Brussels, 14-15 March 2006
{{I. Time to face the facts: Lack of real European cooperation and leadership is why the Lisbon strategy is not working
}}1. Important parts of Europe are doing poorly. And it is not just the ‘economic' child who is suffering from low growth and failing recoveries, Europe's social child is also in the doldrums. Poverty is on the rise. Precarious jobs that pay poverty wages, provide little or no security, give no access to training nor a prospect of moving to a better job are spreading throughout Europe. In many countries, they represent a quarter or even a third of all employment. One quarter of people living at risk of poverty actually have a job, but a job that does not pay a decent living wage. Real wages, on average, are standing still and workers are no longer participating in the fruits of productivity increases. Many of them are being blackmailed into accepting pay cuts and working longer hours while profits are soaring and an elite ‘happy few' are enjoying unimaginable perks.
2. This is no coincidence. Nor is it the inevitable consequence of the European approach of combining market activity with social corrections, of trying to keep societies ‘whole' by preventing sharp inequalities between winners and losers from widening. This can be seen clearly from the fact that a number of member states, in particular in the Northern part of Europe, do quite well in economic terms exactly because they also focus on social cohesion and social Europe. Instead, the real culprit is to be found in economic policy- making, in the abuse that the European Economic Model is making of the concepts of competitiveness and stability.
3. In the name of ‘competitiveness', member states are outbidding each other for the lowest wage, the most flexible labour regime, the least labour rights and the lowest taxation on profits. They are all too often implementing ‘beggar-thy-neighbour' policies in a vain and counterproductive attempt to attract to their country a larger piece of the industrial base remaining in Europe. They are not working together to strengthen and enlarge the European economy as a whole by investing together in research, innovation and knowledge for everyone. They are involved in competing with one another for a larger piece of the cake; they are not trying to enlarge the cake. And in doing so, the cake itself is shrinking. Europe is competing itself out of demand, out of business and into a social and economic disaster...
4. In the name of ‘stability', central banks and governments are leaving the responsibility for recovery from the slump to others, and hence to no one. In the name of ‘stability', a vicious circle has been activated, in particular in the euro area. To fight inflation, monetary policy is keeping the economy below potential. To fight the public deficits operating below potential brings with it, governments are hiking indirect taxes that push up price levels. The cycle of ‘madness' is closed when the central bank starts hiking interest rates to fight the imaginary inflation danger coming from higher indirect taxes. This is not ‘stability' but economic disaster. The stability reached in this way is the ‘stability of the economic graveyard'!
5. The ETUC does not want less Europe. Europe's workers demand a different and better Europe. We want a Europe that shows real cooperation and strong leadership. A Europe that does not leave member states on their own to face the cut-throat competition they are creating amongst themselves. A Europe that stops the race to the bottom by establishing and enforcing a social level playing field. A Europe that rules out unfair competition that comes at the expense of wages, working conditions and social benefits. A Europe that guides and helps member states in making the right decisions: to invest in research and innovation for sustainable development, to invest in a skilled and secure workforce. A Europe that uses the strength of working together by coordinating a European growth initiative, pulling the economy out of the slump and staging a strong recovery. The real way forward to achieve the Lisbon objectives is not ‘competition at any cost', but European cooperation and leadership.
{{II. Time to move up the social gear. Time to change direction and steer the European economy away from the economic cliff edge.
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6. Getting Europe to move on the Lisbon road. Kick off and maintain a cycle of high sustainable growth and high investment. Macro-economic policies should make sure the ongoing recovery continues, not kill it by raising interest rates too rapidly. They should do everything they possibly can to turn Europe into its own engine of growth before global imbalances strike and destroy the growth in export markets in the rest of the world (in particular the US). Neglecting a kick-start for high growth is a mistake that cannot continue indefinitely.
