this  process  from  the  point  of  view  of  the  financial  sustainability  of  pension  systems  and
public  finances  as  a  whole,  as  well  as  of  the  contribution  of  pension  systems  to  the
functioning  of  labour  and  financial  markets  and  to  the  performance  of  the  economy  as  a
whole.  In  particular,  the  Stockholm  European  Council  concluded  that  Member  States'
comprehensive  strategies  for  addressing  the  economic  and  budgetary  challenges  posed  by
ageing populations shall be presented in conjunction with Stability/Convergence Programmes
and be examined as part of the Stability and Growth Pact and through the BEPGs.

surveillance,  aims  at  assessing 

(BEPGs);  multilateral 

Employment  policy  coordination  is  organised  within  the  framework  of  the  European
Employment  Strategy  (EES)  and  has  been  built  around  several  components.  Employment
Guidelines (EGs) set out common objectives  and  priorities  for  Member  States’  employment
policies,  which  are  put  into  practice  nationally  through  National  Action  Plans.  These  are
examined  jointly  by  the  Commission  and  the  Council,  which  present  a  Joint  Employment
Report,  on  the  basis  of  which  country-specific  recommendations  may  be  issued  upon  a
proposal  by  the  Commission.  While  the  reporting  process  is  annual,  the  guidelines  should
remain stable for three years. Besides full employment and quality at work, the promotion of
cohesion and social inclusion is one of the three overarching objectives of the EES reflected
in  the  Employment  Guidelines.  This  objective  is  supported  by  a  number  of  priorities  for
promoting a more inclusive labour market, and the employability of the most disadvantaged
groups.  The  Guidelines  also  encourage  Member  States  to  support  older  workers  and
employers  in  increasing  the  employment  rate  of  older  people  and  extending  the  age  of  exit
from the labour market.

This streamlining has been a major positive achievement; it now raises the question as to how
work on the other aspects of the Lisbon strategy should be organised in order to enhance the
process as a whole.

The  fact  that  streamlining  concerned  other  policy  areas  and  had  the  potential  for  a  more
general  application  was  acknowledged  in  the  Communication  of  last  September  which
proposed  streamlining  of  the  economic  and  employment  policy  coordination  processes6.  It
traced the recent major expansion in the number of different procedures at EU level which are
concerned, to one extent or another, with coordinating economic and related policies. It listed
the  following  processes:  the  Stability  and  Growth  Pact;  the  Cardiff  Process;  the
Macroeconomic Dialogue; a range of benchmarking processes in different policy fields; and
applications  of  the  Open  Method  of  Coordination  in  several  areas,  most  notably  in  this

6

COM (2002) 487

5

                                                
context, in regard to pensions and social inclusion. The point was made that, as each of these
elements is  added, there is a risk of  creating  greater  complexity,  duplication  of  effort  and  a
lack of clarity in overall messages. Furthermore, the Communication had separately identified
the need to focus more on implementation and less on simply creating more policy guidelines.

The  September  2002  Communication  proposed  that  there  would  be  a  reflection  by  the
Commission, "in the coming months, on how to streamline the open process of coordination
in the social protection field – currently covering social inclusion and pensions – and how to
link it to the new streamlined approach". This is logical in view of the close links and strong
potential  synergies  between  the  social  protection  processes  and  the  two  streamlined  Treaty-
based  processes.  The  close  triangular  relationship  between  the  policy  domains  concerned  is
brought out very clearly in work under the OMC for pensions. The common objectives which
were agreed by the Laeken European Council as a basis for the process invited the Member
States  to  set  out  their  policy  response  by  reference  to  a  mix  of  social  objectives  (how  to
maintain  the  adequacy  of  pensions;  how  to  respond  to  societal  change);  labour  market
objectives  (how  to  boost  employment,  particularly  among  older  workers);  and  economic
concerns  (how  to  ensure  long-term  sustainability  of  pension  systems).  Similarly,  pertinent
connections between different policy domains can be found with regard to social protection in
the  field  of  healthcare  and  care  for  the  elderly,  as  pointed  out  by  the  three  broad  policy
objectives endorsed by the Barcelona European Council - ensuring quality of care, equity in
access  and  provision,  and  solidarity  in  financing  mechanisms.  Finally,  work  on  social
inclusion involves very important questions regarding the interaction of social protection and
employment policies.

It is clearly the case when looking, for example, at the issues confronting national pension and
healthcare systems that, while financial challenges have been the driving force for reform, its
impact cannot  exclusively  be  assessed  from  a  financial  perspective.  To  be  effective,  reform
must also ensure that policy continues to  be embedded in  solidarity  and  the  basic  values  of
society.  In  particular,  with  regard  to  pensions,  for  instance,  it  is  necessary  to  ensure  that
Member  States  continue  to  respect  the  social  objective  of  adequacy  in  their  systems  and
pursue  efforts  to  adapt  their  systems  to  changing  societal  needs.  There  is  a  clear
interdependence between financial sustainability and adequacy. Necessary reform is difficult
to  carry  out  without  political  support.  The  same  overall  political  balance  is  more  and  more
required at EU level, if the Lisbon strategy for coordination of socio-economic policies is to
achieve maximum benefits. Streamlining, undertaken with a view to strengthening the social
protection dimension of the strategy, can help achieve such a balance.

