Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the European Parliament, the Council, the European Central Bank, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank Annual Growth Survey 2017’ [COM(2016) 725 final]
Date: 2017-02-22
Institutions: European Economic and Social Committee
Subjects: budgetary equilibrium, economic convergence, economic growth, economic recovery, economic reform, employment aid, fiscal policy, investment, job creation, structural adjustment








C_2017173EN.01007301.xml










31.5.2017   


EN


Official Journal of the European Union


C 173/73





Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the European Parliament, the Council, the European Central Bank, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank Annual Growth Survey 2017’
[COM(2016) 725 final]
(2017/C 173/13)






Rapporteur:



Etele BARÁTH











Consultation


European Commission, 8.12.2016




Legal basis


Article 304 of the Treaty on the Functioning of the European Union




 


 




Subcommittee responsible


SC/046




Adoption by the subcommittee


17.1.2017




Adopted at plenary


22.2.2017




Plenary session No


523




Outcome of vote
(for/against/abstentions)


181/5/36





Cooperation, ownership and flexibility

1.   Conclusions and recommendations









1.1.


The European Economic and Social Committee (EESC) endorses the priorities set out in the European Commission’s 2017 Annual Growth Survey, i.e. the primacy given to fostering job creation and growth, through the three pillars of the AGS: pursuing structural reforms, ensuring responsible fiscal policies, and boosting investment. This annual survey provides a suitable basis for launching the European Semester process and, subsequently, drafting the ‘country-specific recommendations’.












1.2.


The European Semester is seen as a good instrument for further progress in policies and reform, leading to recovery and employment. The AGS 2017 outlines the most pressing economic and social priorities, accompanied by specific recommendations, however the EESC takes very seriously the negative aspects of the rules of the Stability and Growth Pact and Country-Specific Recommendations applied at national level to set the euro area fiscal stance.












1.3.


The AGS recognises many positive developments and signs of recovery in the EU. Investment has started to pick up, 8 million new jobs have been created since 2013, the employment target of 75 % is within reach, there are structural improvements in the performance of the labour market, and the average public deficit level has been reduced slightly in some Member States.












1.4.


The Committee shares the view that preserving the European way of life is rooted in ensuring a promising economic future for all, but believes that further efforts are necessary to this end. The AGS openly says that the recovery is still fragile. Unemployment remains high, the risk of poverty has if anything increased, GDP and productivity growth rates are too low, and investment worryingly remains below pre-crisis levels. There are still significant imbalances and broader risks within the euro area and the EU in general.












1.5.


The EESC also believes that globalisation and technological and demographic developments, in particular digitalisation, are important catalysts for change and that everyone should be able to capitalise on them. The principal measures must include investment in levers of growth: knowledge, innovation, education and ICT.












1.6.


The Committee supports the goals of equality, equity and inclusion, and draws attention to the importance of reforms and coordinated policies.












1.7.


At the same time, the EESC notes that integration must be strengthened if joint objectives are to be achieved and handicaps overcome. European governance that is responsible, based on cooperation and characterised by both discipline and flexibility provides a guarantee in this regard. The European Semester clearly shows that setting up high-level partnerships between Member States is an effective way to overcome the crisis.












1.8.


The EESC welcomes, in principle, the missions set out in the 2017 growth survey, as well as the distribution of tasks between the Commission and the Member States. It repeats its proposal — made previously, in its analysis of the 2016 growth survey — to supplement the European Semester. As well as increasing investment, structural reforms and strengthening macroeconomic balance, the main objectives also include progress to be made in terms of ‘beyond GDP’ indicators (social, environmental and sustainability targets).












1.9.


The EESC believes that only a comprehensive system of indicators — such as the current system, which is also able to factor in social and environmental ramifications — is truly able to show real economic growth on the basis of results (GDR — gross domestic result).












1.10.


In the EESC’s view, a clear and comprehensible overview of the political and strategic positions for the near future and for the longer term is essential. It is important that the priorities of the Juncker Commission as well as the 2030 targets, based on the Europe 2020 strategy (and which also cover sustainable development), jointly determine development processes.












1.11.


