Opinion of the European Economic and Social Committee on the "Broad economic policy guidelines 2003-2005"
Date: 2003-12-11
Institutions: European Economic and Social Committee
Subjects: ESC opinion, economic policy

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Opinion of the European Economic and Social Committee on the ‘Broad economic policy
guidelines 2003-2005’

(2004/C 80/30)

On 15 May 2003, the European Economic and Social Committee, acting under Article 29(2) of its Rules
of Procedure, decided to draw up an own-initiative opinion on the ‘Broad economic policy guidelines
2003-2005’.

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was
responsible for preparing the Committee’s work on the subject, adopted its opinion on 26 November
2003. The rapporteur was Mr Delapina.

At its 404th plenary session of 10 and 11 December 2003 (meeting of 11 December), the Committee
adopted the following opinion by 50 votes to five, with two abstentions.

1. Summary

1.1.
This opinion follows on from the earlier work done on
this issue and draws in particular on the EESC opinion adopted
on 26 March 2003 on the broad economic policy guidelines
(rapporteur: Mr Vever) prepared by the Committee in response
to the Communication from the Commission on the
implementation of the 2002 broad economic policy guidelines.

1.1.1.
In that opinion, the Committee distinguished three
problem areas: (i) the overall focus of the guidelines; (ii) their
implementation and (iii) their incorporation into
practical
other policy areas.

The earlier opinion gave particular attention to the
1.1.2.
issue of practical implementation. Thus, the present opinion
does not address that aspect in any further depth.

1.1.3.
The earlier opinion also criticised the inadequate
overall macroeconomic policy mix. One point made was that
‘in contrast to other regions of the world, the EU does not
have a macroeconomic policy robust enough to jack up its
growth potential, which would put it in a better position to
tackle the economic downturn head-on, boost confidence and
underpin internal demand’.

1.1.4.
The present opinion therefore seeks to focus on the
EESC’s earlier statements and proposals on the overall thrust
of the macroeconomic policy mix. Focusing on that aspect in
no way detracts from the importance attached to structural
measures or to implementation at national level.

1.2.
Economic growth in Europe has been at a disturbingly
low level in the last three years, and the prospects for a quick,
strong and sustained recovery are poor in the absence of
effective domestic demand. Above all,
the low level of
investment gives cause for concern. Achieving the Lisbon
targets by 2010 therefore seems unrealistic.

Despite their lack of success there has been no change
1.3.
for years in the basic thrust of the economic policy guidelines,
which consist of a combination of stability-oriented macropo-
licies and cost-reducing measures on the supply side to increase
flexibility. The theory that a policy of stability will suffice by
itself to automatically generate growth has proved to be false.
The shortage of demand cannot be overcome by increasing
flexibility and lowering costs. A stability policy that is skewed
to improving supply-side conditions has a restrictive effect.
There are still no indications that macroeconomic policies in
the EU are endeavouring to give growth a boost on their own.

Unlike the Commission and the Council, the EESC
1.4.
thinks that only by changing the basic thrust of economic
policies and in particular macroeconomic policies will it be
possible to eliminate within Europe the obstacles which
are thwarting a sustained and more far-reaching economic
recovery. The EU has to act from within if it is to steer the
European economy back on the road to growth and full
employment. This will require an active and coordinated
economic policy which focuses on expansion and which takes
account of macroeconomic interrelationships. As part of such
balanced macroeconomic policies which have full employment
as their declared objective, supply-side measures will be
required to reduce costs and above all effective demand will
have to be given a boost.

1.5.
At the moment there is a particular need to strengthen
investor and consumer confidence and this will require a
credible economic policy. The credibility of economic policy
suffers, however, if it fails to act in a situation such as the one
obtaining over the last three years and continues to show
restraint. A macroeconomic policy-mix which seeks to achieve
growth and full employment by tackling the ongoing problem
of weak demand and as a result also tackles the lack of
confidence in economic operators, requires ....

1.5.1.
... a stability-oriented but also growth-friendly rein-
terpretation of the Stability and Growth Pact aimed at increas-
ing Member States’ room for manoeuvre on taxation so that
they can actively promote growth and employment;

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... a pragmatic forward-looking monetary policy
1.5.2.
which — especially at times when there is no danger of
inflation — also takes over responsibility for the development
of the economy as a whole;

The broad economic policy guidelines are the key
2.2.
document for the policy coordination which marks the system
of economic governance in the EU and its Member States.