Accordingly, the proposals set out in Section 3 foresee that future work on social protection
should be oriented in such a way as to strengthen and complement the Treaty-based processes
regarding employment and macro-economic policies (respectively the  BEPGs and the EES).
Hence  the  need  to  ensure  that  the  timetable  for  the  new  streamlined  process  of  social
protection be fully synchronised with that of these two processes. It will be based on a three-
year cycle for reviewing objectives and delivering major strategic reports. This timeframe is
appropriate for social protection,  given the long-term nature of  social  developments and  the
gradual pace of change in this field. At the same time, with a view to informing the process
leading to the Spring Summit and strengthening the visibility of social protection  within the
Lisbon strategy, Member States will be asked to provide in intervening years light updates on
major policy developments. Synchronisation with the two streamlined processes should take
place from 2006, when the next three-yearly cycle for the BEPGs and the EGs starts.

6

2.2. 

Streamlining:  creating  an  integrated  framework  for  the  cooperation  on  social
protection.

Policy cooperation on social protection made a huge step forward when the Lisbon European
Council outlined its vision of an integrated socio-economic strategy for Europe for the decade
to 2010. The Lisbon conclusions attached considerable importance to the contribution which
social protection systems were to make to achieving the new strategic goals. They gave clear
mandates  for  joint  work  between  the  Member  States  and  the  Commission  in  the  fields  of
social  inclusion  and  pensions;  they  introduced  the  Open  Method  of  Coordination  as  the
mechanism for taking forward this work; and they outlined mechanisms for the guidance and
coordination  of  work  towards  the  new  strategy,  under  which  a  central  role  is  given  to  the
annual Spring European Council.

This view of social protection as an important element in overall socio-economic policy was
further strengthened in the Social Policy Agenda adopted by the Nice European Council7. At
its  heart  was  the  idea  of  the  policy  triangle  involving  the  creation  of  a  virtuous  circle  of
economic,  employment  and  social  protection  policies.  It  confirmed  the  goal  of  modernising
and  improving  social  protection  so  that  it  could  "respond  to  the  transformation  to  the
knowledge  economy,  change  in  social  and  family  structures  and  build  on  the  role  of  social
protection as a productive factor".

The orientations given by the European Councils of Lisbon and Nice provided the framework
within which work has been carried out by the Commission and the Member States with the
aim of meeting the challenge of modernising social protection systems. The broad objectives
for modernisation were defined in the Council conclusions of December 1999, on the basis of
a  communication  by  the  Commission8,  as  making  work  pay  and  provide  secure  income,
making  pensions  safe  and  pension  systems  sustainable,  promoting  social  inclusion,  and
ensuring high quality and sustainability of health care.

The  validity  of  this  framework  has  been  borne  out  by  the  succession  of  mandates  from
subsequent European Councils. These led to the implementation of two substantial processes,
using  the  open  method  of  coordination,  on  two  of  the  four  issues,  social  inclusion  and
pensions.  In  addition,  there  is  a  looser  form  of  policy  cooperation  on  issues  regarding  the
social protection of people in need of health and long-term care.

The  Social  Protection  Committee  has  recently  undertaken  work  on  "making  work  pay"  in
order  to  identify  the  specific  contribution  which  social  protection  systems  can  make  to  this
overall  objective  (for  example,  in  regard  to  the  incentive  structures  of  benefit  systems).
Aspects  of  the  issue  have  been,  and  will  continue  to  be,  addressed  in  the  context  of  the
BEPGs and the Employment Guidelines.

The  rhythm  and  focus  of  work  between  these  different  areas  has,  since  Lisbon,  been
determined by the mandates from the European Council. These have allowed work to advance
and to develop new ambition in the areas of social inclusion and pensions. Nevertheless, the
approach has had some negative consequences. It is a concern that, through the organisation

7

8

The  areas  for  policy  orientation  defined  in  Nice  were:  (I)  more  and  better  jobs;  (ii)  anticipating  and
capitalising on change in the working environment by creating a  new balance between flexibility and
security;  (iii)  fighting  poverty  and  all  forms  of  exclusion  and  determination;  (iv)  modernising  social
protection; (v) promoting  gender  equality;  (vi)  strengthening  the  social  policy  aspects  of  enlargement
and the EU external relations.
"A Concerted Strategy for Modernising Social Protection" (COM (1999) 347 final)

7

                                                
of work into separate strands, the focus on an overall agenda of modernising and improving
social  protection  which  was  sought  by  the  1999  communication  has  not  emerged  so
prominently.  Secondly,  the  flow  of  work  as  a  whole  has  been  somewhat  haphazard,  and
occasionally,  congested.  Thus,  in  Summer-Autumn  2002  Member  States  were  obliged  to
submit substantial reports on healthcare and long-term care and on pensions. The Commission
services then had the task of drafting two Joint  Council/Commission  reports  for  subsequent
agreement in the Council prior to the Spring 2003 European Council.