According to the European Commission’s latest forecasts (1), EU Member States’ economic development will fundamentally stay the same between 2016 and 2018 in comparison to 2015, and the principal source of growth will be consumption rather than investment. This outlook, which is related to low growth and investment, is inauspicious, all the more so given that the strengthening of domestic demand remains as important as ever when it comes to boosting investment.












1.12.


The coordination of all instruments of social policy should also be strengthened, given the limits to the EU’s competences. A well-designed benchmark system, which will be proposed by the future European Pillar of Social Rights, could stimulate the reform process and ensure better coordination of social policies within the European Semester.












1.13.


Analysing the consistency between traditional cohesion policy — currently undergoing a mid-term review — and its financing (ESI Funds) on the one hand, and the new investment instruments (EFSI) on the other hand, should be a focus of the Annual Growth Survey. Since this is one of the most dynamic forms of cooperation between the Union and the Member States, it is also important to ensure better coordination, including in terms of its implementation. The implementation of improvements should be coordinated.












1.14.


The Stability and Growth Pact is one of the main pillars supporting the functioning of the European Semester. Sustainable, long-term economic, social and environmental development must be based on appropriate and coordinated fiscal policies at EU level and the transparent and predictable functioning of financial systems.












1.15.


The EESC draws attention to the fact that the structural changes needed to achieve sustainable development require considerable funds which will only be available if budgetary resources are used more effectively and investment is significantly increased.












1.16.


Although this new European fund, the EFSI, will enable resources in the productive and physical infrastructure sectors to be substantially increased, the fact that social and public investment levels continue to be well below what is needed is very problematic. Sufficient budgetary flexibility should therefore be ensured.












1.17.


The EESC strongly recommends that investing in education, training, healthcare and other social systems should be the priority, especially in regions with lower than average development.












1.18.


European governance must be characterised by both shared ownership and reasonable flexibility. On the one hand, the EESC is of the view that the mid-term revision of the Union’s budget, redefining the objectives, significantly increasing the proportion of own resources and revenue, and making implementation more effective and efficient could help to shape a system in which flexibility could also be seen as a way to cover the risks. On the other hand, improved market conditions and smart regulation can encourage the competitiveness of the European economy in a broad sense (including from an economic, social and environmental perspective).




2.   Context









2.1.


At present, the European Union is being held together not so much by a shared political will to construct the future as by legal guarantees and the need for economic cooperation. The Union is divided and continues to face a crisis on several fronts that refuses to go away. The Brexit vote and the ensuing uncertainty are a clear sign of this. While the political stalemate is deeper than the economic one, there are still considerable economic disparities in spite of the economic recovery which can be observed in some Member States.












2.2.


The migration crisis is sending a tragic signal around the world, one that requires Europe to honour its humanitarian commitments, to maintain its social and societal systems and to consolidate the role it plays beyond the continent’s borders.












2.3.


In terms of how the Union operates, the gap between society’s perception and reality has widened. The partnerships forged between civil society and civil society organisations on the one hand and the Union’s institutional framework on the other are far from satisfactory; Europeans have the distinct impression that the situation is deteriorating. Citizens, as well as large, medium-sized and small businesses, expect effective measures.












2.4.


The political forces that pit the presumed or real requirements of national independence against what has been achieved together are gaining ground. Unfortunately, contemporary politics emphasises differences rather than convergences.












2.5.


Starting from when the proposals were drawn up as part of the mid-term review of the Europe 2020 strategy, it became clear that it was essential to strengthen the development processes (and related instruments) that directly affect European citizens, so as to give expression to European values and advance the Union’s interests.












2.6.


The economic crisis and the ensuing drop in investment have fractured the growth-based unity among the Member States and provoked increasingly serious strains. In spite of the Union’s fundamental objective, the development gaps between Member States — and more particularly between certain regions — are widening.












2.6.1.


In addition, the rules on budget deficits set in 2005 should be adapted to the current economic and social situation of the EU, and should take into account that some public expenses, such as education, have to be removed from deficit calculations as they are important investments for the future.












2.7.


