Towards a stronger social dimension of the European Union

October 3, 2013 - nr.23
Summary

See: total advice

Advice request

Mr F. Korthals Altes
Chairman of the Advisory Council on International Affairs
Postbus 20061
2500 EB The Hague


Date: 26 April 2013

Re: Social dimension of the EU and EMU


Dear Mr Korthals Altes,

The European Council of 13 and 14 December 2012 gave the President of the Council, Herman Van Rompuy, a mandate to put forward proposals to flesh out the social dimension of the EMU, including the social dialogue. To this end, Mr Van Rompuy will present a roadmap at the European Council of June 2013.

The relevant treaties describe the social dimension of the EU as follows.

  • According to article 3, paragraph 3 of the Treaty on European Union (TEU), the EU works for ‘the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress’.
  • Paragraph 3 goes on to say that the EU ‘shall combat social exclusion and discrimination, and shall promote social justice and protection, equality between women and men, solidarity between generations and protection of the rights of the child’.
  • Finally, the paragraph states that the EU ‘shall promote economic, social and territorial cohesion, and solidarity among Member States’. Article 9 of the Treaty on the Functioning of the European Union (TFEU) stipulates that ‘[i]n defining and implementing its policies and activities, the Union shall take into account requirements linked to the promotion of a high level of employment, the guarantee of adequate social protection, the fight against social exclusion, and a high level of education, training and protection of human health’. These provisions are elaborated on in article 153, on the basis of the fundamental social rights enshrined in the European Social Charter (1961). Article 153 also provides that the Union will support and complement the activities of the member states in many fields. These include including improving the working environment, worker health and safety, terms and conditions of employment, and social security.

Thus, the EU and EMU already have a social dimension, at least in part, in the form of fundamental social rights and EU legislation on, for example, the coordination of social security and the European health insurance card.

The European Council of 17 June 2010 adopted the Europe 2020 Strategy and its five targets, including higher employment, a higher level of education and greater social inclusion. The Council has attached quantifiable objectives to these targets, specifically that by 2020, 75% of the population between the ages of 20 and 64 should be employed and 20 million fewer people will live in or be at risk of poverty and exclusion (of the 120 million in that position as of 2010).

Since 2010, little attention has been paid to the EU’s social dimension, as articulated in the treaties and the Europe 2020 Strategy, until the Council Conclusions of December 2012 suddenly identified the ‘social dimension of the EMU, including social dialogue’, as a new focus for the European Council of June 2013. Yet the social dimension remains an issue for all member states, including the members of the EMU.

In February 2013 the Social Protection Committee sounded the alarm: North-South divergence threatened to polarise the Council along the fault line of poverty and social exclusion. If the present course is continued, the social objectives of the Europe 2020 strategy will not be met. Solidarity and social cohesion are under pressure:

  • The financial room for manoeuvre of the governments of net-contributor states is under strain.
  • Public opinion in net-contributor states is turning against the idea of providing more aid to member states hardest hit by the crisis, due in part to mounting domestic unemployment and increasing financial burdens.
  • The governments of member states that have to make stringent cutbacks are approaching the bounds of what is socially tolerable.
  • Not only inequality between countries, but also increasing inequality within individual member states are causing polarisation and a public loss of confidence in government. Internal inequality also erodes solidarity between member states.
  • The social circumstances of large swaths of the population in Southern and Eastern Europe, especially children, are taking on serious forms.

It is in the interest of an economically and socially strong EU to prevent polarisation between the member states. We also need to ensure that future generations do not grow up in poverty and exclusion in the EU; this jeopardises not only their future but that of the Union as a whole.

On 15 February the government presented its initial position paper on the social dimension of the EMU. A more detailed account of the government’s position will be sent to parliament in mid-May. The position paper presents a clear picture of the technical possibilities afforded by the TEU for giving further shape to the social dimension of the EU and EMU.

The government appreciates the need to strengthen the social dimension of the EU and EMU. High unemployment and increasing poverty in a number of EU member states are socially unacceptable and, over the long term, unsustainable. It is unjustifiable that large numbers of people find themselves in a socioeconomic situation that still shows little sign of improvement. This state of affairs also undermines people’s confidence in the governments of the member states and in the EU, and fuels disintegrationist tendencies. For young people, in particular, it is important to create fresh prospects of work and a decent income, so the younger generation can get back to building a future for itself.

In the run-up to the European Council in June, the government would therefore appreciate having a deeper insight into the options open to us under the social dimension of the EU and EMU.

In the light of the above and upcoming discussions on this matter in the government, parliament and Brussels, I urgently request an advisory letter from the AIV, which:

  • analyses whether the social dimension of the EU and EMU, as laid down in the TFEU and the Europe 2020 Strategy, offers enough instruments for tackling the social repercussions of the crisis, safeguarding social cohesion in the EU and regaining the trust of the people of the EU;
  • puts forward proposals if the current set of instruments prove inadequate, for further creative ways of dealing with these repercussions in the framework of the EU, without the need for treaty amendments.