1.5.3.
.... a suitable level of remuneration in keeping with
productivity gains, and a high degree of (social) security so
that the balance between competitiveness, demand and social
cohesion is assured;

1.5.4.
in a constructive and open dialogue.

.... the appropriate coordination of these policy areas

Coordination of economic policy in the European
1.6.
Union has not been successful
in addressing the current
economic crisis. Some rules have proved to be too rigid and
tailored too little to meeting practical challenges, and the
interplay between the institutions also leaves something to be
desired. Extensive reforms are on the agenda. These should
above all provide scope for more flexible responses on the
economic policy front which focus on the economic challenges
of today. This is the only way in which Europe can extricate
itself from the present growth and employment crisis. Given
the strength that Europe has displayed in the past in combining
social stability and innovation, the Committee is optimistic
that the requisite reforms can be implemented successfully.

1.7.
Because of the need for coordination, but also for other
reasons, the 2003-2005 guidelines ought to have taken a close
look at enlargement, which will drastically change the general
environment in the current Member States, too. The Com-
mittee fails to understand why this was not done since the
guidelines are designed to cover a three-year period.

1.8.
Because of this omission alone, a minor revision or
updating in the spring of 2004 will not suffice. The thorough
overhaul
that will be required should be used to make
fundamental changes to the basic thrust of economic policy.

1.9.
In presenting this own-initiative opinion the Com-
mittee is making a constructive contribution within the
meaning of point 27 of the guidelines, which calls for a deeper
analysis of economic developments and policy requirements.

2. Gist of the Council document

The broad economic policy guidelines have been
2.1.
prepared for the first time in conjunction with the employment
policy guidelines (‘guideline package’). The EESC described this
procedure in detail in its opinion on the 2003 broad economic
policy guidelines (1).

(1) OJ C 133, 6.6.2003.

2.3.
The guidelines focus on economic policy’s contribution
over the next three years to attaining the goal set in Lisbon for
the EU. The first part of the document sets out general
guidelines which apply equally to all Member States. There is
also a separate chapter on the special challenges facing the
euro area. The second part contains country-specific guidelines
for each of the 15 Member States.

2.3.1.
In this opinion the EESC will consider the first part,
which concerns all Member States and/or the countries of the
euro area. These general guidelines are based on three pillars:
growth- and stability-oriented macroeconomic policies, econ-
omic reforms to raise Europe’s growth potential, and strength-
ening sustainability.

Pillar 1 (growth- and stability-oriented macro-
2.3.2.
economic policies): in the guidelines the EU emphasises the
importance of higher, sustainable growth rates. This requires
sound macroeconomic conditions and a solid macroeconomic
policy.

2.3.3.
Pillar 2 (economic reforms to raise Europe’s growth
potential): better functioning and more competitive labour,
product and capital markets are vital for a more flexible
economy and higher potential growth.

2.3.4.
Pillar 3 (strengthening sustainability): appropriate
account must be taken of economic, social and environmental
sustainability aspects in order to guarantee that the expected
results are achieved in the longer term.

3. General comments

3.1.
The Committee welcomes a series of improvements
with regard to both the procedure for preparing the guidelines
and their content.

3.1.1.
The synchronisation with the employment policy
guidelines, which has been called for on many occasions, is to
from labour market measures a
be welcomed,
successful employment policy requires in particular growth-
and employment-oriented macroeconomic policies.

for apart

Also to be welcomed is the fact that the guidelines
3.1.2.
are now to be formally valid for three years, since a stable
environment can be provided by a medium-term approach to
economic policy. However, economic policy’s ability to act in
the short term must not be undermined.

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The guidelines are also enhanced by the fact that the
3.1.3.
euro area is dealt with in a special section which refers to the
specific challenges facing this area.

3.1.4.
A further pleasing fact is that there is a section on
sustainability which not only deals with matters relating to the
funding of pension systems and environmental sustainability
but also emphasises the importance of economic and social
cohesion.

Section 4 of this opinion lists a large number of
3.1.5.
other points of detail on which the EESC agrees with the
guidelines.