While the European Union is a major draw, broadly speaking it has not yet recovered its role as a magnet for investors. In terms of productive investments, it is progressively losing ground to the United States. The countries that are lagging behind are holding back the ones that are more dynamic. The fall in productivity levels and the weakness of innovation processes bring down the rate of European added value in global competition.












2.8.


In some countries, productive investment has declined despite a substantial budget surplus, which constitutes an obstacle to making up lost ground. The response is slow and bureaucratic.












2.8.1.


However, the EESC estimates that investment and consumption are greatly needed in order to create the conditions for economic transition to a sustainable economy tackling climate change. There should be new training and job creation to boost European competitiveness.












2.9.


In 2014, the European Commission launched a new model for economic development. The objectives set — creating jobs and promoting growth, strengthening the European single market, streamlining the system of economic regulators, consolidating priority EU achievements, the energy market, supporting investment in the digital market and services, giving priority to intellectual and physical networks to connect Europe, and boosting environmental responsibility — represent a fresh impetus vital for the economy.












2.10.


The measures taken to implement the programme, the work undertaken under the REFIT programme, the European Fund for Strategic Investments and the related institutional framework seem to confirm the validity of the intentions. However, as mentioned before, these growth prospects are not enough.












2.11.


A lack of growth-oriented budgetary policies for countries affected by high public debt and budget deficits, in some cases brought about by the financial and banking collapse, rather than profligate government spending, has turned out to be counter-productive and has contributed to widening the gap between surplus and deficit countries. In some cases, it might be more effective to grant more time to allow a more gradual adjustment, as increasing economic growth plays a key role in reducing deficit and debt ratios












2.12.


A set of development tools needs to be deployed to ensure growth, stimulate symmetrical adjustment across the EU and ease social tensions. The European Semester enables a country-specific process to be drawn up and implementation to be monitored, but this process plays only a coincidental role in setting the fiscal stance of the euro area, as Commission Communication COM(2016) 726 final on the economic policy of the euro area clearly points out.












2.13.


The main objectives of the Europe 2020 strategy are still relevant. The unemployment rate remains unacceptably high, with more than 22 million unemployed in the EU and more than 17 million in the euro area. More than 122 million people are living either on the verge of poverty or at risk of poverty. The lack of prospects for young people constitutes a significant obstacle to a renewable future for Europe. There is a low level of labour mobility. The system of lifelong learning is still not the focus of policies. The trends, which are diverging from the objectives, are not encouraging. There are already more than 70 Directives concerning social rights in force. In its opinion on the European Pillar of Social Rights the EESC argues that, as part of the preparation of the Annual Growth Survey, upward convergence needs to be set as an objective for social rights in Europe. Likewise, it stresses the need to ensure growth and competitiveness across the EU. In this context, it underlines the necessary interdependence between economic, employment and social policy (2).




3.   Specific comments









3.1.



Investment













3.1.1.


The European Commission places the overview of measures that aim to further develop the financial system at the heart of its Annual Growth Survey. These measures are mainly significant in terms of consolidating how the sector functions, improving the efficiency of the EFSI, removing barriers to investments, and expanding the global role of the European economy.












3.1.2.


The EESC agrees that it is vitally important to establish a capital markets union and other framework conditions, so as to improve funding conditions, spread risk and make credit more accessible — particularly by removing hurdles for the SME sector — and to put the principle of equal opportunities into practice.












3.1.3.


Examples include the Regulation on venture capital funds and efforts to develop the Social Entrepreneurship Fund, ‘second chance’ for failing entrepreneurs, the improvement of insolvency proceedings, and the implementation of preventive restructuring schemes. Stimulating the involvement of banks and improving their operational efficiency should form one pillar of efforts to boost investment activity.












3.1.4.


There is every indication that the European Fund for Strategic Investments — in addition to its enlargement, which has already been the subject of a decision — acts as a major incentive on the European investment market. This may take on particular significance with regard to the achievement of the 2030 targets, which also include the sustainable development criteria. The gradual transition towards a low-carbon, circular economy will create new jobs, particularly in the service sector, and products complying with sustainability criteria could open new avenues for innovation.












3.1.5.