I look forward to receiving the AIV’s advisory letter.

Yours sincerely,

 

Frans Timmermans
Minister of Foreign Affairs

 

Government reactions

To the President of the House of Representatives
of the States General
Binnenhof 4
The Hague


Date 26 June 2013
Re Response to the AIV advisory letter on the social dimension of the EMU

Dear Madam President,

On behalf of the Minister of Social Affairs and Employment and in my own capacity as Minister of Foreign Affairs, I am writing in response to the request issued by the House during the debate on parliamentary business on 25 April 2013 (2013Z13279) for a comment on the advisory letter on the social dimension of the EMU issued by the Advisory Council on International Affairs (AIV).

In its letter to parliament of 24 May the government explained in detail its position on the social dimension of the EMU, and clearly presented the options for deepening it (Parliamentary Papers 2012-2013, 21501-31 no. 311).

As the European Council concluded in December 2012, the social dimension of the EMU must be further strengthened. High unemployment and increasing poverty in a number of EU member states are socially unacceptable and, over the long term, unsustainable. It is unjustifiable that large numbers of people find themselves in a socioeconomic situation that still shows little sign of improvement. This situation also undermines the confidence of the public in the governments of the EU member states. For young people, in particular, it is important to create fresh prospects of work and a decent income, by implementing structural reforms and stimulating economic growth, so the younger generation can get back to building a future for itself.

Against this backdrop, the government submitted a request for advice to the AIV in the run-up to the European Council in June. The government read the resultant advisory letter with interest. We would like to thank the AIV for the letter, which it produced under a very tight deadline, and for the recommendations it contains, some of which we endorse.

The advisory letter
The AIV begins by stating that the EU will jeopardise its own future if it is unable to prevent polarisation between member states and fails to at least create the conditions for offering future generations the prospect of meaningful jobs. Being a major export country and an equally important foreign investor, the Netherlands has much to gain from strengthening social cohesion and stability in the Union. Although the AIV expresses certain doubts about the options available to the EU for strengthening the social dimension of the EMU within existing structures, it also notes a clear reluctance among member states to give up control of elements of their social policy to the EU.

As the government previously stated in its letter to the House, it believes that the social dimension of the EMU must be strengthened within the parameters of existing agreements and within the current legal and financial frameworks. This means that the EU should play an auxiliary role in matters of social policy; the government does not want to take any steps towards greater harmonisation in the social policy area. As far as the government is concerned, the EU’s job is to provide country-specific advice and facilitate the exchange of best practices – not prescribe uniform policies.

Granting credit for SMEs
The AIV suggests that the European Investment Bank (EIB) should extend more credit to SMEs. The government agrees with this recommendation and will confer with the other member states at the European Council of 27 and 28 June about how the agreed expansion of EIB resources can be deployed as effectively as possible to the benefit of SMEs and youth employment. In the joint report to the Council by the EIB and the Commission, a number of attractive options were proposed that merit further exploration, provided that the EIB can maintain a healthy balance sheet and a solid financial position.

Combating youth unemployment
To combat youth unemployment over the long term, the AIV sets great store by reform of the training system. The countries with the lowest youth unemployment (including the Netherlands) offer training that combines learning and working, so the knowledge acquired is aligned with the practical skills that employers need. The AIV believes that substantial investments should be made without delay in work experience placements or programmes combining working and learning. The AIV also believes that the recognition of diplomas and the issue of the necessary permits should be coordinated and facilitated at European level. In this regard, the AIV points to the opportunities offered by the Erasmus for All programme for work experience in EU member states.

The government endorses these recommendations, which are consonant with the Dutch position on combating youth unemployment.

Launching customers
The AIV is in favour of amending the EU public procurement rules by making the public authorities launching customers, as this will benefit innovative young businesses. At present, these rules impede young businesses from winning contracts for public projects, for example by setting requirements for a company’s financial standing, which works to the advantage of established companies.

European public procurement rules offer governments the freedom to harness the creative and innovative potential of companies. The Public Procurement Act 2012 has been in force since 1 April 2013, and one of its aims is to increase access for SMEs. To this end, provisions have been enacted to ensure that requirements set by a public authority are proportionate to the objective of the contract. This will also increase young businesses’ access to public contracts. The proposal on revising the European public procurement directives explicitly takes account of innovation, in part by introducing a new procedure for innovation partnerships, with a view to developing and purchasing innovative works, supplies and services. To promote innovation-driven procurement by public authorities, the Ministry of Economic Affairs has created a programme with a number of model projects, which seeks to encourage the public sector to spend a larger proportion of its budget on innovation-driven purchases.