The ETUC urges the European Council to change its model of economic policy-making, to assume responsibility for dynamic domestic demand inside Europe, instead of leaving that responsibility to others. A European Growth Initiative that seeks to score a ‘double dividend' of investing in the Lisbon priorities and getting the economy out of the slump should be set up. Plans to cut deficits should take the fragility of the recovery into account. And the cycle of ‘madness' of governments hiking up indirect taxes providing European central bankers with an alibi for hiking up interest rates should be brought to an end.{{
7. Put social justice and fair working conditions at the heart of the agenda for productive change}}. In its communication for the Spring Council, the Commission states that ‘social justice should be strongly emphasised when making labour markets more responsive to change'. The ETUC calls upon the European Spring Summit to take this further. Social justice is about access to decent jobs, about access to basic and continued training and about access to high level systems of social security, based on the principle of solidarity.
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}}Social justice can make change more acceptable. It prevents human capital from going to waste and promotes investment in it. It forces employers to look for an innovation-based approach instead of going for the easy option of cutting wages and forcing bad working conditions upon workers.
The ETUC invites European leaders at this Spring Summit to underline strongly that social justice is a powerful force for productive change, that Europe needs a workers' rights' based approach to structural change.
The policy agenda this implies is one of fair working conditions. To work smarter and not longer. To reconcile family and work life. To make worker-friendly workplaces adapted to people's real needs. To support reorientation of workers that are hit by restructuring. To promote lifelong learning. To control excessive forms of flexibility and precarious jobs. To guarantee fair and decent wages and protect workers from the burn-out caused by a culture of long working hours.
We call upon the European Commission, the Council and the Parliament to present a road map for social justice and fair working conditions to make productive and positive change happen. As a first step, positive examples of labour market flexibility promoting innovation and upward transition need to be identified. As a second step, European legislation and renewed European coordination of labour market policies to remedy or to eliminate excessive flexibility need to be considered and implemented. In all of this, the social partners need to be closely involved.
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}8. Make major efforts to achieve gender equality Increasing the participation of women in the labour market is crucial to reach the Lisbon criterion of a 70% employment rate. Gender equality and gender mainstreaming, which are important on their own, are key to this. Ensuring that women can participate in the labour market on the same conditions as men and ensuring the combination of professional and private life will promote female employment, Europe needs to pursue an agenda of equal pay for equal work, of addressing multiple discrimination (ethnic minorities, insecure working conditions, double work burdens), of a better work-life balance by, amongst other things, promoting parental leave for both women and men. In line with the letter written by 6 heads of governments (European Pact for Gender equality), the ETUC urges the European Council and the Commission to include the dimension of gender equality in the National Reform programmes and the Annual progress report. This needs to include, amongst other things, the objective of providing child care by 2010 to at least 90% of children between 3 years old and the mandatory school age and at least 33% of children under three years of age, as decided by the 2002 Barcelona council. It also needs to include the objective to substantially reduce the gender pay gap by 2010.The ETUC and its affiliates are ready to take an active part of this agenda.
9. For a better and balanced regulatory framework. The ETUC evaluation of the national reform plans on the issue of better regulation shows that there is a real danger that ‘less but better' regulation is being replaced by a drive for ‘minimal and imbalanced' regulation. We insist that the Commission and Member States make sure all impact assessments evaluate the economic, social and ecological impacts of possible regulation in a balanced way and not to give priority to short term competitiveness concerns. Moreover, the cost of not regulating, in particular the cost of non-social regulation, has to be assessed.
10.The structural funds must contribute to the Lisbon agenda and social cohesion. In the framework of the debate on the “EU financial perspective 2007 - 2013” the ETUC has supported the proposal to raise the proportion of expenditure related to the renewed Lisbon strategy to at least one third of the EU budget. For the ETUC the European Social Fund (ESF) is the privileged instrument for implementing the European Employment Strategy. It must remain in future! It implies that the ESF must make a greater contribution to attainment of the objectives set at the Lisbon European Council for the transition to a knowledge-based society and the promotion of lifelong learning. Furthermore the ETUC welcomes the creation of the Globalisation Adjustment Fund that would allow a rapid response to the problems of workers who lose their jobs owing to restructuring.
11.Sustainable development must be a value-added of the Lisbon agenda. The ETUC evaluation of the national plans regarding the sustainability and environment dimension shows that Member States limit themselves to general statements on how development of environment-friendly technologies and renewable energy contributes to job creation, and the impact on structural employment of environmental policies is ignored. Policies have to be designed so that job creation and environmental sustainability are integrated.