The Committee has already emphasised in previous opinions that the completion of the Energy Union and the Digital Single Market Strategy will open up ideal opportunities for investment. Increased dynamism in these areas also depends on international trade agreements, some of which may be adversely affected by changing attitudes in global politics, and how accessible markets are as a result.












3.1.6.


The EESC considers it essential that the Structural Funds can be used more than is currently possible to support education and training, and the mobility that is linked to this.




3.2.   
Pursuing structural reforms










3.2.1.


The EESC backs the commitment to implement the structural reforms in a differentiated manner, as agreed. The necessary national and European measures to achieve this should be laid out.












3.2.2.


The EESC agrees with the European Parliament’s view that a flexible and well-functioning labour market is one condition for a positive economic situation to develop. However, the EESC also believes that the social dimension of the European single market needs to be strengthened.












3.2.3.


The country-specific recommendations should be implemented in such a way as to ensure that due consideration is given to the budgetary capacities of the Member States so that they can develop policies to boost growth and social inclusion.












3.2.4.


The EESC welcomes the EC’s launch of a consultation on a European Pillar of Social Rights from March 2016, and agrees that economic development should result in greater social progress and cohesion. The best performing Member States in economic terms have developed more ambitious and efficient social policies but, generally speaking, competitiveness and the social dimension need to be enhanced in Europe.












3.2.5.


It is important that reforms implemented by Member States guarantee access to high quality services. Thus improving the level of education, training, healthcare, housing and childcare is an essential prerequisite for economic development and will have a direct impact on changing lifestyles and social inclusion.












3.2.6.


The social partners play a particularly important role in shaping, developing and implementing structural reforms. This role must be rooted in a newstart for social dialogue — one that is based on the current form of dialogue but with enhanced mechanisms for participation. Responsible social engagement depends a lot on clear and direct communication, and the EESC welcomes the announced intention by the EC to involve the social partners in a deep and systematic way in the European semester cycle.












3.2.7.


Consistency in the vision for and implementation of the reforms would also enable the European Semester process to take more account of the social dimension. The tools and methodology of economic policy should be supplemented with a long-term results-based perspective and social values that also take sustainability into account.












3.2.8.


Implementing a system of incentives that creates a level playing field for competition, provides more support to growth and reduces the opportunities for abuse should be an integral part of the reform process.




3.3.   
Positive fiscal policies










3.3.1.


Implementation of the Stability and Growth Pact, and monitoring how its provisions are applied and what their impact is on individual Member States’ economies, are important elements of the European Semester process. It is regrettable that the semester process has proved to be a one-sided instrument that proscribes high debt and deficits on pain of penalties, but only prescribes a simple reduction of high surpluses. The EESC is in favour of flexibility, particularly when this enables public investment to boost sectors that are also of long-term benefit (education, training and healthcare).












3.3.2.


Nevertheless, the EESC believes that the implementation of the Stability and Growth Pact must be complemented by the introduction of a procedure for social imbalances, similar to the existing procedure for macroeconomic imbalances, that would identify and analyse the social impact of economic activities in the Member States. As stated above, special consideration must be given to national budget deficits when these are linked to investments for the future, such as education, or investments aimed at creating the conditions for economic transition to a sustainable economy tackling climate change.












3.3.3.


The EESC welcomes the European Central Bank’s strengthened role, the Commission’s efforts made to attain a positive fiscal stance for the euro area in support of monetary policy. The EESC recognises the important role played by the ECB in restoring stability in the wake of the crisis. This must be complemented by stronger measures to accelerate the rate of increase in economic growth and job creation. In this context, the EESC is gravely concerned and disappointed that the Council rejected the Commission’s recommendation for a positive fiscal stance in the euro area.












3.3.4.


The low interest rates that are currently typical offer Member States the opportunity to increase public investment while also reducing their indebtedness. The EESC is of the opinion that — within the limits of the Stability and Growth Pact — the mid-term review of the EU budget and the preparation of the next programming period, and the introduction of an ‘EU budget focused on results’, should offer an opportunity to implement original investment practices that support economic growth and ensure long-term sustainability.