Questions regarding health and long-term care have not yet been considered in detail within
cooperation  in  social  protection.  Healthcare  issues  are  relevant  for  the  development  of
Europe's social model and its social, economic and employment policies in particular. Health
systems and health policies across the EU are also becoming more interconnected than in the
past, which raise many health policy issues with a clear European dimension. Nevertheless, as
recognised in  the  Joint  Report  on  Health  and  Long-term  Care  to  the  Spring  2003  European
Council,  there  are  very  specific  circumstances  and  complexities  attaching  to  policy
cooperation in this area. A number of joint challenges facing the Member States in the area of
health and healthcare are currently being assessed in the high level process on patient mobility
and healthcare developments in the EU. The European Convention is also looking at how to
better define the EU’s role and responsibility in this area. In particular, it will be necessary to
specify which methods are the most appropriate to deal with social protection issues related to
health and long-term care (ensuring access for all based on need and regardless of resources
and ensuring that health and long-term care needs do not cause poverty to patients and their
relatives), issues  relating to public  health  and  the  advancement  of  better  medical  treatments
and,  finally,  issues  relating  to  the  application  of  Internal  Market  principles  in  the  area  of
healthcare (patient mobility, free provision of services).

In the light of the conclusions of these processes and depending on the subsequent decisions
on health taken by the IGC, the Commission will examine the modalities of enhancing policy
coordination in this field in the context of a streamlined social protection process.

In  summary,  work  across  the  process  as  a  whole  will  benefit  if  it  can  be  rationalised  and
simplified.

Accordingly, it is proposed in Section 3 that, in place of the segmented organisation of work
and  reporting  by  reference  to  the  different  objectives  as  at  present,  future  work  should  be
brought within a unified structure referring to social protection as a whole. This will involve
the  establishment  of  a  single  set  of  common  objectives,  based  on  a  shared  European  vision
and  organised  in  principle  into  three  pillars  relating  to  the  three  policy  areas  of  social
inclusion,  pensions  and  health  and  long-term  care.  Separate  proposals  to  address  "making
work pay" in a lighter way as a "cross-cutting issue" are set out in Section 3.1.

2.3.  Working  Methods:  the  Open  Method  of  Coordination  and  its  role  within  the

overall strategy.

The  Lisbon  Council  proposed  that  the  implementation  of  work  on  the  social  protection
elements under the integrated strategy would be facilitated by applying "a new open method
of coordination". This  was introduced  "as  a  means of spreading best  practice  and  achieving
greater  convergence  towards  the  main  EU  goals",  to  be  applied  in  the  areas  where  the
Community  powers  are  limited.  It  is  consistent  with  the  provisions  of  Article  137  of  the
Treaty as they  refer  to  the Community’s  role  to  “support  and  complement”  the  activities  of
the Member States in providing social protection. It was conceived as a flexible governance
method, in complement to the existing Community method and other Treaty-based processes

8

such as the BEPGs and the EES which continue to be the Community’s core instruments. It is
based firmly on the principle of subsidiarity and has the stated aim of "helping Member States
to progressively develop their own policies". It involves the following features:

– 

– 

– 

– 

fixing guidelines for the Union combined with specific timetables for achieving
the goals which they set in the short, medium and long terms;

establishing,  where  appropriate,  quantitative  and  qualitative  indicators  and
benchmarks against the best in the world and tailored to the needs of different
Member States and sectors as a means of comparing best practice;

translating  these  European  guidelines  into  national  and  regional  policies  by
setting specific targets and adopting measures, taking into account national and
regional differences;

periodic monitoring, evaluation and peer review organised as  mutual  learning
processes.

These features have to be understood as a framework for the application of the Open Method
of  Coordination  in  various  areas.  It  remains  to  be  defined  in  a  more  detailed  way  in  the
context of each application which features and working methods will be applied and how the
work will be organised.

OMC: a complementary method

The Commission's White Paper on Governance9 summarised the characteristics of the OMC
and put forward certain approaches for its use:

-

-

-

The  open  method  of  coordination  is  used  on  a  case  by  case  basis.  It  is  a  way  of
encouraging cooperation, the exchange of best practice and agreeing common targets
and guidelines for Member States, sometimes backed up by national action plans as
in  the  case  of  employment  and  social  exclusion.  It  relies  on  regular  monitoring  of
progress to meet those targets, allowing Member States to compare their efforts and
learn from the experience of others.