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12. Fair taxation policies needed. }}The ETUC is concerned about the fact that several national reform plans intend to continue a downwards spiral tax policy and are announcing further reforms of corporate taxation, ending up in even lower tax burdens for enterprises, implying higher tax burdens or less social services for workers. Therefore, the ETUC notes with positive interest the Austrian presidency's proposal advocating a European tax source which would not only make the debate on the European budget more rational but would also provide an opportunity to put ‘well established ‘floors' in the competition towards lower levels of taxation for mobile income factors. {{
13. Rebuild workers' support for Europe.}} Today, too many workers perceive Europe as a threat to their jobs, working conditions and social welfare. European leaders need to be aware of this and act on it. They should send out a clear signal that Europe is not only about competition and markets but that it is also about an internal market with a social dimension.
European leaders can and should do this by:
a) Taking the European Parliament's vote on the Services Directive seriously and making sure that completing the internal market for services does not constitute a hidden agenda for weakening workers' rights, autonomy of collective bargaining and trade union action, nor the right of governments to regulate in the public interest;
b) Taking a workers' rights-based approach to the agenda of productive change;
c) Changing the European Economic Model by balancing stability- oriented policies with policies that support a dynamic economy.
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}}The ETUC is prepared to discuss and advance a European policy agenda of fair working conditions, balanced flexibility and balanced economic policies that effectively provide opportunities for productive employment, in preference through the joint action programme of the European social partners.
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III. In more detail: key demands and proposals from the ETUC
1. The need for a fifth key priority for the Spring Council: European governance to transform the recovery into a high and sustained growth cycle and to keep it from being squandered again. }}While a recovery seems to be developing itself, it cannot be taken for granted that this recovery will transform itself into a mature business cycle. Especially for the euro area, experience of the last five years has shown that an export-led recovery is too narrow a basis for sustained and strong growth, and that policies to support domestic demand inside the European Union are necessary. In disregarding this dimension when presenting its four key action points, the Commission is again making the mistake of simply ignoring to start the Lisbon growth process. The ETUC urges the Spring Council to add a fifth key priority: Get Europe moving on the Lisbon road and kick off and maintain high growth by stimulating additional demand into the economy.
The ETUC urges the Spring Council to provide the Commission with the mandate to work together with national governments in coming months in order to:
a) Build a European coordinated growth initiative to score a ‘double dividend'. The growth and investment initiatives that are present in national reform plans must be put together, and governments that are completely missing out on this dimension being urged to introduce additional initiatives for growth and investment. The goal is to score up confidence by making a European growth plan highly visible and by publicly insisting on the increased impact on growth when Europe is acting together. Use should be made of the flexibility the renewed Stability and Growth Pact offers in case of structural reform efforts. A ‘double dividend' should be pursued : Growth recovery from the slump as well as a stronger growth potential by increasing investment in R&D investment, training and upgrading of the work force, sustainable development initiatives and social growth.
b) Do not harm the recovery. The different stability plans and fiscal policy intentions must be put together by the Commission to see whether they are consistent and whether a coordinated fiscal consolidation effort does not produce the opposite of what is needed: A broken recovery with rising, not falling, public debt ratios. If so, individual member states should be urged to adapt the pace of fiscal consolidation.
c) Strengthening economic governance. A clear and present danger for growth is the misunderstanding between monetary, fiscal and wage formation policies. The ECB must be kept from hiking interest rates to fight an inflationary danger that does not exist. Governments should beware of providing monetary authorities with wrong signals by hiking indirect taxes and administrative prices. And national social partners should avoid competitive wage moderation and pursue instead wage increases that are in line with trend productivity and inflation. The Macro Economic Dialogue provides a forum to strengthen this form of economic governance and to improve better mutual understanding. The ETUC calls upon the ECB in particular to use this instrument instead of putting the recovery at risk by hiking interest rates in order to convince collective bargainers of something that is already happening in practice.