3.3.5.


The forecasts in the 2017 Annual Growth Survey take on particular importance when the structural evolution of European society is analysed. Efforts to mitigate the negative effects of ageing on society are putting increasing pressure on Member States’ budgets. The importance of training and re-training, the preventive role played by the health sector, and the need to reform the social protection system should be emphasised once again.




4.   General comments









4.1.


The detailed development and implementation of a priority programme that aims to fully consolidate the euro area’s financial system are both essential and urgent. However, this should not result in widening the gulf between Europe’s countries.












4.2.


The first period of two-speed development announced by the ‘five presidents’ and aimed at completing Europe’s Economic and Monetary Union ends in 2017. A ‘white paper’ paves the way for the next step. In the situation generated by Brexit, the strengthening of the four unions — economic, fiscal, financial and political — is of particular importance. In the post-Brexit period, it is essential to revise financial capacity upward.












4.2.1.


While the focus of attention up to now has primarily been the strengthening of the euro area’s economic and financial system — setting up competitiveness and productivity councils, strengthening the banking union and agreeing on its third pillar, a deposit guarantee scheme (EDIS), creating a body responsible for ensuring budgetary discipline, and making headway towards close cooperation on the capital markets — the readiness to instigate political cooperation should also be intensified.












4.2.2.


This clearly must encourage the EU’s leaders to work out a general strategic approach based on a flexible economic policy. In line with the Treaty of Lisbon and the regulatory framework governing its implementation, this approach will take greater account of each country’s societal and social characteristics, and its resilience, even in cases where economic regulation agreements and their instruments work well




(the more flexible approach to reducing budget deficits recently adopted by France, Spain and Portugal reflects this potential development).








4.3.


In previous budgetary and financial periods, the requirement to demonstrate ‘European added value’ has assumed considerable importance in the framing of programmes and tasks. The various programmes supported by European funds have increasingly targeted practical collaboration between EU Member States where joint efforts have resulted in better outcomes than would have been possible at strictly national level (Connecting Europe Facility, Horizon 2020, etc.), or have promoted the convergence of common European interests between the local level and Member State level (fight against unemployment and poverty, development of infrastructure, regional and urban development, etc.). However, the extent of available resources is not in proportion to the tasks that are to be accomplished.












4.4.


The alignment of the Europe 2020 objectives has also received considerable attention in the country-specific recommendations drawn up during the European Semester process. In addition to fiscal and structural reforms, the reform agendas of Member States have also had to set out specific objectives and stipulate how they are to be achieved. The three pillars of the Europe 2020 strategy — a smart, sustainable and inclusive Europe — and its system of indicators can continue to serve as a point of reference for the responses that will have to be found to the new challenges that will arise by 2030.












4.5.


The goals of long-term socio-environmental sustainability must play a greater role in the European Semester mechanism. This will encourage dialogue on key issues such as the promotion of various investments in the social and public sectors, the consideration of investments with long-term benefits when calculating the fiscal deficit, and the development of an institutional structure for the welfare of citizens. There must be a new ‘golden rule’, defining what is consumption and what is investment. The necessary conditions to that end can be put in place by examining the possibility of reforming EU budget mechanisms and of increasing EU own resources.












4.6.


A more widespread sense of ownership, from the point when aims are determined up to their implementation, as well as a recognition of the growing role of final beneficiaries, are particularly important in this consultation. The role of the national Parliaments has to be strengthened and their subsidiarity concerns respected.












4.7.


There is no consistent vision of the future, political will or governance capacity. The legal framework is complicated and the involvement of the social partners and civil society is token, which is reflected in the lack of public support. This worsens the democratic deficit and undermines trust.












4.8.


At present, development processes are being shaped by two very different major sets of economic/financial instruments and institutions, each with their own procedure. Complementarity between these instruments and institutions should be increased; it is not enough just to draw up guidelines to this end. A systematic solution is needed.












4.8.1.


On the one hand there are the conventional European Structural and Investment Funds (ESI Funds), which aim to foster cohesion. They take the form of aid for investment and development and are continuously modernised, although their nature remains unchanged. They are available thanks to redistribution of the Union budget, sourced from contributions from the most developed Member States. In some cases, beneficiaries fail to appreciate the real value of these funds, arguing that they are ‘entitled’ to them.












