Debate: European Semester for economic policy coordination  - European Semester for economic policy coordination: Employment and social priorities for
Date: TUESDAY, 14 MARCH 2023
Speaker: Nicolas Schmit
Language: EN

Let me first focus on the economic and fiscal side. The European economy is facing multiple shocks, but has shown also remarkable resilience. We narrowly avoided a recession and started 2023 on a more optimistic footing. But even if the peak of inflation appears to be behind us, consumers and businesses still struggle with high energy and food prices, and inflationary pressures remain. So while the economy is doing better than initially expected, we are not out of the woods yet. In all, in 23, growth is likely to remain subdued. There are also structural challenges we need to tackle the EU’s energy dependence, the green and digital transitions, skills shortages and the need to strengthen our overall competitiveness. All this against the background of high uncertainty as Russia continues its criminal aggression against Ukraine.  The European Semester has proven to be an agile instrument for European policy coordination. Our focus now is to deal with the immediate consequences of the ongoing shocks and to meet longer term common EU objectives and priorities. In recent months, Member States and the Commission have worked to coordinate targeted and affordable measures to cushion the impact of the energy crisis on vulnerable households and the most impacted businesses, while safeguarding public finances and the single market. Together with the ERF, the semester will continue to ensure an effective reform momentum in each Member State up to 2026. Combined with the reform and investment strategies enabled by other EU programmes.  Fiscal policy coordination is vital. It provides an anchor of stability, supports investments in the twin transition, strengthens resilience, and allows buffers to be built to cope with future shocks. Last week, the Commission presented its orientations for fiscal policy for 2024. After three years of sizeable fiscal support, the focus should now be on improving debt sustainability. Prudent fiscal policy will support monetary policy in the current high-inflation environment. As the European economy is no longer in severe downturn, we confirm that the general escape clause will be deactivated at the end of 2023. The guidance also reflects the fact the EU’s fiscal framework is in a transition phase. As views converge on several key issues, the Commission intends to table legislative proposals after the European Council later this month. The guidance should be seen as a bridge between how the rules have worked in the past and how they may work in the future. This means that certain elements of the Commission’s reform orientations can already be applied. To be specific, we invite Member States to set fiscal targets that ensure the respect of the 3% of GDP deficit reference value and ensure a path for credible continuous debt reduction over keeping it at sustainable levels. On that basis in spring, the Commission will propose fiscal recommendations with a quantitative requirement as well as qualitative guidance on investment and energy measures.  As regards the measures to cushion the impact of high energy prices on households and businesses remaining measures should be better targeted on those most affected. Moreover, as energy prices head lower, governments should move to phasing out most of the support measures, starting with the least targeted ones.  Finally, all Member States should preserve investment to boost sustainable and inclusive growth in line with the common EU priorities, namely in the field of fair transitions. The co-legislators have acted rapidly to phase out the EU’s dependence on Russian fossil fuels, promote zero carbon sources and strengthen energy resilience. Now that the repower EU Regulation has come into force, we are leveraging the Recovery and Resilience Facility to achieve a secure, affordable and sustainable supply of energy. Revising National Recovery and Resilience plans and incorporating REPowerEU chapters with additional funding represent an opportunity to respond to persistent as well as to new challenges in the context of the new Green Deal Industrial Plan.  Let me now turn to the employment skills and social dimension. The employment report provides an important input on the employment and social priorities, focusing, inter alia, on wage and social protection policies, the European Child Guarantee, the use of distributional impact assessments, as well as its call for the strengthening of the social dimension of the semester and the introduction of a social convergence framework. This important debate on the European Semester takes indeed place in an uncertain, as already mentioned, in an uncertain and challenging environment. While the unemployment rate remains low overall in the Union, at only 6.1%, specific groups are still under-represented in the employment statistics. In particular, youth unemployment is still very high at 15%, and the employment gap between women and men continues to be substantial, 10.8 percentage points. Furthermore, the potential of older workers is not sufficiently used. At the same time, labour and skills shortages are increasing across Member States and sectors and this is also due to inadequate quality, equity and labour market relevance of the education and training systems.  Let me just mention one particular issue, which is appalling. It’s the youth NEET rate, which still remains high with over 13%. This represents and this represents a real challenge with more than 8 million young people excluded from the labour market and all kinds of training schemes. A social problem with long lasting consequences, a major loss for our economies facing labour shortages, and here I think strong action is absolutely needed.  With the ongoing high inflation, we still need prompt, adequate and well-targeted policy responses to address poverty risks, as more people and households are experiencing a drop in real incomes. Adequate wage policies and updates of minimum wages in line with the directive as well as collective bargaining, play a key role to prevent increases of in-work poverty. This is particularly important as inflation has significantly outpaced wage growth so far, which brings social risks, especially for low-wage earners. The European Semester remains the key integrated policy coordination framework to address these challenges and pursue key common priorities. Let me underline that coordinated policy action in this semester is key to advance the implementation of the European Pillar of Social Rights. I welcome Parliament’s call to progress in the implementation of the European Pillar of Social Rights in the framework of the European Semester and the Economic Governance Review. Implementing the 21 Pillar Action Plan also means advancing on the 2030 EU headline and national targets, unemployment skills and poverty reduction. This requires that ambitious reforms and investments are put into place by Member States in line with the commitments made in Porto for a strong social Europe. This is all the more important also in view of the very significant transformations that Europe has to undergo to affirm itself as a global leader on the twin transitions. Skills are, of course, central to this. And this is why 23, as the European Year of Skills, will be crucial in promoting skills acquisition, reskilling and upskilling, helping people get the right skills for quality jobs.  Through the Green Deal Industrial Plan, we will further accelerate our work on skills for the green transition, including digital skills with the final aim of supporting competitive and sustainable industrial policies in the EU and creating quality jobs. Skills are an essential tool for our competitiveness as well as for enhancing productivity. The revisions of the Recovery and Resilience Plans in the context of REPowerEU give all Member States an opportunity to boost green skills and reskill our workforce, and also importantly to address the causes of energy poverty. The semester itself will evolve, discussions are ongoing on the economic governance review and, in parallel, Member States are discussing a possible new social convergence framework. This will have implications for the future European Semester of Economic and Employment policy coordination. And I am sure that by using the tools we have more effectively, we can make the semester stronger as a framework to jointly pursue our common priorities and achieve a fairer, more inclusive and greener growth with a competitive and innovative economy that works for people.