European Economic and Social Committee
ECO/380
The Community Method for a
Democratic and Social EMU
150th meeting – 10 July 2015
Section for Economic and Monetary Union and Economic and Social Cohesion
AMENDMENT 1
Tabled by Jonas Berggren
Subject: The Community Method for a Democratic and Social EMU (own-initiative opinion)
Ref.: Draft opinion EESC-2015-01820-00-01-PA-TRA
Quotation at the beginning
Delete:
"The EU must be a community of citizens, not banks. Its foundation is democracy, its future
social justice1."
Reason
Quotation is very polemical. A community of laws and values above all requires that its Member
States comply with agreed rules.
Point 1.1
Amend:
1.1 A genuine stabilisation of tThe economic and monetary union (EMU) can only succeed if
major reforms are undertaken. will be damaged if it does not follow its own rules. This
requires If institutional reforms have to be adopted and this requires a change to the treaties
as part of a convention., Since this is this seems unlikely to happen unrealistic before 2018,.
iIn the meantime other measures must therefore be taken to enhance the democratic and
social dimension of EMU within the framework of the existing treaties.
Reason
The re-wording highlights the shortcomings of EMU.
1
Heribert Prantl Europa – Traum oder Alptraum (Europe – dream or nightmare), presentation in Ludwigsburg on 14 July 2013.
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EN
Point 1.2
Amend:
1.2 The longer the austerity a policy continues which is aimed at a lean and balanced budget
without the addition of (or better still, being replaced by) at least balancing this with an
effective investment plan and measures conditions likely to enhance growth and employment
social cohesion and solidarity, it will become increasingly clear that Europe's economic
integration and prosperity is at risk from growing social inequalities.
Reason
The negative connotations of the term "austerity policy" give a one-sided slant to the whole opinion.
Countries that have lived beyond their means now have no other choice but to improve their
competitiveness in order to restore their long-term growth, prosperity and employment. A functioning
welfare state needs a strong economic base. To boost growth and jobs, the conditions for investment
must above all be designed to ensure that investment, and thus the creation of jobs, are worthwhile.
Point 1.3
Amend:
1.3 A "business as usual" approach will pose a direct risk to the social, political and thus
economic cohesion of the EMU. What is needed is to strengthen social, political and
economic cohesion in the EU once again. The EESC agrees that divergences in the
inflationary adverse trends of in the EMU economies must be given greater consideration and
that balanced structural reforms in these countries must be introduced to reflect the
requirements of a monetary union, not just and national requirements. In addition, the EESC
believes that short-term demand management is essential.
Reason
The distinction drawn here between national requirements and those of the EMU is not clear. As it is
citizens who are concerned here, the first step should be to solve national problems, in line with the
subsidiarity principle. Moreover, economic stimulation measures without structural reforms are not
suitable for contributing to long-term stability. Improved conditions for private investment are much
more effective.
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Point 1.5
Amend:
1.5 The EESC points out that some of the economic policy goals of economic governance of
recent years are at odds should be brought more into line with the EU's social policy
objectives under Article 4(2) TFEU. and calls for these conflicting goals to be subject to
public debate and resolved. All mMeasures under the European Semester with an
employment policy dimension – in accordance with the horizontal social clause – must be
subject to a social impact assessment,. the These results of which will should be published
and discussed at national and European level. The EESC can support this within the
framework of its competences.
Reason
There is no conflict of objectives here, as there is no contradiction between a good social policy and a
good economic policy.
Point 1.7
Amend:
1.7 The EESC is convinced that macroeconomic dialogue in the euro area (MEDEURO) can
make a key contribution to the democratic and social development of the EMU, the outcomes
and conclusions of which should be taken into account both when drawing up the Annual
Growth Survey and in the scoreboard and country-specific recommendations, enabling EMUwide coordination of monetary, budgetary and wage-setting policies.
Reason
EMU-wide coordination of wage-setting policy is contrary to free collective bargaining, e.g. in
Germany, and should therefore be rejected. The reference to monetary policy is also inappropriate, as
this is the responsibility of the ECB, which is independent.
Point 2.1
Amend:
2.1 The EESC has issued several opinions with specific suggestions on how EMU could be
better designed. Whereas some of these opinions set out future scenarios, this opinion
provides proposals for how the democratic and social design of the EMU can be developed as
quickly as possible within the framework of the Community method in such a way that it
bolsters democratic resilience and meets the social obligations arising from the treaties.
