Transcript Fritz von Nordheim - European Policy Centre

Social Dimension of
European Semester
Reinforced
EPC Social Investment Project – Expert Workshop
European Policy Centre, Brussels
23 February 2016
Fritz von Nordheim
Deputy Head of Unit
European Commission, DG EMPL C2:
Modernisation of Social Protection Systems
Questions to EC presentation
• What is the Commission’s view (in particular of DG
Employment) on the future shape of the European
Semester especially concerning the social sphere?
• How to reinforce the social dimension (in particular the
concept of social investment) in the European macroeconomic governance framework?
• What are the options currently developed by the European
Commission and what are the obstacles to realising these
options?
CONTENT
• Notions of Social Investment in EC’s Social Investment Package
• Investments in Junker's 10 points & rebalancing social/economic
• SIP reflection in Economic Governance documents
• Integrated Guidelines: Economic part
• Integrated Guidelines: Employment part
• Guidance to encourage structural reforms and investment
• Macroeconomic Imbalance Procedure (MIP) framework
• Steps towards completing the EMU
• 2016 Annual Growth Survey (AGS) - reflection in CRs & CSRs
• European Pillar of Social Rights
Notion of Social Investment in EC’s SIP
Policy guidance on reforming social policies to realise
Europe 2020 targets on employment & poverty:
Investing in people from early age & all stages of life
(capacitating while protecting to reap returns/savings)
through integrated social services & benefits to
achieve longer & less interrupted working careers
by
- More effective & efficient use of social budgets
- Social policy innovation for evidence-based reforms
- Reinforced partnerships with all actors
The Social investment model
Common traits:
• Emphasis on social promotion (enablement logic)
• Ex ante (early) prevention of risks and needs (ECEC)
• Large role for capacitating social services during the life cycle
• Robust safety nets and activation (inclusion)
• Individuals within households (dual earner/dual carer model)
• Support for reconciling paid work and family life
• Education (schooling, training, LLL) as integral part of welfare
5
EU economic governance slow to SIP-ify
• Sept. 2013 State of Union: No echo of SIP
• Nov 2013 AGS: Little to no echo of SIP
• Dec 2013: Golden Rule possibilities in SGP refuted
• May 2014 Golden Rule refusal confirmed by ECOFIN
• June 2014 SIP concerns visible in CSRs
• Nov 2014 Juncker Commission takes office
• Nov 2014 AGS: Little to no echo of SIP
'Investments' in Juncker's 10 points Agenda
1. A New Boost for Jobs, Growth and Investment
My first priority as Commission President will be to strengthen Europe’s
competitiveness and to stimulate investment for the purpose of job
creation……………………
The focus of additional investment should be in infrastructure…; education,
research and innovation; and renewable energy and energy efficiency. A
significant amount should be channelled towards projects that can help get
the younger generation back to work in decent jobs, further complementing
the efforts already started with the Youth Guarantee Scheme, …………
..the use of national budgets for growth and investment..must – as reaffirmed
by the European Council on 27 June 2014 – respect the Stability and Growth
Pact, while making the best possible use of the flexibility that is built into the
existing rules of the Pact, as reformed in 2005 and 2011. I intend to issue
concrete guidance on this …
Rebalancing Social with Economic concerns
Oct 2014 Inauguration speech:
“I want Europe to be as dedicated to being triple-A on social
issues, as much as it is to being triple A in the financial and
economic sense.”
Mandate for Thyssen:
Making sure Europeans can fully participate in society and
equipping them for modern working life is a key social concern
and crucial for our productivity and ability to compete globally.
Ensuring that employment and social considerations.. are
appropriately taken into account in all Commission proposals and
activities.
Rebalancing Social with Economic concerns
Mandate for ECFIN commissioner Moscovici:…a re-balancing of the
way conditional stability support is granted to Euro zone MS in difficulty..
Mandate for Vice-precidents Dombrovskis:
In recent years, we have taken unprecedented measures to overcome the
crisis and to keep our Union together. It is now time to consolidate,
complement and simplify these measures and to make them more socially
legitimate. The stability of our single currency and the solidity of public
finances are as important as social fairness in implementing the necessary
structural reforms. A hallmark of this Commission will be adherence to the
social market economy, to fairness and to making sure that the most
vulnerable in our society are not left behind.
Preparing.. a re-balancing of the way conditional stability support is
granted to Euro area countries in difficulty. .. Replacing.. the “troika” with
a more democratically legitimate and more accountable structure, and the
preparation of social impact assessments in addition to fiscal sustainability
assessments.
