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Progressive Studies
Fondation Europenne
dtudes Progressistes
Progressive
Policy Making for
THE EuropeAN UNION
The European Union needs more progressive policy-making to overcome
its current crisis and to develop its potential as a progressive project
Maria Joo
RODRIGUES
PROGRESSIVE
POLICY MAKING FOR
the EUROPEan union
The European Union needs more progressive
policy-making to overcome its current crisis and
to develop its potential as a progressive project.
Contents
PREFACE
I. FINANCIAL CRISIS AND RECOVERY
A - Financial Crisis and a Progressive Recovery Plan
B - A Progressive Agenda for the European Union: the key-priorities
Publisher
FEPS - Foundation for European Progressive Studies
Dr. Ernst Stetter - Secretary General
Rue Montoyer, 40 - 1000 Brussels - Belgium
E-mail: info@feps-europe.eu
Edited by Maria Joo Rodrigues
Brussels, 20 October 2013
ISBN 978-2-930769-00-4
Printer Prefilm - Brussels
Designed by p-l-a-s-m-a . net
This book is edited with the financial support of the European Parliament
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359
Preface
Ernst Stetter
he European Union needs more progressive policymaking to overcome its current crisis and to develop its
potential as a progressive project.
Last years were particularly challenging for progressive policymaking in the European Union:
the transition to a new growth model has become urgent
for Europe to ensure prosperity and job creation in a new
context marked by global competitive pressures, climate
change and ageing trends
the so-called European model, whatever its internal
varieties, will have difficulties to survive if Europe is not
able to influence global governance and the global keyplayers in order to built up an international order with
more sustainable development, peace, democracy and
fairness
all these European ambitions were deeply disturbed
by a destructive global financial crisis followed by a
destructive Eurozone crisis, hitting the very heart of
European integration.
Ernst Stetter
FINANCIAL CRISIS
AND RECOVERY
4
FINANCIAL
CRISIS
AND
A
PROGRESSIVE
EUROPEAN
RECOVERY
PLAN
Maria Joo Rodrigues
October 2009
6
Introduction
Finally, this crisis is coming on the top of another
crisis. This financial turmoil has emerged in a special moment
of our history when the gap between global problems and
governance was already becoming evident in several areas:
a multilateral deal for trade and development is still in
pain to be born, migrations flows are expanding without
concerted management and climate change is still without
the appropriate response. In this particular juncture there is
a unique window of opportunity, with a clear choice:
Either each country retrenches in an individual and
-
isolationist and reaction, by hindering trade, de-regulating
PROGRESSIVE POLICY MAKING FOR THE EUROPEAN UNION
11
A coordinated
European position is
now crucial
12
13
15
All this will require more coordination of macroeconomic policies. The Economic and Monetary Union, as
another major asset of European integration, will only be
safeguarded on four conditions:
that Member States improve the coordination of
their budgetary policies, including tax policies;
that the room of manoeuvre of the revised
Stability and Growth Pact is fully used;
that European instruments are further developed,
to enable all Member States to support demand;
and, finally, that non-eurozone Member States
are better protected against speculative attacks on their
currencies.
The political choice is now clear: either we strengthen
European integration to combat this crisis or this crisis will
undermine European integration.
The connections between this crisis and the European
integration are not being fully addressed so far.
1.1.
A budgetary stimulus for growth,
jobs and structural change
Employment should be central for designing the
European budgetary stimulus. In order to take advantage of
the European spill-over effects on growth, Member States
should coordinate their economic policies, including public
investments, fair and effective tax incentives, and incentives
for private investments, according to a common set of
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are not only about inflation but also about growth and
employment. Its interventions were and should remain very
relevant in this direction.
h. Member States should consider new tools to
issue public bonds. In the present context, characterized by
international competition for financial resources, it could be
useful to examine the possibility of converting national bonds
into Eurobonds. The aim would be to reduce the spreads
which are being paid by public debt to launch new investment
projects, supporting business in general by decreasing the
cost of capital, and attracting domestic and foreign savings
and preventing hostile takeovers by foreign investors. A
European agency could be created to organize the common
issuance of EU denominated bonds, with the guarantees to
be provided by all participating Member States.
This important instrument is still waiting for an
institutional initiative.
i. Trade policy must also play a role in the recovery,
through the conclusion of the Doha round and European
Partnership Agreements, as well as promoting the export
potential of Europes small and medium sized businesses.
