Debate: EU initiatives to address the rising cost of living, including the implementation of the European Pillar of Social Rights
Date: TUESDAY, 5 JULY 2022
Speaker: Nicolas Schmit
Language: EN

This has also generated unprecedented challenges in terms of rising cost of living for households in Europe, mainly due to spiralling energy and food prices. The consequences of the current crisis have an impact on supply chains, commodity and energy prices in the EU affecting many sectors of our economy, and especially SMEs and so affecting the overall economic activity as well as the revenues and purchasing power of households.  The European Parliament in its recent resolution of May 19 on the social and economic consequences for the EU of the Russian war in Ukraine, called for action to address the economic and social crisis in a coordinated manner, mitigating the impact of energy prices on vulnerable households and supporting them to ensure a fair green transition with a view to containing poverty, while the EU frees itself of dependence on Russian energy imports and on fossil fuels. Parliament also stressed the importance of preserving social resilience against the background of a possible deterioration of the economic and social situation engendered by a protracted war in Ukraine, spiralling prices and high inflation.  We fully share your concern and we carefully listen to your calls, which are in line also with the social pillar and its action plan. In times of crisis, we must increase our efforts towards the implementation of the pillar on key issues such as the fight against poverty and inequalities. Decent living and working conditions. Labour market integration of vulnerable groups. Investment in skills and effective social protection. What is at stake now is social cohesion, which obviously has a wide political dimension. We are already experiencing a significant rise in inflation in the EU above 8% in June 2022, up from around 2% last year. This is holding back the recovery; in the latest EU economic forecasts, EU GDP growth for 2022 has been revised downward from 4% to 2.7%. The combination of high inflation and muted wage growth is significantly eroding the purchasing power of households and increasing the real cost of living, in particular for low-income households. It is of utmost importance to respect now social partners autonomy. And I want also to underline the importance of social dialogue at all levels to cope with these important economic and social challenges.  Vulnerable groups of citizens and workers have been particularly hit by the COVID crisis as well as the previous financial crisis. The most vulnerable in our society bear the brunt of the consequences of the current geopolitical crisis and the war in Ukraine. It is up to us as policymakers to act and be the Europe that protects.  Assessing the distribution of impact of inflation and rising living costs and mitigating the adverse effects of these developments on the social situation is of the utmost importance for the Commission. In this regard, I am confident that different initiatives that we have been working on will be key in the coming months and years. Let me mention a few examples. The directive on adequate minimum wages is expected to create a positive momentum for measures enhancing their adequacy. The European Child Guarantee will support children in need by breaking the intergenerational cycle of poverty and inequality. And we just heard that the Czech presidency is investing a lot in developing this and strengthening the implementation of this child guarantee. The forthcoming recommendation on adequate minimum income will support those who find themselves without any means to find their way back to society, and especially the labour market. The Communication of October 21 on tackling rising energy prices provides policy guidance to Member States on how to support households. Between October 21 and mid-February 22 alone, Member States adopted measures in line with the toolbox, which eased energy bills for around 71 million households, customers and micro, small and medium-sized enterprises. We recently established the Energy, Poverty and Vulnerable Consumers Coordination Group with Member States. They will discuss the implementation of emergency measures and examine their evolution. In its communication of 8 March 2022 REPowerEU joined a European Action for more affordable, secure and sustainable energy. The Commission provided guidance on the application of fiscal measures on windfall profits with a view to redistributing revenues to final consumers. These measures can play a key role in mitigating the social and economic impact of high energy prices on vulnerable households, as well as on companies and especially SMEs. Tomorrow’s plenary debate on taxing windfall profits of energy companies will provide an important contribution in this context.  On May 18, in response to the consequences of Russia’s invasion of Ukraine, the Commission put forward the REPowerEU plan. The plan aims to achieve energy savings, diversify and secure energy supply and accelerate the green transition by the rollout of renewables, while stressing that our joint action to accelerate the clean energy transition reinforces the need for effective employment skills and social policies in line with the European Pillar of Social Rights. We call on co-legislators to adopt it swiftly.  Member States can rely on financial support at the EU level, and the European Parliament also rightly called for the continuation of financing support for as long as needed. In particular, the European Social Fund PLUS provides funding for supporting children and young people and promoting social inclusion and tackling material deprivation. The funds under the Recovery and Resilience Facility are being used by Member States to enhance social resilience and social cohesion, which accounts for around one third of national plans, as well as to address the structural causes of energy poverty.  To support REPowerEU EUR 225 billion is already available in loans under the RRF. Now it is up to Member States to update their recovery and resilience plans.  As highlighted by President von der Leyen, this transition will either be working for all and be just, or it will not work at all. And the newly proposed social climate fund aims to address the regional and social impact of the green transition, including energy, in line with the fair transition principles of the Fit for 55 package. In this regard, proposed limitations by co-legislators on fairness-focused investments should not lead to an insufficient capacity to address negative distributional impacts.  During the pandemic, we successfully mitigated the risks on employment thanks to the SURE instrument. Clearly it is an EU success story in 2020 that supported approximately 31 million people, almost one third of total employment in 19 beneficiary states.  In the new future, we have to collectively reflect on new innovative instruments modelled on previous instruments to protect citizens, especially the most vulnerable, and to tackle challenges related to the reduction of purchasing power and rising energy prices. The current social and economic outlook requires further coordinated efforts between the EU Member States and social partners to tackle the emerging challenges related to the reduction of purchasing power. To respond to the evolving crisis and the deteriorating situation, economic and social governance mechanisms under the European Semester are an invaluable asset, and the revised social scoreboard, which monitors Member States progress towards better skills and social fairness. We will follow up on the debate on the review of the EU economic governance framework, as well as on the reform of the EU own resources, including the introduction of new own resources. We need to build on the experience of the past two years where we have collectively been able to put the European Pillar of Social Rights at the heart of the EU’s recovery, one that is sustainable, inclusive and fair. The challenge now is to keep the recovery on track, to address the rising cost of living in the current crisis. That is also the message and spirit of Porto, the Pillar, its action plan and the three ambitious social headline targets for 2030 must drive our joint efforts for a fair, green and digital transition. Since the Porto Social Summit, the EU has continued working towards more social and economic fairness and resilience, and we are ready to pursue actively these key objectives. We heard Parliament’s call to organise a follow up to the Porto Social Summit to discuss the challenges of the extraordinary situation we are facing with increasing inflation and its social consequences. I share the view that we have to address this pressing issue of rising cost of living in the EU in a coordinated manner and at the highest level. And the Commission will obviously play fully its role. Thank you.