Integrated Guidelines: Economic part
Broad Guidelines for the economic policies of
the Member States and of the Union
1. Boosting Investment
2. Enhancing Growth by Structural Reforms
3. Removing key barriers to growth and jobs
4. Improving the sustainability and growth-
friendliness of Public Finances
1. Boosting Investment
‘Increasing the level of productive investment in
Europe is key to boost demand and improve
competitiveness and long term growth potential
in Europe.
Efforts should focus on mobilising finance for
investment, making finance reach the real
economy and improving the investment
environment. ….’
No mentioning of social investment
2. Enhancing Growth by Structural Reforms
• Ambitious implementation of structural reforms by the
Member States in both product and labour markets and
social welfare systems is crucial to strengthen and sustain
the economic recovery, correct harmful macro-economic
imbalances and unleash the potential of the Union economies……..
• Labour market and social system reforms need to be
pursued to promote growth and employment, while ensuring
access for all to high quality, affordable and sustainable
social services and benefits. ……
3. Removing barriers to growth and jobs
• …..
• To move Europe's productivity frontier, it is
necessary to increase innovation and
• human capital …….
• Union legislation should focus on those issues
that are best dealt with at European level, and
designed taking into account their economic,
environmental and social impact……..
4. Improving the sustainability and
growth-friendliness of Public Finances
• ……….
• In designing and implementing budgetary
consolidation, strategies should prioritise growthenhancing expenditure items within areas such as
education, skills and employability, …..
• Expenditure reforms that promote efficient
resource allocation to support growth and
employment while preserving equity should
be complemented by modernising revenue
systems ……
Integrated Guidelines: Employment part
Guidelines for the employment policies
of the Member States
1. Boosting demand for labour
2. Enhancing labour supply and skills
3. Enhancing the functioning of labour markets
4. Ensuring fairness, combating poverty and
promoting equal opportunities
5. Boosting demand for labour
…….. Member States should also actively promote
the social economy and foster social
innovation……..
6. Enhancing labour supply and skills
…….. MS should make the necessary investments in education
and vocational training systems while improving their
effectiveness and efficiency to raise the skill level of the
workforce, allowing it to better anticipate and meet the
rapidly changing needs of dynamic labour markets …..
…. step up efforts to improve access to quality adult learning for
all and implement active ageing strategies to enable longer
working lives…
……make a full use of European Social Fund and other Union
funds support in order to improve employment, social inclusion,
education and public administration.
7. Enhancing the functioning of labour markets
• …….. Quality employment should be ensured in terms of
socio-economic security, education and training
opportunities, working conditions (including health and
safety) and work-life balance. ….
• MS should strengthen active labour market policies by
increasing their targeting, outreach, coverage and interplay
with passive measures……..
• MS should also ensure that their social protection systems
effectively activate and enable those who can participate
in the labour market, protect those (temporarily) excluded
from the labour markets and/or unable to participate in it,
and prepare individuals for potential risks, by investing in
human capital……
8. Ensuring fairness, combating poverty
and promoting equal opportunities
MS should modernise their social protection systems to
provide effective, efficient, and adequate protection
throughout all stages of an individual’s life, ensuring
fairness and addressing inequalities. …….
For that purpose a variety of instruments should be
used in a complementary manner, including labour
activation enabling services and income support, targeted
at individual needs. Social protection systems should be
designed in a way that facilitate take up of all persons
entitled, support investment in human capital, and help
prevent, reduce and protect against poverty. ……..
Guidance to encourage structural
reforms and investment (Jan 2015)
1. Encourage effective implementation of structural reforms:
2. Promote investment, specifically in the context of the new
European Fund for Strategic Investments (EFSI)
3. Take better account of economic cycle in individual MS
also to develop a more growth-friendly fiscal stance in euro area.
NO new legislation only guidance on flexibility in existing
NO Golden rule of per se exception of certain expenditure
Depends on concrete contingent assessment by Commission
Notion of social investments NOT mentioned
Guidance to encourage structural
reforms and investment (Jan 2015)
Clarification concerning structural Reforms
For MS in preventive arm of the Pact, the Commission will take account of the
impact of reforms (the so-called "structural reform clause"), provided that they
(i) are major, (ii) have verifiable long-term positive budgetary effects, including
by raising potential sustainable growth, and (iii) are implemented.
Reform measures adopted by the government and/or the Parliament may also
qualify "ex ante" if Member States have presented a dedicated structural reform
plan with well-specified measures and credible timelines for their adoption and
implementation. The Commission will assess the reforms before recommending
to the Council to allow possible temporary deviations ...
Such deviations should not exceed 0.5% of GDP. …The MTO should be reached
within four years of the clause being activated.