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Serious moves towards more comprehensive treaty change are unlikely before 2018. At the
same time, there is still concern that the intergovernmental instruments, in particular the
Fiscal Compact, are undermining the Community method and provoking division in Europe2.
The longer the austerity a policy continues which is aimed at a lean and balanced budget
without the addition of (or better still, being replaced by) at least an investment plan and
measures to enhance growth and social cohesion and solidarity, it will become increasingly
clear that Europe's economic integration and prosperity is at risk from growing social
inequalities.
Reason
The negative connotations of the term ‘austerity policy’ give a one-sided slant to the whole opinion.
Countries that have lived beyond their means now have no other choice but to improve their
competitiveness in order to restore their long-term growth, prosperity and employment. A functioning
welfare state needs a strong economic base. To boost growth and jobs, the conditions for investment
must above all be designed to ensure that investment, and thus the creation of jobs, are worthwhile.
Point 2.3
Amend:
2.3 In the context of the crisis the intergovernmental method was the only way to adopt
important EMU instruments - like the Fiscal Compact - quickly, as individual Member States
would not have agreed to a Treaty change. On the one hand, some instruments have been
improved during the crisis. At the same time, there is consensus that tThese instruments point
to a democratic deficit and are still not enough to ensure a more consistent integration
process. The group of foreign ministers3, for example, recommended as early as 2012 that
"full democratic legitimacy and accountability" be guaranteed in all measures, calling for
stronger cooperation between the EP and national parliaments4, while the European
Commission in its Blueprint for a deep EMU advocated measures to build on the institutional
and legal framework of the treaties. The Eurogroup could then lead the way with specific
measures, provided such measures were open to all Member States.
Reason
This procedure was not undemocratic, but a response to an emergency situation with the declared
intention of transferring the agreements to the Community method.
2
3
4
The EP, the fiscal compact and the EU-institutions: a "critical engagement"; Elmar Brok (EPP, DE), Roberto Gualtieri (S&D, IT)
and Guy Verhofstadt (ALDE, BE).
Final report of the Future of Europe Group of 17 September 2012 by the foreign ministers of Belgium, Denmark, Germany,
France, Italy, Luxembourg, the Netherlands, Austria, Poland, Portugal and Spain.
Ibid. p. 2 (f).
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Point 2.4
Amend:
2.4 Within the framework of European policy, however, more and more intergovernmental
solutions, such as the Fiscal Compact, are being implemented under a parallel system
governed by international law. Even the accountability (ownership) of the Member States has
been inadequate5. Published in December 2012, the Van-Rompuy report pointed out that a
common understanding was important in order to carry out more far-reaching reforms.
Moreover, a high degree of social cohesion was needed, as were a strong role for the EP and
national parliaments and renewed dialogue with social partners. In so doing, the then
president of the European Council6 brought the social dimension and the specific role of the
social partners into the debate, which previously had been geared primarily to economic and
budgetary policy issues and the lack of democratic legitimacy.
Reason
This procedure was not undemocratic, but a response to an emergency situation with the declared
intention of transferring the agreements to the Community method.
Point 2.6
Amend:
2.6 The EESC takes note of these proposals and will assess them in terms of how much the
ideas for the further development of "economic governance" contribute to a social,
democratic, solidarity-based and political union which guarantees appropriate participation
of EU citizens and civil society social partners.
Reason
Only employers' and employees' representatives — the social partners — and not broader civil society
should be more involved in economic governance, because they have the relevant expertise.
5
6
See 2014 Humboldt speech by Mr Barroso.
In close cooperation with Mr Barroso, Mr Juncker and Mr Draghi.
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Point 2.7
Amend:
2.7 The EESC takes the view that the EMU, rather than pitting everyone against each other,
requires a genuine strengthening of intra-Community cooperation, as hinted at in the
Commission's "blueprint". By extending demand instead of stifling it, tThis would ensure that
the economic capacities of the various countries are more closely aligned within the
framework of a growing and prosperous economy. This includes an upwards harmonisation
of social standards and labour rights, rather than a race to the bottom.
Reason
It is precisely intra-Community cooperation that has proved its worth in the context of the financial,
sovereign debt and economic crisis. Solidarity and time were allowed in return for necessary
structural reforms and adaptation measures. The artificial extension of demand referred to is not an
effective measure, since it is not clear who is to finance it. Finally, the expression ‘race to the bottom’
is excessive in the light of the existing European legal framework and the subsidiarity principle.