3.2.
The Committee will, however, explain once again
below that the general macroeconomic policy thrust on which
the guidelines are based is not adequate for mastering the main
challenges and providing more growth and employment (1).
The practical aspects — i.e. the shortcomings in implementing
the guidelines — have already been dealt with in detail by the
Committee in a separate opinion (2).

Such weak economic growth in three consecutive
3.2.3.
years implies welfare losses roughly on the scale of the 1975,
1981 and 1993 recessions. However, unlike those ‘full-
blown’ recessions, the present ‘insidious’ crisis is not attracting
sufficient attention. The current economic crisis has a highly
adverse effect on the labour market and public budgets. Rising
unemployment, a shrinking labour supply and growing public
deficits are, however, not merely short-term phenomena; they
also have adverse effects in the long term.

3.2.4.
Thus, the aim of turning Europe by 2010 into
the world’s most competitive and dynamic knowledge-based
economy capable of sustainable economic growth with more
and better jobs and greater social cohesion fades even further
into the distance. To achieve this aim, annual growth rates of
3 % will be necessary between now and 2010, but the current
crisis, which has been going on for at least three years, has
already made this impossible in the absence of an active
economic policy. The GDP growth rates achieved so far have
been totally inadequate for solving the EU’s priority problems
(such as consistently high unemployment, income and regional
disparities, poverty and exclusion, and the precarious labour
market).

3.2.1.
According to the European Commission’s recent
autumn forecasts, economic growth in Europe will be very
low in 2003 for the third year in a row, falling well short of
Europe’s potential. As a result of the poor economic growth
there will be a drop in employment in the euro area this year.
The unemployment rate will be 8,9 % in 2003 and increase to
9,1 % in 2004, a rise of 1,1 percentage points over 2001.

This ought to have been an opportunity once again
3.2.5.
for revising the EU’s overall economic policy strategy,
i.e.
the Member States’ and the Community’s economic policy
guidelines, and switching to an expansionary course in individ-
ual policy areas. However, this has not been done, and instead
the basic thrust remains unchanged, thereby accentuating the
trend towards stagnation. The basic macroeconomic policy-
mix for tackling the EU’s main challenges has remained
practically the same for years despite its unsuccessfulness.

3.2.2.
The slump in domestic demand was the main reason
for the sharp downturn in the business cycle in 2002.
Consumers were much more reluctant to spend and above all
corporate investments fell sharply in the face of poor sales
prospects. In the meantime the confidence of private house-
holds and businesses has improved somewhat, but there is still
no sign of a self-sustained cyclical upturn in 2004 either. With
domestic demand continuing to be weak, there is a possibility
of a slight export-driven recovery, but not of a return to
potential growth yet. Such a return — along with a drop in
the unemployment rate — is not expected by the Commission
until 2005, but even then it will be extremely risk-laden.

(1) See for example: OJ C 139, 11.5.2001, opinion on the 2000
broad economic policy guidelines; OJ C 48, 21.2.2002, opinion
on world economic changes: new economic challenges for the
European Union; OJ C 85, 8.4.2003, opinion on economic
governance in the EU; OJ C 133, 6.6.2003, opinion on the 2003
broad economic policy guidelines; CESE 1069/2002, resolution
addressed to the European Convention.

(2) OJ C 133, 6.6.2003, opinion on the 2003 broad economic policy

guidelines.

The Commission (3) and the Council of the European
3.2.6.
Union (recommendation of 26 June 2003 on the broad
economic policy guidelines) are right to emphasise the import-
ance of macroeconomic policies for the promotion of growth
they do not criticise the de facto
and employment, but
abstinence of macroeconomic policies. They continue to opt
for an economic policy model, mainly aimed at boosting
economic growth with the aid of cost-cutting measures and
greater flexibility. Such a macroeconomic model with its three
component parts (monetary, fiscal and wage policy) remains
restrictive in its approach. The general thrust of the economic
policy recommendations offers no promise of success; it is
imbalanced and inadequate, for it focuses on the supply side
the need for the balanced
and fails to take account of
development of supply- and demand-side factors in the
economy in order to be able to exploit its growth potential.

(3) COM(2003) 170 final: Commission recommendation of 8 April

2003 on the broad economic policy guidelines.