The Doha Round conclusion is still blocked.
j. The Community budget should be adapted to
contribute directly to the immediate need for economic
recovery, starting with the proposal for the 2010 budget and
then also in the forthcoming mid-term review of budget.
Still waiting for an institutional initiative. The new
financial perspectives should be consistent with an
ambitious recovery and long-term strategy for sustainable
development as the post-2010 Lisbon strategy.
PROGRESSIVE POLICY MAKING FOR THE EUROPEAN UNION
21
Smarter growth
23
Greener growth
25
1.3.
Social and Employment Policies to provide
more security to change
Social and employment policies should be adapted
to cope with the recession. It is important to safeguard
jobs as far as possible, support the unemployed back into
employment as fast as possible and stimulate the creation
of new jobs. This crisis should also be seen as an opportunity
for a European-wide radical re-skilling of the labour force.
Above all, fairness in the response to the recession should
be our main guiding principle and a special concern should
be kept for the most vulnerable. A European Employment
Pact and Social Progress Pact should be developed as two
major pillars of the recovery plan. The priorities should be:
a. To launch programmes for job creation in the
priorities already identified in point 1, combining public
and private investments, notably structural funds, EIB and
Eurobonds. These initiatives should promote access to new
jobs, particularly amongst young and older workers, and
will require stronger proactive action, based on a better
coordination of labour market, education and innovation
policies. Attention should also be paid to facilitating
entry into the labour market for young people for
example through large-scale support for internships and
apprenticeship programmes and tackling the increased
risks of age discrimination in the labour market.
b. To launch a European-wide programme for New
skills for New jobs to ensure a massive re-skilling for
new jobs. This programme should be financed by public
and private spending to be coupled with a refocusing of
the European social fund, providing tailor-made solutions
for education and training to those who will need a
knowledge lift to get a new job or keep their existing one.
This programme requires not only building a European coPROGRESSIVE POLICY MAKING FOR THE EUROPEAN UNION
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2.
Swift action to activate and regulate the
financial systems
2.1.
Urgent
measures
for
financial
stabilization to protect saving, investment and
jobs
Restoring bank lending and promoting good banking, is
crucial for a quick, sound and lasting recovery. The concept
of good banking can be defined by a set of criteria such
as developed retail services, strong deposit business,
diversification, closer relationships with customers, a
leverage cap and striking a right balance between efficiency
and safety. This concept should become a driver for the
unavoidable restructuring process which should be carried
out in the banking sector. A long term strategy to strengthen
and developing good banking meeting the real needs of
citizens and business should frame the public intervention
in this sector.
The measures already adopted to avoid the financial
meltdown are still not completely implemented and are
crucial to re-activate the interaction between the financial
system and economic activity, which is at core of this crisis.
Besides guaranteeing deposits, ensuring more liquidity and
supporting inter-banking lending:
Restructuring bank balance sheets in order to
isolate the effect of the impaired assets. Bad banks
and insurances can be considered but in other cases,
recapitalizing banks will be necessary. In any case, clear
conditions should be set for them to get public support:
presenting restructuring plans and ensuring transparency,
equal treatment of their cross border branches and fair
cost-sharing between taxpayers and shareholders, the latter
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35
I.
II. Better
institutions
regulation
of
all
financial
37
interests.
All short-selling should be properly regulated.
Detrimental short selling that exacerbates crises should be
curbed by regulatory authorities.
Credit rating agencies have always relied on
credibility. This has been damaged. Their role and
accountability must be reassessed. The establishment of a
European credit rating agency would be a means to develop
competition and re-establish market credibility in this
seriously affected sector. It could also provide registration
and oversight of rating agencies. Credit rating agencies are
amongst the financial actors with the highest profit margins:
in addition to the two ratings they have to provide, they
should provide a third rating free of charge. In addition, we
should examine how to broaden rating measures.
III. Better regulation of financial products
For credit default swaps, a transparent clearing
house should be set up.
A European public classification of products,
including derivatives, should be established.
Issuers of securitised products should retain on
their books for the life of the instrument a meaningful
amount of the underlying risk (non-hedged).
IV. Pensions and savings
National and European rules must obtain better
protection of wage earners pension savings through funds
with fiduciary responsibility.
National and European rules must be tightened to
better protect wage earners pension savings through funds:
38
havens
and
off-shore
financial
Unregulated tax havens and off-shore financial
centres must be covered by regulation through a new
international initiative. Europe must lead the way in fighting
tax evasion.