Administrative instruments
The AIV is sceptical about the steering capacity of the Open Method of Coordination (OMC), mainly due to the meagre results achieved with the implementation of the Lisbon Strategy 2000. In their view the OMC is too bureaucratic and nowhere near binding enough to lead to significant structural reforms. The AIV concludes that in giving further shape to European social policy, binding agreements between member states may be inevitable.

The government does not share this analysis, but, as indicated in the letter to the House on the social dimension of the EMU, it does acknowledge that the OMC could be improved. Benchmarking of socioeconomic reforms can lead to political and more visible conclusions at European level. The Council of Employment, Social Policy and Health Ministers has a major role to play in this regard. In harmonising social policy, there can also be scope for ex ante coordination of structural socioeconomic reforms.

The government regards policy on employment, social affairs, care and education as primarily national responsibilities. Social policy must be formulated as close as possible to the public, with due regard for local circumstances. Efforts to strengthen the social dimension of the EMU must square with existing agreements and current legal and financial frameworks.

Within those frameworks, however, the government can support the AIV’s call for solutions that offer new prospects for boosting growth and employment in the EU countries as a whole, especially those that have suffered the most in the crisis.

Country contracts
The AIV also believes that the Netherlands should not reject in advance a separate euro budget or a separate fund for supporting structural reforms. The government feels that contractual agreements on reforms could be an additional useful instrument for spurring on member states to implement structural reforms. However, the government is opposed to linking financial support to existing contractual agreements. The financial incentive can cause member states to postpone structural reforms until some form of financial compensation is offered in exchange. Contractual agreements can, in the government’s view, also be concluded without financial support, provided that no restrictions are placed on the policymaking freedom of member states that adhere to the agreements, the process of economic policy coordination is not needlessly complicated, and total Dutch contributions to the EU do not increase. At the same time the government will work to ensure that any new instruments to strengthen the EMU respect the autonomy of social partners in the various member states, as set out in the letter to parliament of 22 April, on ex ante coordination of reforms (Parliamentary Papers 2012-2013, 21 501-20, no. 780). The government is against the proposal to set up a eurozone fund in the long term.

Social supervision of labour migration
The AIV states that labour mobility from weak to strong economic regions is a precondition for the long-term sustainability of the euro and that with the EU facing massive unemployment, especially in southern member states, there are also social reasons for seeing cross-border labour migration in a positive light and for encouraging it. It is an effective means, in their view, for offering the long-term unemployed, with no prospect of a job, a new economic future in countries contending with labour shortages, at least in certain sectors. Although the right to cross-border mobility is being exercised, the AIV finds the current numbers to be very modest. Numerous obstacles are preventing skilled unemployed workers who are interested in beginning a life in another country from taking such a major step. The AIV identified several (mainly bilateral) efforts to eliminate these obstacles, but it believes that this should occur at EU level, for example with the help of EURES. The AIV calls on the Dutch government to support proposals for a broader and stronger European labour mobility programme.

Considering the number of labour migrants from other EU member states, particularly those in Central and Eastern Europe, the government feels that cross-border mobility in the EU cannot be characterised as modest in scope. The government is in favour of the free movement of people and workers and the freedom for EU citizens to seek employment anywhere in the EU. However, it does not share the view that labour market participation should be promoted for social reasons. The government does not see promoting labour migration as a good way to reduce the negative effects of the crisis. The AIV also stresses the downside of labour migration. The government regards the AIV’s position that associated abuses are a powerful incentive for national authorities to vigorously tackle rogue practices involving the exploitation of foreign workers, as a clear vote of support for its own policy in this area.

Cofinancing
The AIV recommends that the cofinancing of EU support programmes directly connected with tackling youth unemployment should not be included in the calculation of the budget deficit of recipient countries. The government is not in favour of such a move, as it does not wish to weaken European budget agreements.

Minimum wage in EU member states
The AIV understands the government’s misgivings about European-level agreements on a minimum wage, but contends that additional agreements in this area are probably advisable, in order to protect employees’ social security. The AIV asserts that there is currently a favourable opportunity for persuading all member states to establish a socially acceptable floor to the wage structure in their own countries.

The government notices many similarities between the position it presented in its letter to the House on the social dimension of the EMU and the dilemma as outlined by the AIV, but unlike the AIV, it sees no scope for EU policy in this areas, in the light of the existing division of responsibilities between the EU and the member states. In this letter, the government did, however, indicate that the EU could focus more on compliance with international agreements on the right to fair pay, and on the exchange of best practices for national minimum wage agreements.

Conclusion
The government is grateful to the AIV for submitting its advisory letter so quickly and thereby making a valuable contribution to the debate on the social dimension of the EMU. In connection with the above-mentioned letter to the House, the government has set parameters for the further development of this aspect of the EMU. The government believes that social policy and employment policy should be crafted mainly at national level, with the EU playing a maximum supporting role.

Yours sincerely,

Frans Timmermans
Minister of Foreign Affairs
 

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