In  some  areas, such  as  employment  and  social  policy  or  immigration  policy,  it  sits
alongside the programme-based and legislative approach; in others, it adds value at a
European level where there is little scope for legislative solutions.

The Commission plays an active coordinating role already and is prepared to do so in
the  future,  but  the  use  of  the  method  must  not  upset  the  institutional  balance  nor
dilute  the  achievement  of  common  objectives  in  the  Treaty.  In  particular,  it  should
not  exclude  the  European  Parliament  from  a  European  policy  process.  The  open
method  of  coordination  should  be  a  complement,  rather  than  a  replacement,  for
Community action.

Each of these  different aspects of the  OMC  is  reflected  to  an  extent  in  the  current  work  on
social  inclusion  or  pensions.  In  turn,  the  principles  set  out  in  the  Governance  White  Paper
should underpin any future application of the OMC in the context of creating an across-the-
board  process  for  social  protection.  The  modalities  of  implementing  the  Open  Method  of

9

COM (2001) 428 of 25 July 2001.

9

                                                
Coordination in the social protection area will depend on the conclusions of the forthcoming
Inter-Governmental Conference.

Flexibility and full application of subsidiarity

Within social inclusion, the OMC is used to create a concerted policy focus on goals, as part
of  a  process  through  which  Member  States  are  invited  to  improve  their  national  policies
against  poverty  and  social  exclusion,  inter  alia  by  setting  national  targets  in  line  with  the
Lisbon Council's call for "steps to be taken to make a decisive impact on the  eradication of
poverty".  Action under the  OMC  is  underpinned  by  a  set  of  common  indicators  and  is  also
linked closely to a Community Action Programme to fight social exclusion. While it will be
important  to  maintain  this  focus  on  policy  objectives  in  this  domain,  and  also  to  develop  it
further in other areas of future coordination on social protection, implementation of the OMC
should continue to be flexible. It must take account of the different circumstances, aims and
state of development of policy coordination in the different policy domains.

In addition, the work should continue to recognise diversity and the responsibility of Member
States for the design, organisation and financing of their systems.

Openness: the involvement of actors

Reflecting the high degree of organisation of civil society in relation to social exclusion, plus
the fact that policies in this area are delivered in diverse and often decentralised ways within
the  Member  States,  the  process  places  strong  emphasis  on  the  involvement  of  a  range  of
actors - the involvement of social partners and consultation with NGOs and representatives of
sub-national  branches  of  government.  This  is  an  approach  which  could  usefully  be  applied
across the entire range of the future social protection process.

The link with existing processes and instruments

The key question which emerges from the OMC for pensions relates to the two fundamental
issues identified by the Governance White Paper - how to ensure that the OMC "adds value"
to existing Community processes and that it takes the institutional balance into account.

The  Common  Objectives  agreed  at  the  Laeken  Council  as  the  basis  for  implementing  the
OMC for pensions explicitly addressed this question.

The  open  method  of  coordination  applied  to  pension  policies  will  take  its  place
alongside a range of existing, well functioning EU processes which, as part of their
wider  remit,  deal  with  aspects  of  pension  policies.  It  will  be  important  to  ensure
coherence with the processes which are already established.

It  listed  these  -  the  BEPGs,  multilateral  surveillance  (including  the  Cardiff  process),  the
Stability  and  Growth  Pact,  the  European  Employment  Strategy  and  the  Social  Inclusion
Process - before stating that:

It  will  be  a  specific  objective  of  the  proposed  new  method  to  provide,  in  an
integrated  way,  information  and  analysis  on  national  pension  strategies  which  can
help  to  ensure  consistency  between  these  processes  in  their  treatment  of  pension
policies.

Finally, it stated that "the results of the work (on pensions) will be integrated into the Broad
Economic Policy Guidelines".

10

The relationship between the OMC and existing Community processes and the need to take
account  of  the  institutional  balance  is  a  key  issue  for  the  future  on  social  protection  as  a
whole. A modus operandi similar to that developed for the existing OMC for pensions should
be  created.  It  will  be  the  role  of  future  cooperation  on  social  protection  via  the  OMC  to
undertake a detailed analysis of the issues which confront national systems and the particular
contribution  which,  when  they  are  modernised  and  improved,  they  can  make  to  the  Lisbon
strategy. It should produce policy messages capable of being taken up in the other instruments
-  key  messages  relevant  to  the  Annual  Spring  Report,  for  example;  or  contributions  to  the
policy areas of concern to the BEPGs and the EGs. These messages must complement and be
consistent with  the those  of the  economic  and employment policy coordination processes  at
the EU level.