Co-ordinated efforts should be intensified in
relation to poorly regulated or uncooperative jurisdictions
to:
o Enhance cooperation in exchanging
information on tax evasion with other supervisors and
authorities;
PROGRESSIVE POLICY MAKING FOR THE EUROPEAN UNION
39
o Provide
prudential
information
or information related to activities to fight money
laundering and terrorism.
At the European level, supervisors should
increase capital requirements for those financial institutions
investing in or doing business with poorly regulated or
supervised financial centres whenever they are not satisfied
by the due diligence performed or where they are unable to
obtain or exchange pertinent information from supervisors
in these offshore jurisdictions
At the International level, the Financial Action
Task Force (FATF), OECD and FSF should propose a toolbox
of possible sanctions.
The G-20 adopted a new control mechanism regarding
tax heavens, agreed to develop international rules by the
end of 2010 to strengthen the quality of bank activity and
mitigate pro-cyclicality; it also stated that bonuses should
avoid excessive risk taking, be aligned with long term value
creation and be subject to claw back, be transparent.
In September 2009, The G-20 agreed to work on an
international framework for a transaction tax.
In the meantime the EU has amended the capital
requirements directive and is discussing new regulatory
instruments on hedge funds, investor compensation schemes
and market abuse as well as the new regulations creating
the European Systemic Risk Board, the European Banking
Authority and the European Insurance Authority. The final
content of all these new instruments will decisive to define
the kind of reforms which will be introduced in the financial
systems: either the transformational reforms it is requiring
or just adjustment reforms to keep business as usual
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45
A
Progressive
Agenda
for
the
European
Union
_____________________________________
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50
The strategic priorities of the European Union for the next five
years should address with ambition the main challenges the Union is
confronted with. They should be the following:
1. To respond to the current financial and economic crisis
with a stronger recovery process and a long term strategy for
economic, social and environmental development
2. To respond to climate change by promoting green growth
and by implementing a global agreement where Europe should take
the lead
3. To adapt the Welfare systems to fight unemployment and
to support re-skilling, active ageing, youth empowerment, European
mobility and immigration policy, according to a common European
Framework
4. To reform the financial system and to direct public
finances to support greener, smarter and more inclusive growth
5. To make Europe a global player in the reshaping of the
global order, paving the way for a global new deal
6. To implement the Lisbon Treaty to strengthen European
political institutions and European citizenship and to pursue the other
strategic priorities
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With this long term strategy, Europe can take again the
lead of promoting sustainable development based on new
sources of growth, low carbon energy and human creativity.
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The emerging global order is requiring an urgent redefinition of Europes position and role in world affairs.
The Lisbon Treaty will equip the EU with a service of
external representation and will lead to a more consistent
and coherent external action comprising CFSP, trade,
cooperation, humanitarian aid and the external dimension
of internal services such as energy, research, education,
employment.
A new EU external agenda should define the orientations
for the long term priorities as expanding the neighbourhood
policy, renovating the transatlantic cooperation, deepening
the strategic partnerships with the key-global players and
the macro-regions, strengthening the instruments to
support the MDGs. This new external agenda should also
frame the European position regarding pressing issues such
as the main process of peace keeping and peace building or
the regulation of the financial markets, the coordination of
the recovery, the agreement on climate change, the WTO
Doha Round or the ILO agenda on decent work. Making
the best use of the recent G-20 process and clarifying the
European position regarding the reform of the Bretton
Woods institutions have also become urgent issues.
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FOR A NEW
GROWTH MODEL
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ON
THE
EUROPE
2020
Strategy,
FROM
LISBON
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the relevant discussion for the future is about the right mix
of all these factors, if we want to avoid a downgrade of the
European welfare systems.
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D.
economy
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4.
And the State? A new approach for policy
making
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All this will require more coordination of macroeconomic policies. The Economic and Monetary Union, as
another major asset of European integration, will only be
safeguarded on four conditions: that Member States improve
the coordination of their budgetary policies, including tax
policies; that the room of manoeuvre of the revised Stability
and Growth Pact is fully used; that European instruments are
further developed, to enable all Member States to support
demand; and, finally, that non-eurozone Member States
are better protected against speculative attacks on their
currencies.
II
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II
To
strengthen
the
European
research
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transitions
and
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G.
Reform the financial system and corporate
governance for sustainable development
H.
Public finances to support sustainable
development
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requires some
II
formation;
- define a general road map for its application;
- improve the Committees support work to the
Council;
- improve the peer review methods regarding
the implementation at national level.