2. Putting social justice and fair working conditions at the heart of the agenda for positive change. For the ETUC the question is not whether workers should adapt or not adapt to globalisation, technological developments and ageing. The question is how to adapt in the right way and ensure upward flexibility and upward mobility. Cutting wages, working longer hours and excessive flexibility is not the answer to the enormous expansion of the global workforce and will only serve to intensify the problems by destroying internal demand dynamics in Europe. Instead, the correct answer is to move the European economy up the technology ladder (innovation and industrial policy agendas) and to ensure that as many workers as possible are able to take part in this process of economic and technological upgrading (the agenda of labour market agility as opposed to an agenda of labour market deregulation).
Social justice plays an important role in the process of ‘change to make things better'. Social justice can make change acceptable, by ensuring that the benefits of globalisation are not restricted to a small group of winners and by preventing big groups of workers (lower skilled workers, older workers) from being left out in the cold. Social justice, moreover, implies institutional arrangements that ensure fairness on the labour market. And fair working conditions, if implemented well, are an essential key to maintain and improve human resources and prevent it from going to waste. More people will be drawn into productive jobs when key workers' rights are taken out of ‘cut-throat' competition:
a) A right on a working hours' regime that prevents workers' burn-out and human capital from going to waste. A regime of (weekly) working time that is adapted to the needs of workers and their families is essential to prevent labour and skills from going to waste. This is in particular true from a gender perspective. On the one hand, a culture of long working hours is detrimental to the work-life balance of families. It either forces many women out of the labour market or obliges them to do part-time jobs beneath their skill levels. On the other hand, employers often only offer part-time jobs as they believe this promotes the flexibility of their organisation, thereby locking workers into part-time inactivity. To fight these malpractices and the waste of human capital they imply, workers need the right to maximum hours of work a week as well as the right to work full-time.
b) Gender equality. In general, gender inequality and the problems that women face on labour markets (double work load at home and at work, pay inequalities, incomplete social security coverage, unbalanced access to quality jobs and career prospects) work to depress female participation. Besides quality and affordable care facilities, addressing gender inequality in all its forms is necessary if we want to avoid waste of human capital and increase employment rates in Europe.
c) Negotiated, worker-friendly flexibility and an adaptable workplace. If employment rates of currently underemployed specific groups (women, young and older workers) are to be increased, then measures need to be taken to make workplaces, working time schedules and job contents more worker-friendly and adapted to different categories of workers (young parents, older workers, workers suffering from sickness).
d) Job protection and prior notification combined with the right to productive reinsertion of retrenched workers. Prior notification of retrenchment prevents workers from falling immediately into the ‘black hole' of unemployment and gives them time to prepare and make a better start to find a new productive job once they become unemployed. In addition, this time frame also provides the opportunity for public employment services and/or social partner retraining funds to support retrenched workers right away, instead of picking them up after several months of unemployment. In this way, prior notification combined with immediate active support have the potential of upgrading workers and moving them into new and decent, well paid jobs. In contrast, free ‘hire-and-fire' systems ignore the need to upgrade retrenched workers ‘on the spot', thereby tending to force them into accepting any kind of job afterwards. Again, this is a waste of workers' potential!
e) High level unemployment benefits combined with ‘active learnfare' policies. High level unemployment benefits also serve the purpose of investing in human resources. They provide the unemployed with the financial means to re-enter the labour market, to engage in retraining and to prolong their job search in order to find jobs that match their skills, instead of being forced to take up jobs that are far below their potential and which work as a ‘bad job' trap. What is essential here is that the European Employment Strategy keeps and strengthens its focus on investing in skills and education. The Commission's intention to extend active support for young workers, from 6 months to 100 days' unemployment, is to be welcomed. But disappointing is the fact that the other precise objectives on offering other unemployed and long term unemployed a new start have not been fully taken up by all member states in their national reform plans. The ETUC urges the Commission and the Spring Council to correct this and ensure a close and country-level follow-up.
f) Controlling forms of excessive flexibility Jobs that are excessively flexible function as a bad jobs trap in which workers remain stuck. These ‘bad job traps' need to be corrected by providing these workers with ‘equivalent' rights and access to social protection and general working conditions; with decent wages and broad access to high-quality training schemes.
g) Finally, the ETUC demands a policy that secures jobs as well as job transitions in the interest of workers. In particular this implies :
quality jobs for all workers;
Basic education and lifelong learning training focussed on the needs of workers and employers and effectively leading to employment;
High level social protection based on the principle of solidarity, in particular during periods of unemployment and/or career breaks so that the situation of being without a job does not result in social exclusion or a higher risk of poverty.