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The Commission’s and the Council’s failure to recog-
3.2.7.
nise that this approach to economic policy has contributed,
alongside geopolitical and exogenous factors, to the current
weak growth is clear from the Commission’s explanation of
the causes (See The EU Economy 2002 Review and the Spring
2003 Economic Forecasts). The Commission quite rightly lists
geopolitical tensions, uncertainties brought on by exogenous
factors (stock markets, oil price) and structural rigidities as
causes, but it does not recognise that Europe’s weak growth is
also attributable to the fact that Europe is the only region in
the world not to have opted for expansive macroeconomic
policies clearly geared to growth and instead is sitting back
and waiting to be able to take part in the economic recovery
in other regions of the world. The policy-mix which the
Commission and the Council have been proposing for years
now has proved to be incapable of generating enough domestic
demand to stimulate the readiness to invest. For all the
recommended supply-side measures for bringing about struc-
tural improvements remain ineffective if demand and market
expectations do not rise accordingly.

3.2.8.
One noteworthy fact in this connection is that the
OECD definitely appears to regard the varying trends in
demand in individual regions of the world as a reflex reaction
to the different courses steered by macroeconomic policies,
which in some regions have given demand a considerable
boost
(See OECD Economic Outlook No. 73, executive
summary).

3.3.
The Committee therefore calls for a more even policy-
mix which establishes balance between supply- and demand-
side factors and between microeconomic and macroeconomic
factors. The macroeconomic policy thrust recommended by
the Committee is set out in points 4.1 to 4.3 below. A
growth initiative in the form of a joint European investment
programme would be a sensible adjunct in this context. In
addition, the proper implementation of the recommendations
at national level should be demanded. At a microeconomic
policy level there is a need in particular for businesses to adapt
efficiently in terms of technology and competitiveness so as to
be able to make better use of existing production potential and
hence increase their productivity.

4. Specific comments

4.1. Monetary policy

4.1.1.
The monetary policy guidelines are traditionally very
meagre. They merely make the standard point that monetary
policy is geared to price stability and — if this is not threatened
— also supports general economic policy. It would seem that
no clearer recommendations are made because the ECB could
see its independence threatened.

4.1.2.
The aim of monetary policy at all events should be
to strike a balance between price stability, economic growth
and employment. However, the policy-mix recommended by
the Council fails to include a clear call to the ECB to also

assume its responsibilities in relation to the real economy
(growth and employment). It would make sense to oblige the
ECB to target stability in the wider sense, i.e. not only monetary
stability but also stability in terms of growth, employment
and social cohesion. The European Economic and Social
Committee has itself already demanded on several occasions
that growth and full employment must also be monetary
policy objectives (e.g. the Committee’s resolution of 19 Sep-
tember 2002 addressed to the European Convention).

4.1.3.
In order to retain the confidence of investors and
consumers, a responsible and pragmatic monetary policy
which also keeps an eye on real economic trends must send
out credible signals even in the event of the threat of a
downturn to show that it intends to take resolute counter-
action. Even though it is necessary to take account of the
differing environments when making international compari-
sons, it is a fact that such a monetary policy contributed in no
small measure to the prolonged US economic boom in the
Nineties. Since the summer of 2001 the ECB has failed to seize
this opportunity. Even before the September 11 terrorist
attacks, the economy was stagnating in all three major regions
of the world. Whereas there was massive intervention on the
monetary policy front outside Europe, the ECB reacted too late
and too little. Not cutting interest rates until half a year after
the start of a downturn is not helpful if the confidence of
investors is to be bolstered.

4.1.4. With consumer and investor activity weak and the
euro exchange rate high there is no general danger of inflation
in Europe at the moment. This being so, the ECB’s policy on
interest rates seems to be unduly hesitant in 2003, too (See
OECD Economic Outlook No. 73). Interest rates in Europe are
comparatively high in global terms and attract capital flows,
thereby contributing to a high euro exchange rate and — quite
apart from causing a rise in prices — also reducing the export
opportunities for Europe’s businesses.

4.1.5.
The Committee would also suggest that the ECB’s
inflation target should be overhauled. A target bracket (similar
to the ones in the United Kingdom and Sweden) would allow
more flexible adjustments to be made. If inflation rates in
individual countries differ greatly, this could pose a threat of
deflation in countries with very low price increases. However,
this is something which must be avoided since otherwise
monetary policy instruments would lose their effect.