Role of the Commission

The Commission plays an initiating role in both the pensions and social inclusion processes,
acting as a catalyst and seeking to maintain the ambition of the process. The practice whereby
the  Commission  is  in  charge  of  the  first  draft  of  each  joint  Council/Commission  report  has
helped to ensure that the OMC as implemented is a stronger method of working than might
originally have been thought. This practice should be maintained.

Association of the European Parliament

Finally, it must be said that neither process has yet found an appropriate way to associate the
European Parliament, as suggested by the While Paper on Governance. The very proliferation
of processes has undoubtedly represented a stumbling block in this regard. It is proposed that,
in creating a streamlined social protection process, given the importance of the process within
the Lisbon strategy, methods to involve the European Parliament as appropriate and practical
should be explored. This could, for example, take the form of reporting to the Parliament at
the  point  of  defining  across-the-board  common  objectives  on  the  basis  of  the  evaluation  of
policy cooperation and  coordination to date,  as proposed in section  3.1 below, as  well as at
other such key points in the future process.

3. 

CREATING THE STRENGTHENED AND SIMPLIFIED COORDIATION PROCESS.

3.1. 

Common objectives

A streamlined approach to policy cooperation should start with the definition of an integrated
and consistent set of common objectives, which should, in principle, be structured into three
pillars  reflecting  the  scope  of  policy  cooperation  in  the  social  protection  area  –  social
inclusion, pensions, and health and long-term care. These should replace the existing separate
sets of objectives. This set of objectives should be adopted by the Council in 2006, acting on a
proposal from the Commission, at the same time as the Guideline package for economic and
employment  policies.  They  should  remain  stable  for  a  period  of  3  years,  i.e.  up  to  2009,
unless unforeseen circumstances require otherwise.

The set of common objectives will be defined under the Lisbon strategy and should be fully
consistent  and  interconnected  with  the  BEPGs  and  EGs  that  will  be  adopted  in  2006.  They
should  also  reflect  the  results  of  the  evaluation  of  the  experience  gained  in  the  different
processes of policy cooperation in the area of social protection up to that point. Following the
mandate  from  the  Brussels  European  Council  of  March  2003,  a  review  of  the  progress
achieved within the open method of coordination in the field of pensions is due to be carried

11

out in 2006. This review should be extended to cover progress in the social inclusion process
and  in  the  cooperative  exchange  on  health  and  should  form  part  of  the  preparation  for  the
setting of common objectives for the new streamlined process.

The set of common  objectives should also include a limited number of  cross-cutting  issues.
Such  issues  could  cover  subjects  that  have  more  general  relevance  for  social  protection
systems and cannot simply be captured within one of the three pillars of the new cooperation
process, for example, the challenge of gender mainstreaming. In addition, this approach could
cover  how  social  protection  can  contribute  to  the  policy  approach  of  "making  work  pay",
particularly in  what  regards  the  provision  of  social  benefits,  the  promotion  of  active  ageing
and the policies for reconciling work with family life. The European Council of March 2003
has  invited  the  Commission  "to  report  in  time  for  the  2004  Spring  Council  on  the
improvement  in  the  overall  framework  for  social  protection  policies  through  a  greater
emphasis on the  effectiveness  of incentives  and  the identification of best practice.10" In this
connection,  due  account  must  be  taken  of  the  work  already  launched  in  the  context  of  the
economic and  employment policy coordination processes. These cover, and will continue to
cover,  the  objective  of  “making  work  pay”  from  the  perspectives  of  economic  and
employment  policies  respectively.  In  this  context,  both  the  economic  and  the  employment
policy coordination processes address appropriate incentives to take up work, remain in work,
increase work effort and invest in education and training. This implies in particular that they
deal  with  the  incentive  effects  of  the  interaction  of  tax  and  benefit  systems,  as  well  as  of
active labour market policies.

3.2. 

Reporting mechanisms: a new annual joint report on social protection

The key instrument  of the new streamlined process  will  consist  of  a  Joint  Social  Protection
Report, which will document and assess progress across the full range of common objectives.
It  will  be  drawn  up  jointly  by  the  Commission  and  the  Council  on  the  basis  of  a  draft
submitted by the Commission. Preparation of the Joint Report at the same time as the other
reporting instruments in the run-up to the Spring European Council means that it will add new
and  valuable  material  to  the  preparation  of  the  Annual  Synthesis  Report.  The  results  of  the
analysis conducted by the Commission will be incorporated into the annual synthesis report to
the Spring Summit. It should be consistent with parallel work carried out in the framework of
the EES and the BEPGs. Synchronisation will much improve the conditions for ensuring such
consistency.  The  final  Joint  Report  will  provide  an  important  basis  for  input  from  the
Employment and Social Policy (EPSCO) Council regarding social protection to that Summit.