E. Improving the implementation of the guidelines
and the common objectives taking advantage of the
techniques used by the open method of coordination:
- improve the consistency between the
reporting, the integrated guidelines and the keyactions;
- prepare EU2020 national programme
mutually consistent with the national governmental
programmes;
- combine the national annual progress(short)
reports with annual thematic reports focusing only
on some key-actions previously selected;
- define indicators and deadlines regarding the
main objectives and invite the Member States to
define specific ambitious, but realistic targets for its
particular case;
- select the key-indicators to grasp the main
dimensions regarding the general well-being, the
knowledge-economy and the development potential;
- develop a more intelligent benchmarking,
putting good practices in the right context, using
progression indicators, developing rankings regarding
each Member State capacity to evolve towards the
targets set for by each of them;
- improve the monitoring and evaluation process
by focusing on the country specific recommendations;
- improve the learning process based on thematic
PROGRESSIVE POLICY MAKING FOR THE EUROPEAN UNION
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7.
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Institutions
The reforms to be introduced in the EU political
institutions can also have several implications for the Lisbon
agenda:
- the European Council is defined as central
institution in its guiding role and equipped with a fulltime and permanent President;
- the Council will extend the qualified majority
area to more fifty new areas, using a new calculation
rule after 2014-17, based on a double majority.
Besides, the Council will have a new formation, a
General Affairs Council clearly distinct of the Foreign
Affairs Council, with the purpose of coordinating the
internal policies and their interface with the national
policies;
- the Presidency of the Council will be provided
by a rotating team of three Member States which can
organise their tasks in various ways;
- the European Commission will be chaired by
a President with a stronger democratic legitimacy
because he/she will be elected by the European
Parliament;
- a High Representative of the Union for Foreign
Affairs and Security Policy, also a Vice-President
of the European Commission, will coordinate the
instruments for the external action of the Union;
- the national parliaments will more
systematically consulted on the Union decisions;
a stronger inter-parliamentary cooperation is also
envisaged;
- the European Parliament will get co-decision
competences with the Council in forty new areas;
-
besides a stronger interface between
PROGRESSIVE POLICY MAKING FOR THE EUROPEAN UNION
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property rights;
- the introduction of the concept of European
research area;
- the inclusion of a European space policy;
- the strengthening of the energy policy
addressing security issues;
- the strengthening of the environmental policy
addressing climate change;
- the reference to both co-decision and to the
tools of the open method of coordination in research
policy, industrial policy, health policy and social policy;
- the development of a European immigration
policy;
- a stronger role of the Commission in monitoring
the broad economic policy guidelines and the Stability
and Growth Pact;
- a declaration emphasising the need to ensure
not only sound budgetary positions but also
raising the growth potential as the two pillars of the
economic and fiscal policy of the Union;
- a detailed organisation of the functioning of
the Eurogroup, including the external representation
of the Euro.
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Annex
Taking stock of the Lisbon strategy
Even if there were clear failures, the implementation of
the Lisbon strategy should not be considered a failure. We
need to be precise in this assessment in order not to throw
out the baby with the bath water. When defining the post
2010, it is important not to lose the acquis of the Lisbon
strategy which is relevant:
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Information society
(Relative) achievements
(Relative) failures
Scale in content
industries
II
Research
European research
networks
Community patent
European research
infrastructure
Mobility of researchers
Technology platforms
European Institute of
Technology
Innovation
Joint technology
initiatives
Interface businessuniversities
Clusters
Venture capital
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Lifelong learning
Single market
Extension of early-school
education
Modernisation of
universities
Extension of vocational
and technological
education
Telecommunications
Energy
Single sky
Portability of pensions
Financial services
Better regulation
Services directive
II
Employment
Bilateral agreements
Doha Round
Flexicurity
Modernisation of
employment services
Employment of young
people
Women employment
rate
Immigration
management
Restructuring
management
Social protection
Pensions reform
Active ageing
Social inclusion
Childcare services
Environment
Environmental
awareness
Renewable energies
Recent Bibliography
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The europe
2020
Strategy
and the
national
reform
Programmes
_____________________________________
A progressive guide
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A decisive period
to shape national
policies
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Promoting growth
and re-balancing the
budgets
EU DECISION
II
HEADLINE TARGET
Medium-term objectives regarding the public deficit and
the public debt, below the limits of 3% and 60% over the
national GDP
Guideline 1:
Ensuring the quality and the sustainability of
public finances
Member States should implement budgetary
consolidation strategies under the Stability and Growth Pact
and in particular recommendations addressed to Member
States under the excessive deficit procedure, and/or in
memoranda of understanding, in the case of balance-ofpayments support, as follows:
Member States should achieve a
consolidation of well beyond the benchmark of
0.5 % of gross domestic product (GDP) per year
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A PROGRESSIVE APPROACH
Ensuring fiscal consolidation and long term sustainability
of public finances
II
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II
II
EU DECISION
HEADLINE TARGET
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II
Guideline 2:
Addressing macroeconomic imbalances
Member
States
should
avoid
unsustainable
macroeconomic imbalances, arising from developments
in current accounts, asset markets and the balance sheets
of the household and corporate sectors. Member States
with large current account deficits rooted in a persistent
lack of competitiveness or prudential and taxation policies
should address the underlying causes by acting on fiscal
policy, on wage developments, on structural reforms
relating to product and financial services markets, and on
labour markets, in line with the employment guidelines.
