Completing Economic and Monetary Union: Rebalancing European Economic Governance (ETUC position)

Adopted at the ETUC Executive Committee on 16-17 December 2015

Introduction

The Commission Communication of 21 October describes the initiatives the Commission will undertake in stage 1 of the process to deepen EMU. In this stage, the Commission will intensify the use of policy instruments and levers that already exist within the current Treaties in order to improve the functioning of EMU.

This involves revamping the European Semester and improving the toolbox for economic governance through an increased focus on the ‘euro area as a whole’ in the AGS, convergence towards best labour market practices through common benchmarks (such as flexicurity, lifelong learning, modern social protection or enabling labour taxation), macro-conditionalities in the European Structural and Investment Funds, prioritising Capital Markets Union, creating an independent advisory European Fiscal Board and introducing a system of national Competitiveness Boards in all euro area members.

In a second phase, which is programmed to take place after 2017, more fundamental reforms would be undertaken with (labour market) benchmarks, principles and/or best practices to be anchored in a revised Treaty. To prepare this process, the Commission, as announced in its recent work programme, will publish in spring 2017 a White Paper on the transition from stage 1 to stage 2 of completing EMU. This will be preceded by consultations and the setting up of a high-level expert group from mid-2016. The ETUC will call on the Commission to involve the social partners in this high-level group in order to influence discussion which will have major consequences for workers in Europe.

Recalling the ETUC position on economic governance  

While acknowledging that a single market, and even more so a single currency, needs closer coordination of national economic policies, the ETUC has also denounced the current system of European economic governance as being highly unbalanced. The focus is almost exclusively on fiscal stability and (wage) competitiveness whereas concerns over economic recovery, more and better jobs and social cohesion are being largely ignored[1].

The ETUC is particularly concerned that the idea that ‘since we cannot devalue the national currency anymore, we have to devalue wages’ has become a key pillar of European economic thinking. This has already resulted, in an increasing number of Member States, in a collapse in the number and share of workers covered by collective agreement.  

The ETUC insists that European policy-makers need to break with the narrative of (wage) cost competitiveness and austerity, which is leading our economies into depression and deflation. To ensure a strong and meaningful recovery, Europe needs to address the real problem, which is a lack of aggregate demand. Demand should be relaunched by using unconventional monetary policy to finance a robust fiscal stimulus in the form of higher public investment.

ETUC general principles and demands on completing Economic and Monetary Union

The ETUC rejects National Competitiveness Boards

As part of stage 1 of completing EMU, the Commission wants each euro area Member State to install a National Competitiveness Board. These Competitiveness Boards are to be composed of independent experts and will have the legal competence to monitor competitiveness developments, including wages, as well as to inform the process of setting wages.

The ETUC[2] has rejected the Commission’s proposal to set up these Competitiveness Boards. The ETUC opposes any measure that infringes or allows for the infringement of the autonomy of social partners and their freedom to bargain collectively. For the ETUC, this autonomy is crucial, as the social partners have the best knowledge of the realities of the labour market and it is their members who have to deal with its functioning (or dysfunctioning). Moreover, the autonomy of collective bargaining is an important safeguard against so-called ‘expert’ committees being hijacked by particular interests.

Equal balance between the economic pillar and the social pillar is urgently needed  

The Commission is actively advancing on a series of proposals (Competitiveness Boards, macro-conditionalities in European funds, European Fiscal Board etc.) that will further strengthen economic governance. At the same time, it remains disappointingly vague on how to implement in practice ideas such as a ‘Social Triple A’ or a ‘European pillar of social rights’. However, to restore balance between the economic and social dimension, it is necessary to establish workers’ rights and social principles which European economic governance is not allowed to breach. Moving ahead on economic governance, while action on the social pillar remains under discussion and may end up getting blocked again, is not an option.