The new Joint Social Protection Report will replace the existing 'Social Protection in Europe
Report'  provided  for  under  the  Decision  establishing  the  Social  Protection  Committee.  This
change  would  already  take  effect  in  200511.  It  will  also  replace  the  Joint  Report  on  Social
Inclusion and the Joint Report on Pensions as well as taking over the task of reflecting on the
progress made in policy cooperation on healthcare and long-term care.

Starting in 2006, Member States will feed into the preparation of the Joint Social Protection
Report  by  means  of  a  national  report  setting  out  the  strategy  for  reaching  the  common
objectives to be agreed earlier in that year. The 2006 national reports will be comprehensive,
covering all three pillars, and forward-looking.

10

11

For instance, benefit systems, reconciliation of family and work life, measures for older people.
For more details on the transition period, see below, Section 3.4 and the Annexes.

12

                                                
In  2007  and  2008,  Member  States  will  submit  much  lighter  reports,  essentially  focusing  on
progress  in  implementing  the  strategies  established  in  2006,  as  well  as  updating  on  major
policy developments.

The reports should draw on commonly agreed indicators to reflect progress towards common
objectives.

The national reports on social protection will become, after 2006, the only contribution from
Member States  to  the  process.  They  will  therefore  replace  both  the  NAPs/inclusion  and  the
National Strategy Reports on pensions.

Thus,  the  nature  of  the  Joint  Social  Protection  Report  will  vary  according  to  a  three-year
cycle,  with  comprehensive  and  forward-looking  reports  being  compiled  every  three  years,
followed by lighter updates in intervening years.

The  structure  outlined  here  will  mean  substantial  changes  in  approach  from  the  reporting
instruments  used  currently.  The  focus  will  be  on  implementation,  as  is  the  case  also  in
economic  and  employment  policy  coordination.  From  the  point  of  view  of  seeking  to  give
more  weight  and  visibility  to  the  contribution  of  social  protection  policies  to  the  Lisbon
strategy, this is clearly a welcome development.

The tasks of examining the national reports, promoting a policy debate on the implementation
of  policies  and  strategies,  inter  alia  by  using  peer  review  methods,  and  drafting  the  Joint
Social  Protection  Report  require  close  and  regular  joint  work  between  the  EU-level
Committees concerned with social protection, employment, economic policy coordination and
healthcare.

3.3. 

Indicators: an important underpinning of streamlining

A particular  challenge  for  the  new  streamlined  social  protection  process  is  that  it  should  be
able  to  monitor  progress  across  the  social  protection  field  towards  the  agreed  common
objectives in a way which is both transparent and effective in driving forward policy reform.
Development of a set of commonly agreed indicators fully reflecting the common objectives
is essential for responding to  such  a challenge. Such  a task  should  build  on  existing  sets  of
common indicators, such as those developed for the social inclusion process, those currently
being developed for the pensions process and those used within the coordination processes of
economic and employment policies. However, there is still a need to extend the coverage of
indicators  to  the  field  of  pensions.  Moreover,  indicators  relating  to  the  social  protection  of
people  in  need  of  health  and  long-term  care  will  have  to  be  defined  as  the  cooperative
exchange in this area is further developed. It is therefore crucial to step up the work already
under way within the Social Protection Committee's Indicators Sub-group.

While  the  development  of  indicators  needs  to  cover  a  wider  field,  it  will  be  necessary  to
ensure that the overall  number of indicators is  kept  as  concise  as  possible.  The  tendency  to
date  has  been  to  expand  the  number  of  indicators  as  a  way  of  accommodating  different
approaches between Member States. Such an approach would not produce the limited number
of summary indicators needed if the annual report is to accomplish its main task.

The new process will also grant more visibility to EU-level social statistics and will increase
demands  for  greater  reliability,  comparability  and  timeliness.  This  can  only  be  achieved  if
there  is  a  strong  commitment  on  the  part  of  the  Member  States  to  develop  such  key
instruments  as  ESSPROSS,  which  deals  with  financing  and  expenditure  on  the  different

13

branches  of  social  protection,  SILC,  the  annual  EU-wide  survey  of  the  income  and  living
conditions of households, and the System of Health Accounts (SHA). There also needs to be a
better  interaction  between  the  ongoing  work  of  developing  such  statistical  instruments
(involving  the  Commission  and  national  statistical  authorities)  and  the  streamlined  social
protection process.

3.4. 

Preparation  of  the  streamlined  Open  Method  of  Coordination  on  social
protection

As  stated  earlier,  it  is  proposed  that  the  streamlined  approach  outlined  here  should  be
introduced  in  2006.  The  period  2003-2006  should  be  used  to  prepare  the  conditions  for
launching  the  new  process,  taking  into  account  the  various  mandates  received  from  the
Brussels Spring Summit as regards pensions, healthcare and the incentive structures of benefit
systems12.

