Employment must be at the heart of the European Semester – ETUC position in advance of the June European Council (27-28 June 2013)

Brussels, 05/06/2013

Key messages

The European Council must critically assess the European Semester to determine if the process meets the challenges of creating quality and sustainable jobs. Inadequate policies pursued by the Member States and the European Union need to be corrected. The ETUC calls on the European Union to adopt a REAL change of course and strategy by prioritising growth, jobs and social cohesion. This requires:

- prioritising investments for sustainable growth and tackling unemployment through a major investment programme – a new “European Recovery Programme” – amounting to 1-2% of European GDP
- putting the creation of more and better jobs at the centre of the European Semester by prioritising measures to promote quality and sustainable job creation. This objective should be the starting point for the reforms whatever their field (taxation, labour market). We reject all policies that have the objective of shifting the burden onto workers through increased labour market flexibility, deregulation and competition on wages and working conditions
- stopping cuts to public spending and social protection which weaken public services and social safety nets
- guaranteeing the autonomy of social partners and free collective bargaining, along with the central place of social dialogue in reform policy.

One year ago, in June 2012, the European Council agreed on a Compact for Growth and Jobs (the 'Growth Compact’) with the aim of “re-launching growth, investment and employment as well as making Europe more competitive”. The ETUC warned then that the proposed measures were insufficient to meet the challenge of re-launching the economy and reducing unemployment.

Twelve months on, speculation over the survival of the euro may have dampened but the Eurozone remains in a protracted recession. Recent reports also bear testimony to the continued deterioration of the European labour market and in the social situation. Eurostat estimates that 26,521 million Europeans were unemployed in March 2013, almost 2 million more compared to the previous year. The Spring Economic Forecast offers little in the way of hope and warns that unemployment is actually set to worsen. Precarious work and job insecurity are increasing while wages are falling; profits are rising while more people are being put at risk of poverty as social expenditure and social protection schemes are being reduced.

This situation is intolerable. Despite the Growth Compact and other commitments, the European Union and the member states have continued to favour austerity measures – even if in the guise of “growth friendly fiscal consolidation” – to the detriment of growth and job creation but the strategy of fiscal austerity has manifestly failed. The current European policy framework is hampering the EU’s ability to reach the Europe 2020 objectives, notably on employment and poverty reduction. This is why, in advance of the June 2013 European Council, the ETUC again calls on the European Union to place employment, growth and the alleviation of the social crisis at the heart of European policy.

The ETUC observes that the European policy narrative has now somewhat loosened up the timetable for deficit reduction. The Commission is proposing to give France, Poland, Slovenia and Spain an extra two years to reduce their deficits below the 3% of GDP threshold, while Portugal and the Netherlands are getting an extension of one year. Meanwhile, Italy, where the deficit would otherwise fall to 2% in 2013 and 2014, intends to use any margin below the 3% deficit to provide credit flows to companies and to revive public investments. On the other hand, Belgium has not been accorded the same flexibility, because in the Commission’s opinion its structural deficit reduction measures up until now have been limited to 1.5% of GDP, which is only half of the adjustment undertaken in other Euro Area countries.

However, slowing down the pace of deficit reduction does not mean that the Commission has fundamentally departed from the policy of austerity. Indeed, at the same time, the Commission spells out in detail the amount of structural deficit reduction measures Member States need to take in coming years. This ranges from 1.3% of GDP by 2014 (Netherlands), over 2.9% by 2015 (France) and up to 4% of GDP by 2016 (Spain). These cuts will still be substantial enough to represent a serious setback to economic recovery and job creation.

Moreover, the price to be paid for relaxing the pace of fiscal austerity risks being substantial. Under pressure from the European Central Bank, the Directorate-General for Economic and Financial Affairs (DG ECFIN) and the Economic and Financial Affairs Council (ECOFIN) are demanding an ever greater flexibilisation of markets, in particular labour markets, and wage formation systems in return for some flexibility in the fiscal austerity strategy. The theory is that flexible markets and wages will restore competitiveness and growth, thereby providing a better basis in the future to reduce public debt. However, this approach suffers from similar drawbacks to that of fiscal austerity. If wage depression is pursued simultaneously by many Member States, competitive gains will cancel each other out and the squeezing of wages will have a regressive effect of on domestic demand. If interest rates are already at the zero bound, monetary policy cannot compensate for the negative impact on aggregate demand resulting from a redistribution from wages to profits.