4.1.6.
The call made in the guidelines for improved and
efficient macropolicy coordination must logically also include
an obligation for monetary policy to be coordinated with
other policymaking areas. It would be quite feasible to fully
engage the ECB in a open, permanent dialogue about the
economic situation and economic policy options without its
independence being encroached upon in the process. It is
necessary at all events to preserve the independence of the
individual players involved in this coordination process.

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4.2. Budgetary policy

4.2.1.
In a monetary union it makes sense to coordinate
Member States’ budgetary policies if a stable trend in the
economy and an improvement in the employment situation
are the goals. However, recent events in the ongoing economic
crisis point to the inadequacy of the present method used for
coordinating budgetary policy under the Stability and Growth
Pact.

However, the EESC thinks that if such coordination
4.2.2.
mechanisms are forever being discussed and called to question,
considerable harm will be done to the economy. It would
therefore urge that the outstanding issues surrounding the
wording and interpretation of the Stability and Growth Pact
be clarified as quickly as possible.

4.2.3. With regard to fiscal policy, the guidelines emphasise
once again the importance of rapidly meeting the medium-
term balanced budget requirement agreed on in the Stability
and Growth Pact. Moves to balance public budgets at times of
economic stagnation threaten, however, to culminate in a
further dampening of economic growth and a rise in unem-
ployment. The pursuit of such a fiscal policy fails to take
sufficient account of the high and still mounting unemploy-
ment in the EU. A reduction in unemployment would go a
long way towards securing the sustainability of public budgets.

It is frequently argued that the credibility of budget-
4.2.7.
ary policy plays a key role in connection with the urgent need
to strengthen investor and consumer confidence and that this
credibility is under threat unless massive cuts are made in
expenditure. In reply to this, the Committee would argue that
the credibility of such a policy is bound to be enhanced if —
at a time when demand is extremely weak — economic policy
actively demonstrates its willingness to act in order to promote
growth and employment. It is not plausible in the EESC’s eyes
for the international financial markets to welcome savings
which deepen a crisis, and yet criticise a growth-oriented
course.

Above all, it would be desirable for the policy of
4.2.8.
considering balances indiscriminately to be replaced by an
approach which takes greater account of the structural and
qualitative aspects of public budgets. An attempt should be
made to make the structure of both revenue and expenditure
more growth- and employment-intensive. Basically, public
expenditure on large-scale investments which benefit several
generations should also be spread over several generations for
the sake of fairness. In practice, however, such proposals face
numerous unsolved problems. These are partly of a technical
nature (e.g. questions of definition and demarcation) and
partly of a political nature. Therefore the EESC is currently
considering the subject of budgetary policy and investment in
an own-initiative opinion (1).

4.3. Wage policy

4.2.4.
Budgetary policy must also be clearly committed to
the ‘growth and employment’ targets. However, fiscal policy
— not least because of self-imposed constraints — has tended
to have a more procyclical effect, since the tendency to save
has been particularly marked during downward phases.

4.3.1. Wage policy’s responsibility for overall economic
developments was enhanced with the arrival of monetary
union. Previously, exchange-rate adjustments were able to
compensate for a misguided wage policy which did not reflect
overall economic conditions. It is now no longer possible to
make such corrections.

4.2.5.
In recent months a more flexible approach to
the Stability and Growth Pact has been proposed by the
Commission and adopted by the Council — inter alia in the
guidelines. The Committee welcomes this. Particularly positive
are: the affirmation supporting the full play of the automatic
stabilisers; the avoidance of procyclical behaviour; and the
emphasis on the role of debt ratios vis-à-vis new indebtedness.

follows that

4.3.2.
Since monetary policy and budgetary policy are not
critically addressed to a sufficient degree in the guidelines,
it
the guidelines impose a disproportionate
responsibility for the overall development of the economy on
wage policy. The importance of wage policy in the policy-mix
would be reduced, however, if monetary and budgetary policy
were to take on their proper role with regard to the whole
system.

4.2.6.
The basic problem with the Pact (low GDP growth
results in higher deficits; subsequent expenditure cuts curb
demand and hence growth) still remains unresolved, however.
Following the failing in the past to trim public deficits during
periods of strong growth, the guidelines are now calling for a
gradual reduction in the structural deficit of 0,5 percentage
points per year as an interim solution in the countries of the
euro area; such a reduction is, however, also counterproductive
during a recession, since further demand is suppressed in
line with the trend, thereby dampening the business cycle.
Therefore the Committee would press for a further reinterpret-
ation of the Pact, which allows fiscal policy to cater for
differing economic situations.