It  is  also  vital  to  take  into  account  how  enlargement  will  affect  the  current  processes  and
ensure that the new Member States are involved as soon as possible after their  accession.  It
should be noted that, since the spring of 2002, the Commission has worked with the national
authorities  of  each  applicant  country13  to  set  in  motion  a  cooperation  process  aimed  at
preparing the  way for their full participation in the Open Method of Coordination  on  social
inclusion  and  on  pensions  after  accession.  2003  will  see  the  completion  of  the  process  of
concluding Joint Inclusion Memoranda (JIMs) between the Commission and the 10 acceding
countries,  under  which  they  shadow  the  main  aspects  of  the  preparation  of 
the
NAPs/inclusion.

2003  will  also  see  the  launch  of  a  cooperation  process  between  the  Commission  and  each
applicant country in the domain of pensions, which will involve a series of national seminars.

During  the  transition  period  2003-2006,  the  following  initiatives  will  be  taken  in  order  to
continue policy cooperation and prepare the ground for streamlining open coordination in the
social protection field:

Social inclusion

In  accordance  with  a  decision  already  taken  by  the  Council,  Member  States  will
present NAPs/Inclusion in July 2003 for the period 2003-2005 and the Commission
and  the  Council  will  submit  a  Joint  Inclusion  Report  to  the  Spring  2004  European
Council.

In  2004,  the  new  Member  States  will  submit  their  first  action  plans  on  social
inclusion  for  the  period  2004-2006,  building  upon  the  Joint  Inclusion  Memoranda
(JIMs) jointly established with the Commission in 2003.

12

13

See in particular paragraphs 49 to 52 of the Presidency Conclusions.
All applicant countries, except Turkey.

14

                                                
Pensions

By the middle of 2005, the new Member States will present national strategy reports
on  pensions  containing  an  analysis  of  the  situation  in  their  respective  countries,
documenting  the  state  of  reform  of  their  pension  systems  and  setting  out  their
strategies  in  the  light  of  the  common  objectives  agreed  for  the  Open  Method  of
Coordination on pensions.

At  the  same  time,  the  existing  Member  States  will  present  implementation  reports
covering the period since 2002 as well as an update of their national strategy reports
for 2002 focusing on new major policy developments.

The  Member  States  and  the  Commission  will  work  jointly  with  the  aim  of
establishing  new  demographic  and  financial  projections,  in  order  to  allow  Member
States to prepare timely their strategy reports for submission by the middle of 2005.
In  addition,  the  committees  continue  to  work  on  a  consolidated  set  of  commonly
agreed indicators encompassing all the strands of policy coordination in the field of
social protection..

Healthcare

The  European  Council  has  called  for  a  Commission  Communication  setting  out
further  proposals  for  the  intensification  of  the  cooperative  exchange  in  the  field  of
healthcare and care for the elderly. This will be a first step towards exploring ways of
advancing the process of policy cooperation in the field of healthcare via exchanges
of information and good practice and the development of comparable indicators. Its
content and timing will depend on the outcome of the European Convention and the
IGC and the conclusions of the High Level Reflection Group on Patient Mobility and
Healthcare which are expected towards the end of 2003.

Joint Report on Social Protection

This  new  instrument  will  be  launched  in  a  transitional  form  in  2005,  in  order  to
improve the basis for preparation of the synthesis report by the Commission and to
improve  consistency  in  the  key  messages  from  the  EPSCO  Council  to  the  Spring
Summit on social protection.

While in 2005 the new joint report will be particularly focused on social inclusion ,
relying as it does on the NAPs/inclusion to be submitted in 2004 by the new Member
States, in 2006 the focus will then be on pensions. In 2007, the report will reach its
final form, reflecting the new streamlined approach covering the three fields – social
inclusion, pensions and healthcare.

As  a  result  of  these  activities,  in  2006  the  Commission  and  the  Member  States  will  review
progress  in  the  Open  Method  of  Coordination  on  pensions,  as  requested  by  the  Brussels
European Council, and on social inclusion, as well as policy exchange undertaken in the field
of healthcare. This evaluation will take account of the situation in the new Member States. It
will provide the basis for the orientations that will be set out by the Commission in 2006 in
view  of  an  integrated  and  consistent  set  of  common  objectives  for  the  Open  Method  of
Coordination on social protection.

15

Annex  1  sets  out  the  steps  to  be  taken  in  the  transition  to  streamlining  in  2006.  Annex  2
outlines  its  implementation  during  2006-2009.  Annex  3  shows  how  streamlined  social
protection will function alongside the streamlined BEPGs and EES in the period after 2006.

16

TRANSITION PERIOD 2003-2005

ANNEX 1

Year

2003

2004

January

Spring

Summer

Autumn

Mandate  from  Spring
European Council

Submission  by  MS  of  NAP
inclusion 2003-2005

Adoption 
Streamlining
Communication

of

Studies  on  pensions  (as 
in
Brussels  Summit  conclusions,
para.49)  are  ongoing  through
2003-2005

Commission adopts synthesis of the JIMs.