PROGRESSIVE POLICY MAKING FOR THE EUROPEAN UNION
119
Guideline 3:
II
A PROGRESSIVE APPROACH
Some macroeconomic imbalances were magnified by the
crisis and are now more visible in the current accounts and
the balance sheets of the households and companies. Their
underlying causes might be explained by unsustainable public
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social inequalities.
A smarter growth
EU DECISION
II
HEADLINE TARGET
Investing 3% of the GDP in R&D
Guideline 4:
Optimising support for R&D and innovation,
strengthening the knowledge triangle and
unleashing the potential of the digital economy
Member States should reform national (and regional)
R&D and innovation systems, ensuring adequate public
investment, orienting them towards addressing major
societal challenges (for example. energy, climate change,
social cohesion, health, and security), fostering excellence
and smart specialisation, and reinforcing cooperation
between universities, research institutes and private sector
PROGRESSIVE POLICY MAKING FOR THE EUROPEAN UNION
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A PROGRESSIVE APPROACH
Strengthening investment in research
A high level of research and development (R&D) is
crucial for our future competitiveness and for addressing
new societal needs. R&D affects economic growth through
various channels: first, it can contribute to the creation of
new markets or production processes; second, it can lead to
incremental improvements in already existing products and
production processes; and third, it increases the capacity of
a country to absorb new technologies.
More rapid progress towards establishing the European
Research Area, including meeting the collective EU target of
raising research investment to 3 % of GDP is needed. Public
research expenditure must be made more effective and the
links between public research and the private sector have
to be improved. The main challenge is to put framework
conditions in place, instruments and incentives for
companies to invest more in research. Poles and networks of
excellence should be strengthened; better overall use should
be made of public support mechanisms to boost private
sector innovation.
In addition, a determined effort must be made to increase
the number and quality of researchers active in Europe,
in particular by attracting more students into scientific,
technical and engineering disciplines, enhancing the career
development and the transnational and inter-sectoral
mobility of researchers, reducing barriers to the mobility of
researchers and students and by enhancing access to the
R&D sector for women, who represent 60% of university
graduates. The international dimension of R&D should be
strengthened in terms of joint financing, development of
a more critical mass at the EU level in key areas requiring
large funds.
PROGRESSIVE POLICY MAKING FOR THE EUROPEAN UNION
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A greener growth
EU DECISION
HEADLINE TARGET
Reduce greenhouse gas emissions by at least 20%compared
with 1990, increase the share of renewable energy to 20%
and achieve 20% increase in energy efficiency
Guideline 5:
Reducing greenhouse gas emissions and using
resources efficiently
Member States should decouple economic growth from
resource use. In order to reduce emissions and progress
towards the agreed targets, Member States should make
extensive use of market-based instruments, including
taxation, to support green growth and jobs and incentivise
the use of renewable energy and clean technologies.
Member States should phase out environmentally harmful
subsidies and ensure fair distribution of their costs and
benefits, limiting exceptions to people with social needs.
Member States should use regulatory and fiscal instruments,
including building performance standards, subsidies
and green procurement, to incentivise cost-effective
adaptation of production and consumption methods,
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A PROGRESSIVE APPROACH
II
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EU DECISION
Guideline 6:
Improving the business environment
modernising the industrial base
and
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II
A PROGRESSIVE APPROACH
A new industrial policy
II
1.
Industrial policy for fair, green and smart
growth: The development of a proactive industrial policy is
crucial for fair, green and smart growth. It must be servant
of human and societies progress by contributing to the
creation of new, decent jobs, strengthening the economic
capacity of member states, to the consolidation of their
budgets and providing affordable and high-quality products
to European consumers.
2.