When opening an Excessive Deficit Procedure, the Commission may recommend
a longer deadline for the correction of the excessive deficit provided that a
dedicated structural reform plan as described above also exists.
Guidance to encourage structural
reforms and investment (Jan 2015)
Clarification concerning the ‘Investment Clause’
MS in the preventive arm can deviate temporarily from their medium-term
budget objective or from the agreed fiscal adjustment path towards it, in order
to accommodate investment, under the following conditions:
1. Their GDP growth is negative or GDP remains well below its potential
(resulting in an output gap greater than minus 1.5% of GDP);
2. The deviation does not lead to non-respect of the 3% deficit reference value
and an appropriate safety margin is preserved;
3. Investment levels are effectively increased as a result;
4. Eligible investments are national expenditures on projects co-funded by the
EU under the Structural and Cohesion policy (including projects co-funded
under the Youth Employment Initiative), ….
5. The deviation is compensated within the timeframe of the MS’s Stability or
Convergence Programme (medium-term fiscal plans).
Guidance to encourage structural
reforms and investment (Jan 2015)
Clarification concerning the ‘Economic Cycles’
MS will be required to make a larger fiscal effort during better times
and a smaller fiscal effort during difficult economic times.
In cases of a severe economic downturn in the euro area or the EU as
a whole, the pace of fiscal consolidation can be adapted for all Member
States, if this does not endanger fiscal sustainability in the mediumterm.
The clause has so far never been applied, although it reflects the logic
used at the time of the 2008 financial crisis when the adjustment
paths were re-designed for several Member States
MIP framework
The Macroeconomic Imbalance Procedure (MIP) is a
surveillance procedure established by the EU in
response to the economic crisis and applied to
improve macroeconomic governance.
It endeavors to avoid unsustainable booms in good
times that will bring busts with highly costly
consequences in terms of economic activity,
financial stability and employment both in the
domestic economy as well as in partner countries.
Alert Mechanism Report
The yearly MIP cycle starts with a comprehensive economic analysis,
the Alert Mechanism Report, which covers all EU MS to distinguish
those economies that warrant detailed scrutiny before concluding if
there is an imbalance or an excessive imbalance.
The analysis is based on the reading of a scoreboard of fourteen
headline indicators in combination with auxiliary indicators, economic
circumstances and all relevant factors available specific to the
situation in the country.
This ensures that there is no automaticity involved (i.e. a "flash" for
an indicator does not lead to an automatic conclusion that an indepth review is warranted).
Employment added to MIP Scoreboard
The MIP alert mechanism consists of an economic reading of a scoreboard with 14 indicators
covering the major areas of macroeconomic imbalances and adjustment issues:
3 year backward moving average of the current account balance as percent of GDP,
net international investment position as percent of GDP,
5 years percentage change of export market shares measured in values,
3 years percentage change in nominal unit labour cost,
3 years percentage change of the real effective exchange rates
private sector debt (consolidated) in % of GDP
private sector credit flow in % of GDP
year-on-year changes in house prices relative to a Eurostat consumption deflator
general government sector debt in % of GDP
3-year backward moving average of unemployment rate,
year-on-year changes in total financial sector liabilities,
3 years change in p.p. of the activity rate,
3 year change in p.p. of the long-term unemployment rate,
3 year change in p.p. of the youth unemployment rate
Interpretation of new MIP indicators
The inclusion of these employment indicators as headline indicators
would allow for a better understanding of the social consequences of
imbalances, including during the correction of imbalances, and it
would help fine-tune the policy recommendations that fall under the
scope of the MIP.
The inclusion of these variables into the scoreboard shall not have
legal implications nor change the focus of the MIP, which remains
aimed at preventing the emergence of harmful macroeconomic
imbalance and ensuring their correction.
To this purpose, no additional employment and social indicators
should a priori be added to the scoreboard in the future. Flashes of
the new indicators would not be read as implying, by themselves, an
aggravation of macro-financial risks, and consequently will not
trigger further steps in the MIP.
Steps towards completing the EMU
(Oct 15)
2. A REVAMPED EUROPEAN SEMESTER
2015 changes: time for debate, fewer more key macro-economic &
social priority focussed CSRs
For 2016:
• better integrating the euro area and national dimensions
• stronger focus on employment and social performance
• promoting upward (social) convergence by benchmarking
pursuing best practices
• support to reforms through EU funds & technical assistance
2016 Annual Growth Survey 1
(Nov 15)
2. Re-launching investment: Investing in human capital
It is essential that MS promote social investment more broadly, including
in healthcare, childcare, housing support and rehabilitation services to
strengthen people's current and future capacities to engage in the labour
market and adapt.