Setting the priorities for the current European Semester, the Annual Growth Survey 2013 urged member states to maintain the “momentum for reform” recommending in the employment sphere that member states should prepare for job-rich recovery by continuing deregulation of employment legislation and increasing flexibility in wage setting mechanisms. This approach has resulted in an increase in precarious work, atypical contracts, the proportion of underemployed part-time workers and a growing number of working poor. Unemployment is becoming increasingly structural, with long-term unemployment on the rise in a majority of member states.

This is in contradiction with the member states’ commitment, in the Growth Compact, to taking the immediate action required at national level to achieve the objectives of the Europe 2020 Strategy, including emphasizing tackling unemployment and addressing the social consequences of the crisis. The Growth Compact states that “Member States will swiftly implement their National Job Plans and develop more ambitious and precise National Job Plans for the next European Semester ones”. However, the feedback from ETUC affiliates regarding the National Job Plans reveals that the situation is still unsatisfactory and that several member states had not even prepared such plans.

The Growth Compact together with the Commission’s recent proposals (the Employment package, the Youth Guarantee and the Social investment Package) are presented as a cornerstone of a comprehensive EU answer to the crisis. The European Council must critically assess the European Semester to determine why the process is not meeting key objectives of Europe 2020 strategy, namely the creation of quality and sustainable jobs. Inadequate policies pursued by the member states and the European Union need to be corrected. The ETUC therefore calls on the European Union to adopt a real change of course of the strategy. This requires:
- stopping cuts to public spending and social protection which weaken public services and social safety nets
- putting the creation of more and better jobs at the centre of the European Semester by
- prioritising investments for sustainable growth through a major investment programme – a new “European Recovery Programme” – amounting to 1-2% of European GDP
- prioritising measures to promote quality and sustainable job creation
- correcting structural reforms focusing on increasing labour flexibility through deregulation and competitiveness through competition on wages and working conditions
- investing in productivity enhancing measures such as education, skills upgrading and increased competence, together with better conditions for research and development
- the structural reforms to also include an overhaul of the taxation system in order to combat fraud, tax evasion, tax havens and tax competition between companies.

The gender dimension of the crisis continues to be neglected and the gender perspective has largely been absent from the policy responses. All aspects of the semester process should therefore be gender mainstreamed to ensure a coherent and comprehensive approach. When developing and implementing the NRPs member states should apply a gender equality perspective as recommended by the European Pact for Gender Equality 2011-2020. The CSRs should also have a wider gender equality perspective to ensure that recommendations aimed at improving gender equality and women’s situation in the labour market are not undermined by other recommendations.

Some positive actions need to be reinforced and accelerated. The ETUC welcomed the adoption of the Youth Guarantee in March this year, guaranteeing that every young person will get the offer of a quality job, additional training, an apprenticeship or an internship within four months of leaving school or becoming unemployed. This step in the right direction must be effectively resourced and followed up at national level. Concrete and urgent action which leads to quality job opportunities for young people, including in the public sector, is required.

The ETUC also welcomes the fact that with the Social Investment Package the Commission has recognised the need for social investment in the European Union. Public social protection systems, based on principles like universality and solidarity, are the best way to guarantee adequate and effective social protection to all those in need and to enhance social cohesion. They must be adequately resourced by effective and adequate taxation and by ensuring that a majority of Europeans citizens are in work and contributing to the benefit of all. However, mere recommendations are not enough and Europe needs a real investment package to promote growth, employment and ensure economic and social cohesion. The ETUC underlines that the European Social Fund is too small to fund the Social Investment Package, or the social investment in general, that Europe needs.

In April 2012, the Commission’s Employment Package set out a medium-term agenda for action, at European and national level, to support a ‘job-rich recovery’ and identified the green economy, health and social services and ICT as sectors with a potential for job-creation. Industrial policy is also a key factor in job creation. The ETUC fully supports the need to focus on existing and future sectors with job-creation potential, but greater attention must be paid to on-going job destruction and to sector specific developments in the short-term. However, the job-rich recovery remains elusive and the Council needs to answer the question about what concrete steps have been taken to follow up on the proposals and what are their results.

The social dimension must be embedded and guaranteed within the economic governance framework, as advocated by the ETUC in its position on the social dimension of the European Union, and in its proposal for a Social Compact for Europe (*). It is of crucial importance that the search of the budgetary and fiscal goals does not damage the achievability of the employment and social objectives. The ability of the June Council to meet this challenge will be key to restoring and maintaining workers’ commitment to the process of the European integration.