Being innovative: A key challenge for Europes
industry is to be more innovative than other world regions.
This requires a forward looking policy of closely coordinating
innovation, competition, industrial, education and
employment policies on European, national and regional
level. European citizens and employees need to be prepared
for innovation, by increasing their skills and improving
working conditions. Support for R&D must be increased
by direct subsidies, tax cuts, access to specific loans and
other financial means. Support is needed to transform
R&D success into new market-ripe products and services
to cope with new needs. Innovative enterprises, especially
SMEs need to be supported. Networks for innovation and
job creation need to be established, involving companies,
PROGRESSIVE POLICY MAKING FOR THE EUROPEAN UNION
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Guideline 7:
Increasing labour market participation and
reducing structural unemployment
Member States should integrate the flexicurity principles
endorsed by the European Council into their labour market
policies and apply them, making full use of European Social Fund
support with a view to increasing labour market participation
and combating segmentation and inactivity, whilst reducing
structural unemployment. Measures to enhance flexibility and
security should be both balanced and mutually reinforcing.
Member States should therefore introduce a combination
of flexible and reliable employment contracts, active labour
market policies, effective lifelong learning, policies to promote
labour mobility, and adequate social security systems during
transitions accompanied by clear rights and responsibilities for
the unemployed to actively seek work.
Member States should step up social dialogue and tackle
138
Guideline 8:
Developing a skilled workforce, promoting job
quality and lifelong learning
Member States should promote productivity and
employability through an adequate supply of skills to
match demand in the job market, with a combination
of basic education, vocational training, lifelong learning,
PROGRESSIVE POLICY MAKING FOR THE EUROPEAN UNION
139
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A PROGRESSIVE APPROACH
Creating more and better jobs, investing in skills
The recovery process provides a unique opportunity to
redirect growth for a greener and more inclusive future.
Creating new jobs and greening existing jobs should
become a priority and an important element of innovation
and industrial policies as well as of supportive macroeconomic policies. They should contribute to achieving an
average employment rate of at least 75 % overall and to
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Investing in youth
EU DECISION
HEADLINE TARGET
Education target: school drop-out rate should be less than
10% and the share of population having completed tertiary
or equivalent education should be at least 40% by 2020.
II
Guideline 9:
Improving the performance of education
systems at all levels and increasing participation
in tertiary education
Member States should invest efficiently in education
and training systems and implement an integrated approach
within all segments (pre-school, primary, secondary,
vocational and tertiary) in order to improve educational
outcomes and ensure access to quality education for all.
Reforms should aim to deliver the key competencies that
every individual needs for success in a knowledge-based
economy. Teaching careers should be made more attractive,
teacher and student mobility promoted and universities
modernised. Member States should improve the openness
and relevance of education systems by building national
qualification frameworks and better gearing outcomes
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A PROGRESSIVE APPROACH
Raising educational levels and quality
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II
A fairer society
EU DECISION
HEADLINE TARGET
II
Guideline 10:
Combating poverty and social exclusion
Member States efforts to reduce poverty should be
aimed at promoting full participation in society and extending
employment opportunities. Efforts should also concentrate
on ensuring equal opportunities, including through access
to affordable, sustainable and high quality services and in
particular health care. Member States should put in place
effective anti-discrimination measures. Equally, to fight
social exclusion and empower people, social protection
150
A PROGRESSIVE APPROACH
Ensuring high and sustainable social protection
National social protection systems have played an ever
significant role in supporting and taking responsibility for
those unable to afford a dignified standard of living. These
systems are under growing pressure due to demographic
trends and the hardships of the current crisis. Furthermore,
there are increasing social divisions, tensions and inequalities
within our societies which have to be addressed in solidarity.
It is also important that Member States have a secure and
sustainable social protection system. Although the structure
and instruments of these systems vary among the Member
States, common indicators and targets could support these
policies. National social and health standards can contribute
to the fight against poverty and social inequalities while
supporting the social and economic development of the EU.
151
II
II
153
II
II
155
II
II
Regulating the
financial markets for
sustainable growth
A PROGRESSIVE APPROACH
The magnitude of the financial crisis and the massive
economic and social repercussions have exposed the
fallacies of the so-called self-regulation approach and
there now exists, at the global and European levels, a wide
consensus on the need to achieve an appropriate regulation
of all financial actors and products in order to promote
stability, growth and jobs.
To ensure a more stable and sound financial system,
Member States should contribute, through their national
competent regulatory authorities, to the effectiveness of the
macro and micro-prudential oversight of financial market
participants.