A lot can be done with the support of EU programmes, such as the
European Structural and Investment Funds. Social investment offers
economic and social returns over time, notably in terms of employment
prospects, labour incomes and productivity, prevention of poverty and
strengthening of social cohesion.
2016 Annual Growth Survey 2
Social infrastructure should be provided in a more flexible way,
personalised and better integrated to promote the active inclusion of
people with the weakest link to the labour market…..
' MS should have a comprehensive approach to improving the worklife balance, including through care facilities, leave and flexible
working time arrangements, as well as tax and benefit systems free
of disincentives for second earners to work or to work more.'….
' Adequate and well-designed income support, such as
unemployment benefits and minimum income schemes, allow those
out of work to invest in job search and training, increasing their
chances to find adequate employment that matches their skills.'
' A healthier population will also improve labour market participation
and labour productivity.'
Social investment in Country Reports?
For examination when published end February
Social investment in 2016 CSRs?
• For examination when published Mid-May
European Pillar of Social Rights
Announced in 9 Sept. 2015 State of Union
• Ensure economic growth and the deepening of EMU
goes hand in hand with social fairness
• Overall aim: foster upward social convergence
towards labour market and social protection
institutions with increased resilience to economic
shocks, and thereby achieve the Social Triple A
• Equip people to adapt to changes in world of work
and maintain their labour and social rights
• Initiative foremost conceived for the euro area
• To be launched for public consultation in March
What is meant by social rights?
Rights linked to the employment contract, working conditions or access to
welfare, such as:
Right to minimum pay; Minimum rights to representation;
Minimum rights during probation periods;
Minimum protection against unfair dismissal;
Minimum measures to ensure awareness of rights and access to justice;
Right to equal treatment regardless of the type of employment contract.
Minimum health and safety rights;
Minimum working time protection rights;
Access to provisions relating to maternity/paternity;
Access to provisions relating to childcare and benefits;
Access to life-long learning and (re-) training;
Access to provisions relating to unemployment;
Access to provisions relating to active inclusion;
Access to provisions relating to pensions;
Access to basic social services, including health care.
Thank You!
Modernisation of Social Protection II
• Social Protection may be biased across generations
• Necessity of balanced orientation towards future as
well as present and past workforce
• Social Protection may be inefficient
• Necessity of raising efficiency
• Social Protection may be inequitable
• Necessity of raising equity
• Social Protection may be insufficiently coordinated
with other key policies
36
• Necessity of ensuring compatibility & synergies
4,5
Bulgaria
Switzerland
Sweden
Austria
Finland
Slovenia
Belgium
15,0
16
Ireland
11,3
14
Netherlands
9,7
Croatia
Germany
Italy
9,5
7,5
Denmark
United Kingdom
7,1
Spain
EU-27
9,3
7,0
7,2
8,4
6,9
Norway
12
France
6,9
8,1
6,7
7,8
6,3
6,6
7,6
6,3
5,8
Portugal
5,7
Malta
Luxembourg
10
Czech Republic
5,5
8
Slovakia
5,1
4,3
Estonia
4,9
4,3
Lithuania
Cyprus
4,2
Hungary
4,2
Poland
6
Romania
3,0
0
Latvia
2
2,9
4
Greece
Modernisation of Social Protection
Figure A4. Spending on health benefits and services as a percentage of GDP, European countries
Source: Data for Greece: World Bank based on 2014 data inputs from GAO and MoLSISS. Data for other countries: Eurostat, ESSPROS, 2012.
0,5
3,3
3,4
Finland
Ireland
4,0
4,5
Denmark
3,7
3,2
Sweden
Luxembourg
3,2
4
Germany
2,9
3,5
Norway
2,6
Austria
2,1
Belgium
2,5
2,0
Slovenia
3
Hungary
1,9
1,8
Slovakia
2,5
EU-27
1,8
Cyprus
United Kingdom
Switzerland
1,7
Italy
Estonia
Romania
1,6
Lithuania
Bulgaria
Portugal
1,6
Czech Republic
1,6
1,3
Netherlands
France
1,3
Spain
Croatia
1,2
1,5
1,1
1,4
1,0
1,1
1,4
1,0
0
Malta
1,5
0,9
2
Latvia
0,7
0,4
1
Poland
Greece
Modernisation of Social Protection
Figure A10. Spending on family and children benefits and services as a percentage of GDP, European countries
Source: Data for Greece: World Bank based on 2014 data inputs from GAO and MoLSISS. Data for other countries: Eurostat, ESSPROS, 2012.