4.3.3.
The Committee generally welcomes the call made in
the guidelines for nominal wage increases to be consistent
with productivity gains and inflation in the medium term.
However, if the repeated call for wage moderation and restraint
means that wage increases should be lower than the growth in
productivity, the Committee cannot give its approval, since as
a result the balance between supply- and demand-side factors
would be destroyed.

(1) Opinion on budgetary policy and type of investment.

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Seen simply as a supply-side factor,

lower wage
4.3.4.
increases reduce the relative costs of the factor labour and can
therefore boost employment. However, this overlooks the fact
that wages are not only a supply-side cost factor but also have
an effect on the demand side as the most important factor
determining domestic demand. Considerable wage restraint
therefore weakens overall demand and thus growth and
employment, too. In overall economic terms, a policy of
basing wage increases in the medium term on the overall gain
in productivity throughout the national economy therefore
guarantees that a balance is maintained between giving demand
a sufficient boost and maintaining competitive prices. It is
therefore consistent with the call for a responsible wage policy,
which takes on responsibility for both the supply side and the
demand side and hence for growth and price stability, too. The
corresponding institutional prerequisites are naturally needed
for this.

4.3.5.
The parties negotiating collective wage agreements
are vital participants in the macroeconomic dialogue and as
such are involved in the process of coordinating economic
policies (see 4.6.4 below). By analogy with the comments
made in 4.1.6 on the ECB’s independence, the Committee
would emphasise that in wage negotiations the independence
of the negotiating parties must be respected. The approach to
wage policy described above can serve to show how, despite
the negotiating parties preserving their autonomy in full, it
would be possible to reach a certain understanding on
fundamental
interrelations and thus improve macropolicy
coordination.

4.4.

Economic reforms

4.4.1.

L a b o u r m a r k e t s

4.4.1.1.
The Committee emphasises the need for better use
of human resources and a higher employment rate. The
guidelines list a number of measures which can contribute.
These include, in particular, promoting the quality of education
and training, modernising the labour markets and work
organisation, increasing mobility, reviewing the effects which
taxes and benefits have as incentives, and developing social
infrastructure, thereby, for example, allowing working parents
to reconcile working and family life.

The EESC would stress that the social partners
4.4.1.2.
must be fully involved in these steps to modernise, which must
maintain the social balance, take the fundamental interests of
the labour force into account, and guarantee a high degree of
social security. After all, social cohesion is one of the explicit
objectives of EU policymaking.

4.4.1.3.
described above in 4.3.

The principles of wage policy have already been

4.4.2. G o o d s , s e r v i c e s a n d c a p i t a l m a r k e t s

Increasing the EU’s growth potential requires that
4.4.2.1.
productivity and business dynamism be given a further boost.
A prerequisite for this is that the advantages of the internal
market be exploited more consistently, e.g. by increasing the
transposition rate for internal market directives.

4.4.2.2.
Investment is the key to increasing productivity.
Apart from growth-enhancing investment in physical capital,
this means more investment in knowledge and skills, i.e. in
human capital. Access to, and more widespread use of, new
technologies should also be supported. In the field of European
infrastructure investment, the EU level shoulders a major
responsibility for driving key projects forward (e.g. trans-
European networks).

In the services sector, the guidelines rightly call for
4.4.2.3.
a precise study of the effects which a full opening-up of
markets may have. The importance of the services sector for
creating added value and employment is much higher in the
USA than in the EU. Many services which are provided via the
markets in the USA are paid for out of budgets in Europe.
However, there are also considerable differences in service
provision breakdown within the EU. In Scandinavian countries
a wide range of social services are provided by the public
the possibilities for
sector. A more precise analysis of
expanding service provision in the EU must consider efficiency-
related issues but above all must pay special attention to
questions relating to general availability (universality) and the
quality of services of general
interest. The effects of the
relatively uneven charges on the factors labour and capital
should also be studied in greater detail.

4.4.2.4.
A supportive environment for entrepreneurship
and business start-ups is also needed. This includes a clear and
as simple as possible regulatory environment and tax system
and improved access to funding — something which is
particularly important for SMEs.