Point 2.8
Amend:
2.8 The co-existence of the Community method, intergovernmental initiatives (such as the
Fiscal Compact) and other new "intermediate forms" linked to the Commission's and the
European Court of Justice's supervisory function in the application of international
agreements have given rise to renewed confusion regarding operators and their legitimacy
and accountability. Transparency and thorough democratic scrutiny cannot be guaranteed
given this state of affairs and tThis has aroused a lot of criticism. In the midst of the crisis,
quick solutions were had to be favoured, and the question of democratic scrutiny, ensured by
the Community method, was put off until better times.but always with the declared intention
that individual international-law agreements would later be transferred to the Community
method. The five presidents would like this state of affairs to continue until at least 2017.
They too are pushing the democratisation of current policy on the euro back into a second
phase, which might start after 2017. In the meantime, the European Semester dialogue
between the EP, Council and Eurogroup, as well as between national parliaments and the
Commission and between national parliamentarians and MEPs (COSAC), is intended to
enhance trust and spur joint action. In this regard, the EESC points out that increased
dialogue cannot replace integration policy. The Community method must now be
strengthened once again and form the basis of a functioning EMU, instead of different,
parallel systems based on international law. is a prerequisite for more democratic scrutiny,
but it cannot replace that scrutiny. The democratic deficit therefore continues to exist.
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Reason
The coexistence of various international-law systems is non-transparent and not ideal, but not
undemocratic.
Point 3.1
Amend:
3.1
Better involvement of organised civil society the social partners can contribute to
improved democratic resilienceEMU governance. The EESC is willing to play a special role
here and to make its experience and resources available, as is already the case with the 2020
strategy, for example7.
Reason
Only employers' and employees' representatives — the social partners — and not broader civil society
should be more involved in economic governance, because they have the relevant expertise.
Point 4.1.1
Amend:
4.1.1 The EESC expects the report on Completing Europe's Economic and Monetary Union8,
presented by the five presidents9 on 22 June 2015, to serve as a guide for future development
of structures for economic policy governance in Europe. The EESC is of the opinion that
ongoing imbalances as well as the creation of trust require more effective and democratic
economic governance, notably in the euro area10. On the other hand, the analysis is based on
some false premises, which leads – despite some good points – to problematic conclusions.
The corollary of the paper would be a tougher policy of austerity aimed at a lean a balanced
budget and wage and welfare cuts. While it is recognised that the minimum conditions for the
long-term viability of the EMU have not yet been achieved, the recommended stepping up and
long-term institutionalisation of the current anti-crisis policy is nonetheless to continue. The
EESC sees a contradiction here.
7
8
9
10
EESC opinion: Taking stock of the Europe 2020 strategy, SC/039.
See footnote 9. Only those elements of the report that are relevant to this opinion will be discussed. The EESC will produce a
separate detailed assessment.
The President of the European Commission, the President of the European Council, the President of the European Parliament, the
President of the Eurogroup and the President of the European Central Bank.
EESC opinion: Completing EMU: The political pillar, ECO/376.
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Reason
Economic governance is not undemocratic. Its effectiveness should, however, be increased by
ensuring that it applies its own rules.
Point 4.2.2
Delete:
4.2.2 Capital flows from surplus countries have led to overheating in deficit countries, with
nominal wages increasing as a result. The EESC shares the view that the imbalances in
capital flows between the centre and the periphery, which came to a sudden standstill with the
onset of the financial crisis, are a cause of the competitiveness problems of peripheral
countries. Rather than a correlation between nominal wages and jobs, there is thus a causal
link between capital flows and jobs in the deficit countries. The financial imbalances have
been given too little attention in light of the fact that bank resolution was seen as a matter for
the Member States, which is at odds with deeper financial market integration.
Reason
A polemical point that adds no value to the argument. "Capital flows" means loans which were
granted at the request of the borrower. Deficits and surpluses are not objectionable per se. The
question should always be considered on a case-by-case basis: e.g. what is the capital used for in
deficit countries? Private investment that increases competitiveness is to be welcomed.
Point 4.2.3
Amend:
4.2.3 The pro-cyclical fiscal policy between 2011 and 2013 and the absence of a countercyclical fiscal policy in 2014 have has further exacerbated social hardships unnecessarily11.