The financial crisis unveiled that individual Member
States cannot tackle supervisory and regulatory challenges
or ensure effective crisis management of cross-border
institutions. Therefore, one of the major challenges at the
European level is to improve the capacity of the financial
system to resist systemic shocks.
A European resolution framework for cross-border banks
is essential to ensure the effectiveness of the new supervisory
architecture. While the European Systemic Risk Board
will have an important role by providing an early warning
156
157
II
II
159
II
How
can
europe
foster
job
creation?
II
161
Political priorities to
foster job creation
II
-
macroeconomic
policies
(including
monetary, fiscal and wage policies) achieving a better
combination between macroeconomic stability and
growth;
-
active trade, industrial and innovation
policies to support the redeployment of investment
and job creation towards new activities which are
more knowledge-intensive and low-carbon and,
therefore, with more added value;
-
strong regional policy to support the
catching-up of the lagging regions;
-
ambitious research, education and
training policies to renew the knowledge base of
growth and jobs;
162
163
-
active employment policies aiming at
strengthening the human capital, attracting more
people into the labour market and improving
adaptability; and
-
promoting
social
inclusion
and
modernising social protection in order to make it
more adequate, adaptable and sustainable.
II
of
the
national
165
II
Innovation, the
central engine for job
creation
II
-
Innovation turns knowledge into added value,
leads to new products and services and should become the
main engine for a smarter growth with more and better
jobs. Over the recent period, innovation policy has gone
through important developments, but new momentum is
needed to strengthen this engine. This new momentum
should be given by a stronger focus on users needs, demand
and market opportunities and a more effective connection
between innovation, research, education and job creation.
-
It is up to business to identify and grasp the market
opportunities, but these initiatives can be supported by a
more pro-active state, with better coordination between
trade, cooperation, public procurement and standardisation
policies, which can create market opportunities, and
research, innovation and education policies, which can
enable their full exploitation.
-
Apart from improving the general conditions,
the European and the national innovation policies should
also focus on special catalysts to speed up the innovation
process. The approach based on clusters is particular useful
to develop partnerships for innovation, job creation and
competence building, involving all the relevant actors:
companies, research institutions, education and training
institutions and financial bodies.
These partnerships for innovation and job creation
should be launched in order to foster the creative process
166
167
II
6/
to focus on some clusters in order to
illustrate the advantages of developing partnerships
for innovation and job creation, as a good practice
which can be followed by other clusters;
7/
to dynamise the national innovation
system, by focusing on the missions and the
interactions among its bodies, including the flexibility
of labour markets;
8/
to reform public management with
implications for innovation;
9/
to spread skills for innovation and to train
innovation managers;
10/ to improve governance for innovation,
by improving the internal coordination of the
government and the relevant public departments, by
creating public awareness and by developing specific
consultation and participation mechanisms with the
civil society.
II
169
II
Investment in Human
Capital, the Most
Strategic Investment
for Europe
II
171
II
II
skilled workers.
D. to foster the various demands for learning and to
create a demand-led system:
-
to improve the framework conditions for
lifelong learning;
-
to develop a dynamic guidance system over
the life course;
-
to renew the validation and recognition
system; and
-
to create compensations for the investment
in learning.
E. to spread new financial arrangements in order to
share the costs of lifelong learning;
F. to improve governance for lifelong learning, involving
all the stakeholders along the following lines.
A permanent and inclusive system of lifelong learning
at European scale should be created. Generalising access to
Erasmus opportunities for learning mobility should be part
of this endeavour.
The Financial
Instruments to
Support Job creation
The financial and economic crisis is not over yet. It was
controlled, but not really overcome. The most likely scenario
is still a very sluggish growth with rising unemployment and
increasing social and regional inequalities across Europe.
This means that economic policies to sustain demand
PROGRESSIVE POLICY MAKING FOR THE EUROPEAN UNION
173
II
II
- The surveillance procedures should followup not only the indicators of the public deficit and
debt, but also growth, competitiveness, private debt,
employment and social cohesion (See macroeconomic
surveillance).
The available financial instruments should be swiftly
adapted for this purpose and complemented by some new
ones.