A ‘business — or enterprise-friendly’ climate is
4.4.2.5.
normally equated with better functioning markets, deregu-
lation, liberalisation and more competition. The Committee
underlines the need for reforms which must be aimed at
making regulatory systems more efficient. However, the Com-
mittee cannot support a general indiscriminate call for State
withdrawal and a general reduction in State intervention. It
emphasises the important role of public intervention in areas
such as research and development, structural policy, regional
aid and environmental policy. In addition, growing liberalis-
ation increases the need for independent and capable compe-
tition and regulatory bodies which make for an orderly
transition and effective monitoring of the liberalised sectors
on the basis of democratically formulated and generally
applicable principles.

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4.5.

Sustainability

4.5.2.

E c o n o m i c a n d s o c i a l c o h e s i o n

4.5.1. O l d a g e p r o v i s i o n

4.5.1.1.
Increasing employment rates is the first point in
the three-pronged strategy agreed on in Stockholm for meeting
the challenges of an ageing society. The Committee would
stress the urgency of this task, since every increase in the
number of people paying into pension systems reduces the
In this context
need for measures on the benefits side.
the Committee would refer to the importance of social
infrastructure (See 4.4.1.1 above) and of retraining measures.
The Committee welcomes the call made in the guidelines for
the impact of
from
economic aspects, it is necessary in this context to also analyse
the effects on social cohesion in both the country of origin
and the country of destination. The age of people entering the
labour market
is also important for the development of
employment rates.

immigration to be examined. Apart

4.5.1.2.
The government debt ratio is the second point in
the Stockholm strategy. Here the Committee would refer to its
view expressed above in 4.2.3 that the debt ratio is more
important that new indebtedness.

The third point focused on in safeguarding pen-
4.5.1.3.
sions is the reform of pension systems. The Committee agrees
with the guidelines that increasing the effective retirement age
is a fundamentally sensible objective provided that this is
to individual workers. The
voluntary and of benefit
implementing proposals must, however, bear in mind that
there are no suitable jobs for many elderly persons who would
like to work. Without sufficient jobs, the call for a higher
effective retirement age would mean rising unemployment
among the elderly and/or cuts in pensions. The same applies
to the call for more flexible systems. With a view to enhancing
the sustainability of pension systems, measures should be
developed to help regularise precarious employment and
undeclared work.

4.5.1.4.
There is an urgent need in the longer term to raise
the de facto age of retirement. So that this has no disadvantages
for the parties concerned, special measures for older workers
will be necessary. These include improvements in further
training, greater flexibility in the organisation of working
time, and improvements in health care. In this context the
Committee would refer to a number of its opinions which
address the problems of older workers (1).

4.5.2.1.
The Committee unreservedly endorses the view
expressed in the guidelines that jobs are the best protection
against poverty and exclusion. Therefore, economic and social
cohesion is a further reason why a general economic policy
geared to growth and employment should be given top
priority.

4.5.2.2.
To support macroeconomic policies, there is a
particular need in lagging regions for an improved education
and training structure and investment in infrastructure and
R&D. With regard to the reform of social protection systems
and labour markets called for in the guidelines, the Committee
would refer to its comments in 4.4.1.2 above.

4.5.3.

E n v i r o n m e n t a l s u s t a i n a b i l i t y

4.5.3.1.
The Committee underlines the need — and there-
fore endorses the efforts — to consider economic and environ-
mental concerns together. With due regard for the Kyoto
protocol, further efforts must be made to make more efficient
use of energy and raw materials and to make greater use of
renewable energy. The Committee would reaffirm that as a
rule environmental objectives cannot be achieved without
State intervention, since natural resources and the environment
are ‘public property’.

The Committee also endorses the efforts to apply
4.5.3.2.
the polluter-pays principle systematically and internalise exter-
nal costs,
i.e. prices should reflect the cost to society of
extracting and using natural resources and their final disposal
(including long-term permanent storage costs).

4.5.3.3.
In addition, the Committee welcomes the fact that
particularly in the transport sector the true cost is to be applied
more. In this sector, too, intermodal distortions in demand are
to be reduced by internalising external environmental costs.

4.6.