These measures come at a cost. That is why the ETUC also requests that the financial base of public social security systems be secured by:
- Looking to implement a structure of social security contributions that puts less weight on employment, in particular on firms using a high input of labour;
- New sources of finance, based on all revenues, so that all cuts in social security or tax contributions are systematically compensated through the State budget and/or other sources of revenue.
3. Better regulation, yes. Imbalanced simplification, no!
The ETUC evaluation of the national reform plans on the issue of better regulation shows that there is a danger that ‘less but better' regulation is being replaced by a drive for ‘minimal and imbalanced' regulation:
a) Better regulation is mainly focussed on business: Better regulation for citizens is not a high priority issue, the need for better regulation for citizens is rarely mentioned (only Greece, Spain);
b) Social impacts are neglected: Only a few Member Sates refer explicitly to all three dimensions of impact assessments (for example Denmark). Many don't even mention social impacts and some have even excluded the social impact from the design of impact assessments. Similarly, the Commission is not even addressing the need for conducting balanced assessments. At the same time a new study initiated by the European Parliament shows that many impact assessments made by the Commission are not assessing social consequences in a systematic way either;
c) A one-sided focus on administrative costs/standard cost model: The standard cost model that was initially developed in the Netherlands is used in some member states (NL, DK, SV, UK), whereas others plans to do so or have launched studies or pilot projects to assess the instrument (for example. Germany, France, Estonia). Some member states indicated to wait for a European methodology (Luxemburg). The ETUC is rather critical on the Commission's intention to impose on all Member States to adopt and implement a method to measure administrative costs for national rules and regulations.
The ETUC insists that the Commission and Member States make sure that all impact assessments evaluate the economic, social and ecological impacts of possible regulation, and this in a balanced way and without giving immediate priority to short term competitiveness concerns. Moreover, the cost of not regulating, in particular the cost of non social regulation, has to be assessed.
The ETUC will closely monitor this process to ensure that the design of the instruments does not result in a shift in the balance of the three pillars of the Lisbon strategy in favour of a mere business-oriented approach. Improving the regulatory framework is useful but requires a more balanced approach, both at the European level and at the national level.
4. Lisbon agenda and structural funds: Shifting from social cohesion to competitiveness?
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}}a) In the framework of the debate on the “EU financial perspectives 2007-2013”, the ETUC has supported the proposal to raise the proportion of expenditure related to the renewed Lisbon Strategy to at least one third of the EU budget.
b) For the Structural Funds, however, we cannot accept President Barroso's proposal requesting each Member State to bring the share of cohesion expenditure devoted directly to competitiveness to an average minimum of 60%. The ETUC remains of the view that there needs to be a balance between the three pillars - economic, social and environmental - of the renewed Lisbon Strategy, and that this balance also needs to be reflected in the structural fund spending.
c) The European Social Fund (ESF) is the privileged instrument for implementing the European Employment Strategy. It must remain so in future. The EES must become part and parcel of national, regional and local labour market policies and of the ESF objectives. It implies that the ESF must make a greater contribution to attainment of the objectives set at the Lisbon European Council for the transition to a knowledge-based society and the promotion of lifelong learning.
d) The ETUC reiterates its support to the Commission's proposal whereby, under the convergence target, at least 2% of ESF resources would be allocated to capacity building and activities undertaken by the social partners.
e) Furthermore the ETUC welcomes the creation of the Globalisation Adjustment Fund that would allow a rapid response to the problems of workers who lose their jobs owing to restructuring. However, we consider that the Fund should be used consistently with the future Structural Fund programmes, as proposed by the Commission, aimed at putting into place permanent monitoring systems involving the social partners, businesses and local communities, whose role will be to review economic and social changes at national, regional and local level, and to anticipate future developments in the economy and the labour market.