In addition to the necessary structural reforms, policies should therefore offer people
opportunities, for instance through favourable conditions for private investment in order to
rebuild long-term employment. Such measures should be accompanied by a productivityorientated wage policy. Policy should therefore restore competitiveness, i.e. the ability to
generate income and prosperity to guarantee social stability to all. However, competition
among Member States to lower wages puts democracy and social welfare at risk. The EESC
therefore strongly endorses the conclusion that, in the short term, aggregate demand and
inflation must be increased as a matter of urgency. Furthermore, the ECB must be relieved of
the tasks of fiscal policy and adjustment of unit labour costs, which fall outside its mandate
11
Zsolt Darvas and Olga Tschekassin, Poor and under pressure: the social impact of Europe's fiscal consolidation, Bruegel Policy
Contribution 2015/04, March 2015.
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but which it carries out for all intents and purposes owing to the political inaction of the other
institutions.
Reason
How is a pure demand-side policy to be funded?
Point 4.2.4
Amend:
4.2.4 In the EESC’s view, further action is required in respect of this "fiscal federalism by
exception" in order to address the basic issues of democratic legitimacy through the national
parliaments and the EP. The EESC supports the "parliamentarisation" of the euro area
(grand EP committee including all members of parliament from the EMU and those wishing
to join the euro area). Even coordination among members of parliament from the euro area
on EMU issues should be improved within the framework of COSAC12.
Reason
It is not clear what is meant by "fiscal federalism by exception". In addition, the reworded text focuses
more on the process than on the potential stakeholders.
Point 4.3.2
Delete:
4.3.2 The EESC points out that many of the economic policy goals of economic governance
are at odds with the EU's social policy objectives under Article 4(2) TFEU. In order to
remedy this, it recommends that – in accordance with the horizontal social clause – all
measures be subject to a social impact assessment under the European Semester too, the
results of which will be published and discussed openly at national and European level. The
Committee can support this. Even the tripartite social summit needs to address these
questions and must be given greater importance.
Reason
Responsibility for coordination of fiscal and financial policies should remain with the Council of
Finance Ministers and the governments.
12
ECO/376 – Completing EMU: The political pillar, 2015.
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Point 4.3.3
Amend:
4.3.3 The five presidents' report, on the other hand, speaks of a financial, fiscal and political
union, while there is no mention of the social union. It urges strengthening the unique
European model, while no longer saying anything about the unique European social model. It
is true that the image of the "social triple A" is raised, which is intended to be achieved as
part of a deepened EMU, but it remains extremely vague. Social issues are dealt with at best
as supplementary matters, or in the context of increased mobility of the labour markets in the
Member States. Key elements – mentioned without further explanation – are a minimum level
of social protection, effective welfare systems in the Member States as well as new
employment "flexicurity" initiatives.
Reason
To be given orally.
Point 4.3.8
Amend:
4.3.8 The EESC believes that MED-EURO should meet at least twice a year and become an
integral part of the economic governance of EMU. Its findings and conclusions should
therefore be taken into account both when drawing up the Annual Growth Survey and in the
scoreboard and country-specific recommendations. Instead of the prescribed wage and
expenditure recommendations, there would thus be coordination of monetary, budgetary and
wage-setting policy in EMU, which – by analogy with the fiscal policy's Stability and Growth
Pact – could lead to a higher degree of transparent commitment by all economic operators
and be known as a "stability and jobs pact". In this context, the EESC stresses the importance
of smooth interaction between monetary and budgetary policy and wage development in
order to ensure more growth and jobs, boosting confidence in monetary union.
Reason
Misinterpretation of the economic policy recommendations, inter alia with regard to the countryspecific recommendations. Also inappropriate references: to "monetary policy - the ECB is politically
independent and bound by its mandate alone; to "wage-setting policy" - wage agreements cannot be
concluded at European level (free collective bargaining).
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Point 4.3.10
Amend:
4.3.10 Outlook: without undertaking fundamental institutional and political reforms, EMU
will always remain fragile. The Committee is extremely concerned about the stability of the
EU, since the necessary reforms – with or without treaty change – always occur only at the
last minute and under intense pressure (often from the markets). What is needed is to
strengthen social, political and economic cohesion in the EU once again and to continue a
coherent economic and monetary integration as a basis for a properly functioning EMU.
Without bold members of parliament, politicians and social partners, who lead the discussion
with civil society both nationally and at European level and who fight for the best solutions, a
well-functioning EMU cannot succeed.
Reason
The re-wording highlights the shortcomings of EMU.
_____________
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