Economic policy coordination

4.6.1.
A coherent economic policy is needed at all levels if
Europe is to be able to successfully master the numerous
challenges in the global environment in which systems and
locations for businesses compete. The basis must be provided
by suitable Treaty provisions. A coordinated economic policy
must be built up at European level on that basis to meet the
requirements of an economic and monetary union. The
Committee’s detailed comments on the equally important role
and responsibility of national policy are to be found in its
March 2003 opinion on the implementation of the 2003
broad economic policy guidelines (2).

(1) OJ C 14, 16.1.2001, opinion on older workers; OJ C 48,
21.2.2002, opinion on economic growth, taxation and sustain-
ability of pension rights in the EU; OJ C 48, 21.2.2003, opinion
on supporting national strategies for safe and sustainable pensions.

(2) OJ C 133, 6.6.2003, opinion on the 2003 broad economic policy

guidelines.

30.3.2004

EN

Official Journal of the European Union

C 80/127

The Committee has already stressed on several
4.6.2.
occasions that the EU’s economy suffers from the fact that
even though it has been possible to introduce a monetary
union successfully in 12 countries, these do not have a
properly coordinated, let alone common economic policy. The
EESC is commenting in this opinion on the economic policy
guidelines. It therefore does not address the coordination or
standardisation of economic policy, which extends beyond the
scope of this document. Such matters include in particular the
EU’s economic constitution and institutional reform, which
will have to be clarified at the current Intergovernmental
Conference on the basis of the draft constitution presented by
the Convention. On these matters, including the restoration of
the Commission’s right of proposal, the Committee would
refer to numerous earlier opinions (1).

4.6.3.
A joint European investment programme for infra-
structure projects, as proposed by the Italian Council presi-
dency and taken up by the Commission and the Council,
should be carefully discussed and examined as, if properly
organised, this could be a major step towards strengthening
Community economic policy.

4.6.4.
The EESC expressly welcomes the call made in the
guidelines for the various players to coordinate economic
policy more closely. Both in connection with wage policy and
in the chapter on the euro area, it is pleasing to note that
the guidelines stress the importance of the macroeconomic
dialogue (Cologne process) for promoting a more balanced
economic development. The Committee calls on national
governments to assume their full responsibilities vis-à-vis the
European economy and to use the possibilities available to
them for taking action, though naturally without encroaching
on the independence of the individual players.

(1) OJ C 125, 27.5.2002, opinion on the ESC’s contribution to the
economic policy guidelines for the Member States and the
Community in 2002; OJ C 221, 17.9.2002, opinion on the
coordination of economic policies in the long term; OJ C 85,
8.4.2003, opinion on economic governance in the EU.

Brussels, 11 December 2003.

Another positive fact is that the guidelines emphasise
4.6.5.
the role of the social partners in this coordinating process. In
the EESC’s view the tripartite social summit held to prepare
for Council meetings should also become a fully-fledged
consultative forum for growth and employment.

The Committee would stress that better economic
4.6.6.
policy coordination basically concerns the whole of
the
European Union and is not only a requirement for the euro
area.

4.6.7.
In this context it seems surprising that though the
guidelines cover a period of three years, they mention in only
one single sentence the fact that ten new Member States are to
accede to the EU in a few months. It is simply stated that these
countries are being asked to conduct their policies along the
lines of the guidelines and will be considered more closely in
the updated guidelines in 2004. Since the general environment
in the current Member States, too, will also be drastically
changed in the wake of EU enlargement, the EESC considers
this approach to be lacking in foresight.

Above all, economic policy coordination — which is
4.6.8.
already inadequate — will be made much more difficult by
enlargement. This is because as a result of enlargement there
will be a new need for coordination in two areas: firstly,
within individual policymaking areas (for example, the internal
coordination of wage policy) and secondly, between the three
main macroeconomic policies, where the differences will
increase appreciably as a result of enlargement.

4.6.9.
There is an instrument for coordinating economic
policies — the Stability and Growth Pact — but Committee
warns against its unduly rigid interpretation, especially in the
new Member States. After all,
it is possible that the new
Member States will attempt to meet the criteria for EMU
membership as quickly as possible and in so doing will adhere
closely to the criteria governing the Stability and Growth Pact.
This could curb the investments that are required to make up
for the great shortcomings in infrastructure and underdevel-
oped social systems.

The President

of the European Economic and Social Committee

Roger BRIESCH