In the same logic, the ETUC calls for the social partners at different levels to be involved in all stages of the process of managing actions carried out in the framework of the Globalisation Adjustment Fund. The ETUC urges the Commission to stipulate the modalities of the consultation in the proposal requested by the European council.
{{5. Does the Lisbon agenda provide added value to sustainable development ?
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The Commission's Communication states that the Lisbon objectives must be achieved while respecting the imperatives of sustainable development. For the ETUC, sustainable development means that economic, social and environment policies should be pursued in a mutually reinforcing way.
Our evaluation of national plans regarding the sustainability and environment dimensions shows that :
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a) The potential of environment protection for quality jobs and social cohesion is neglected. }}Most of the time, Member states limit themselves to general statements on how development of environment-friendly technologies and renewable energy contributes to job creation. Only a few of them try to design policies so that job creation and environmental sustainability are integrated.
However, gains from action in environmental protection depend on progress made in other policy areas like employment, education, training, social cohesion:
The return on investment in renewable energy and energy efficiency is maximised if the education and training conditions are in place to convert it into high quality jobs;
Investment in energy renovation of social housing brings energy efficiency, job creation and reduced heating bills;
Both employment and a better environment could be promoted by partly shifting the tax burden from labour to capital, environmental goods and natural resources, while avoiding any negative impact on the level of public services and social security provision and paying attention to the social impact;
Public procurement (which represents 17% of EU GDP) rules can be used to advance social and environmental goals such as access to training to all workers and clean goods and services.
b. Structural employment impacts of major environmental policies are ignored. The EU is committed to achieve ambitious goals in terms of reduction of greenhouse gases emissions and chemicals safety which will have major potential impact on jobs and skills in all economic sectors. Governments, labour market institutions and social partners need to anticipate and plan for implementation of policies that aim at compensating the negative consequences for workers, their families and the communities in which they live.
c. The ETUC agrees on the need for coordinated action at European level on energy issues but criticises the Commission's narrow view The ETUC supports the need for an integrated EU energy policy which provides collective answers to increased import dependency, climate change and unequal access to energy services. The emphasis on resource efficiency, rational use of energy, renewable energy and clean coal technologies is strongly supported. An appropriate regulatory framework should be put in place, and priority should be given to developing EU legislation.{{
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6. Fair taxation policies
The ETUC underlines that the basic objectives of taxation are to pursue a fair distribution of income and to finance public goods, public services and social security.
However, several rounds of ‘we'll host you cheaper' initiatives at member state level are putting these two basic functions of the instrument of taxation under pressure. Such ‘beggar-thy-neighbour' policy in the field of taxation is particularly outspoken for those factors of income and production that are mobile, that is to say corporate taxes, wealth taxes and taxes on income from capital.
In particular, overall corporate tax rates in the EU declined from 46% on average in 1980 to 40% in 1990 and to 32% in 2003, declining still further afterwards. Conspicuous is also the fact that real tax burdens or “effective implicit tax rates” (which are very different from headline tax rates) are rather similar between ‘old' and ‘new' member states (effective or implicit tax rates : EU 15 average : 19.3 % , EU 10 average :19 %) and have now reached a relatively low level (share of corporate taxes in GNP limited to 3.1 % for the EU 15 , and 2.7 % for the new member states, whereas shares of profits in GNP are high and rising). This points to the detrimental effects on public finance of excessive competition between member states to attract the most foreign investment through the most favourable corporate taxation regime.
The ETUC is much concerned about the fact that several national reform plans intend to continue this downwards spiral and are announcing further reforms of corporate taxation, ending up in even lower tax burdens for enterprises, implying higher tax burdens or less social services for workers.
Therefore, the ETUC notes with a positive interest the Austrian presidency proposal advocating a European tax source which would not only make the debate on the European budget more rational (making the discussion on net payer and net recipient no longer relevant) but would also provide an opportunity to put ‘well established ‘floors' in the competition towards lower levels of taxation for mobile income factors.
Taxation plays a leading part in the Member States' contribution to the European budget; we must therefore ensure that the financial perspectives pay sufficient attention to the financing of a social Europe.