4.8.2.


To facilitate the complementarity mentioned above, it is essential to expand and simplify the rules as part of the mid-term review planned under the seven-year financial framework (MFF) that runs up to 2020.












4.8.3.


This is the aim of the European Commission proposals to strengthen the financial objectives, stimulate investment, deal with migration, and reduce youth unemployment.












4.8.4.


Improving flexibility and simplifying the rules on access to funding are key elements.












4.8.5.


The second set of instruments used in the implementation of the Juncker plan is the European Fund for Strategic Investments (EFSI), a new market-oriented financial instrument capable of supporting venture capital and activating public, banking and private funds. The EFSI already totals EUR 500 billion and its reference period runs until 2020. It could be called on to play an important role in the next programming period.












4.9.


It is important to incorporate the new governance mechanism thus created into the development-focused governance of the future. The two funding systems must also be harmonised within each Member State. In the longer term, it makes sense to combine the two governance mechanisms.












4.10.


The EESC is encouraged by the new communication from the European Commission which summarises, for the period up to 2030, the strategic orientation work that has been carried out to tackle the challenges of sustainability.












4.11.


Missions under the new programming process should focus on a small number of clear objectives. Implementation requires a new strategic instrument within the European Commission — a coordination-based system of governance that also takes control by society into account.












4.12.


Evaluation of the effectiveness and efficiency of different financial instruments suggests that a proposal needs to be framed even now for the period running up to 2030 to secure a better distribution of tasks between the traditional cohesion objectives and market-oriented investments. The project assessment mechanism linked to the EFSI provides excellent methodological support, including for those cases where traditional cohesion instruments are used.












4.13.


The institutional structure of the partnership should be strengthened and opened up to all European citizens under the right of public participation, in order to improve the effectiveness and efficiency of the European Semester. EU citizens should be ensured access to relevant information and be able to take part in planning and implementation decisions. They should also be able to express their opinions regarding draft programmes, calls for tender and evaluation reports.





Brussels, 22 February 2017.


The President of the European Economic and Social Committee

Georges DASSIS




(1)  European Commission: Winter 2017 Economic Forecast — Overview, 13 February 2017

(2)  SOC/542 (OJ C 125, 21.4.2017, p. 10).


APPENDIX
to the OPINION
of the European Economic and Social Committee
The following points of the subcommittee opinion, which were replaced by amendments adopted by the Assembly, received at least one-quarter of the votes cast (Article 54(4) of the Rules of Procedure):
a)   Point 1.9:







 



The EESC believes that only a complex system of indicators — one that is also able to factor in social and environmental ramifications — is truly able to show real economic growth on the basis of results (GDR — gross domestic result).






Voting result:







For:


111




Against:


109




Abstentions:


13










b)



Point 2.13:











 



The main objectives of the Europe 2020 strategy are still relevant. The unemployment rate remains unacceptably high, with more than 22 million unemployed in the EU and more than 17 million in the euro area. More than 122 million people are living either on the verge of poverty or at risk of poverty. The lack of prospects for young people constitutes a significant obstacle to a renewable future for Europe. There is a low level of labour mobility. The system of lifelong learning is still not the focus of policies. The trends, which are diverging from the objectives, are not encouraging. There are already more than 70 Directives concerning social rights in force. ‘The EESC emphasises the need for growth and competitiveness in the whole of the EU. In this context, the EESC stresses the necessary interlinkage between economic, employment and social policy’
 (3).





Voting result:







For:


145




Against:


62




Abstentions:


14




c)   Point 3.2.2:







 



The EESC agrees with the European Parliament’s view that a flexible and well-functioning labour market is one condition for a positive economic situation to develop. The EESC notes that the EU is the most developed region in the world in terms of social provision.






Voting result:







For:


141




Against:


65




Abstentions:


16






(3)  EESC opinion on ‘European Pillar of Social Rights’ (SOC/542) (OJ C 125, 21.4.2017, p. 10).