Council  adopts 
joint inclusion report.

the

Council 
takes  note
of/endorses  synthesis
report  on  JIMs  and
report 
on  making
work pay.

adopts
Commission 
on
communication 
continuation  of 
the
cooperative  exchange
to
relation 
in 

17

Commission  examines  NAPsincl
and  adopts  Draft  Joint  Inclusion
Report for 2003-2005.

work 

report  on
Commission  adopts 
pay/better
making 
incentive  structures 
in  social
protection  systems  (para  50  of
Brussels Summit Conclusions).

of 

Submission  by  new  Member
NAPs/inclusion,
States 
building  upon  the  JIMs.  Member
States;  examination  of  these  by
the Commission.

Year

January

Spring

Summer

Autumn

Healthcare

2005

Commission  adopts  first  annual  draft  social
protection report, covering in particular the field
of social inclusion.

Council  adopts  first
annual 
social
protection report.

Submission  by  new  MS  of
National  Strategy  Reports  on
pensions;  existing  MS  submit
updates/implem. reports.

Commission  presents  evaluation
of  policy  cooperation  to  date  in
inclusion  and
pensions,  social 
healthcare.

18

Full Streamlining 2006-2009

ANNEX 2

Year

January

Spring

June

Autumn

on 

Commission  sets  out
orientations  for  across-
common
the-board 
for
objectives 
streamlined 
social
protection  process  after
2006.  Council  adopts
conclusions 
the
Commission's
for
orientations 
common  objectives  for
protection.
social 
Commission 
adopts
second  draft  annual
social 
protection
report.  This  has  a
particular  emphasis  on
pensions.

2006

Council  adoption  of  second  annual  social
protection report

Spring 
orientations.

European  Council 

gives 

policy

Commission  formally  proposes  new  across-the-
board common objectives.

adopts

Council 
across-the-board
Common  Objectives
for social protection

Submission  by  MS  of  first  general
reports  on  all  strands  of  social
protection

2007

Adoption  by  Com  of
draft 
social
joint 
protection report

Council adopts Joint Social Protection Report

Spring  European  Council:  endorses  and  gives
policy orientations.

Submission  by  MS  of 
light
update/implementation report on all
strands of social protection

19

2008

2009

Adoption  by  Com  of
draft 
social
joint 
protection report

Adoption  by  Com  of
draft 
social
joint 
protection report

Council adopts Joint Social Protection Report

Spring  European  Council:  endorses  and  gives
policy orientations.

light
Submission  by  MS  of 
update/implementation report on all
strands of social protection

Council adopts Joint Social Protection Report

Spring  European  Council:  endorses  and  gives
policy orientations.

adopts

Council 
revised/validated
across-the-board
Common Objectives

Submission  by  MS  of  full  reports
on all strands of social protection.

20

Full Streamlining 2006-2008: complementing socio-economic governance and the streamlined BEPGs and EES.

Year

January

Spring

April

June

Autumn

ANNEX 3

Commission  adopts  the
Synthesis  Report  to  the
Spring 
European
Council.

Commission  adopts  the
implementation report on
the  BEPGs  and  the  Joint
Report.
Employment 

Commission adopts draft
annual  social  protection
report.

2006

Spring European Council
gives policy orientations.

Commission 
takes
account  of  the  Spring
policy
council's 
orientations and adopts:

Recommendations 
the BEPGs 2006-2008;

for

Proposals 
for
Employment  Guidelines
and
2006-2008 
Recommendations;

Across-the-board
common  objectives 
for
social  protection  2006-
2008.

Council 

adopts

BEPGs;

Employment  Guidelines
and  Recommendations;
and

across-the-board
Common  Objectives  for
social protection

Submission by MS of

Implementation 
under the BEPGs;

reports

National  Action  Plans
for Employment; and

National 
social protection.

reports 

on

21

Commission  adopts  the  Synthesis
Report  to  the  Spring  European
council.

2007

the
Commission 
implementation 
the
BEPGs and the Joint Employment
Report.

adopts 
report  on 

Spring 
Council: 
policy orientations.

European
gives

.

Commission  adopts  draft  annual
social protection report.

necessary, 

If 
commission
proposes  adjustments  to  the
common
and 
BEPGs 
objectives.

Employment
Proposes 
(normally
Guidelines 
unchanged)  and  Employment
Recommendations.

Council  adopts
Employment
Guidelines  and
Recommendati
ons  and  any
adjustments  to
BEPGs 
or
common
objectives

Submission by MS of

Implementation  reports  under  the
BEPGs;

National  Action 
Employment; and

Plans 

for

Light updates on social protection.

2008

As in 2007.

As in 2007.

As in 2007.

As in 2007.

As in 2007.

22