-
175
II
II
-
Eurobonds for long term investments and job
creation
II
177
III
179
THE
euro-Zone
CRISIS
AND THE
REFORM
OF THE EU
ECONOMIC
GOVERNANCE
Maria Joo Rodrigues
May 2010
180
181
182
183
III
-
Ensuring the external credibility of the
euro-zone, in financial and political terms
-
Fostering the economic recovery while
improving fiscal consolidation
-
Launching a long-term strategy for a
smarter, greener and inclusive growth with the means
to ensure success
These challenges are completely intertwined: the strength
of the euro-zone depends not only on fiscal consolidation
but also on ensuring a stronger recovery while reducing the
internal divergences. This complex equation can only be
solved by combining national and European instruments. In
the current level of interdependence, the Member States
efforts regarding fiscal consolidation, growth and structural
reforms can only succeed if they are supported by stronger
coordination and stronger European instruments regarding
fiscal consolidation, growth and structural reforms.
III
185
III
III
187
III
III
4.
Urgent Developments for the Euro-Zone
Governance
Collective political vision and leadership will be necessary
to develop the governance of the euro-zone. Some priority
reforms can already be clearly identified (see Box below) and
we present with more detail those which are still not agreed
or in implementation.
III
189
III
190
191
III
III
193
III
III
194
195
III
196
PROGRESSIVE POLICY MAKING FOR THE EUROPEAN UNION
EXTERNAL REPRESENTATION
PROMOTING
SUSTAINABLE
GROWTH
REDISTRIBUTION
ECB
EURO-ZONE REPRESENTATION
IN BWS, G-8, G-20
COORDINATION OF TAX
SHIFT TO NEW SOURCES
BUDGET STRUCTURE
QUALITY OF PUBLIC FINANCES
REWARDS OF REDIRECTION OF
PUBLIC SPENDING TO
INVESTMENT
STRUCTURAL REFORMS EU20220
COMMUNITY BUDGET
STRUCTURE
EUROPEAN INVESTMENT
BANK
EUROBONDS
PROMOTING
SUSTAINABLE
GROWTH
ALLOCATION
BUDGET STRUCTURE
STATE AIDS
SOCIAL BENEFITS
TAX INCENTIVES
AUTOMATIC STABILIZERS
TIME AND STRUCTURE OF
WITHDRAWING FISCAL
STIMULUS
REDUCING THE
MACROECONOMIC IMBALANCES
FRONTLOADING STRUCTURAL
FUNDS
ECB
BALANCE OF
PAYMENTS
FACILITY
PROMOTING SUSTAINABLE
GROWTH
ECONOMIC STABILIZATION
STRUCTURAL FUNDS
FRONTLOADING
TAXATION LEVELS
EUROPEAN
SUPERVISION
BODIES
FINANCIAL
REGULATION
FINANCIAL STABILIZATION
BALANCE OF
PAYMENTS
FACILITY
TAXATION LEVELS
FISCAL CONSOLIDATION
ECB +
NATIONAL
CENTRAL
BANKS
MONETARY
POLICY
TAX POLICY
TABLE 1
DEVELOPING EUROPEAN ECONOMIC GOVERNANCE
Instruments by Macroeconomic Function and by Policies
Activated with the financial and economic crisis of 2008
-2010/ STILL MISSING
BUDGET POLICY NATIONAL
LEVEL
III
BUDGETARY POLICY
COMMUNATARY
LEVEL
EXCHANGE
RATE
POLICY
POLICIES FUNCTIONS
WAGE STRUCTURE
WAGE/PRODUCTIVITY
WAGE FLEXIBILITY
WAGE POLICY
III
197
Bibliography
Malcolm
Townsend
(2007),
The
Euro
and
Economic
and
Monetary
Union
An historical, institutional and economic description, London
United Kingdom, John Haper Publishing
Leila Simona Talani, Bernard Casey (2008), Between
Growth And Stability The Demise and Reform of the
European Unions Stability and Growth Pact, Cheltenham,
UK, Edward Elgar Publishing
Marco Buti, Andr Sapir (2002), EMU and
Economic Policy in Europe, The Challenge of the Early
Years, Cheltenham, UK, Edward Elgar Publishing
David Marsh (2009), The Euro, The Politic of the
new global currency, New Haven and London, Yale Press
III
199
III
Shaping
the
Economic
Union
___________________________________
III
201
III
There are two different ways to look to the current eurozone crisis: a crisis in the euro-zone or a crisis of the eurozone.
According to the first version, the main problem has to do
with the lack of fiscal discipline in some peripheral countries
which led to unsustainable public debts damaging the
credibility of the euro. Hence, the logic solution should be to
strengthen fiscal discipline and to impose austerity even at
the cost of recession in these countries, which should learn
a lesson. Ultimately, if they default, their negative effect can
202
203
III
205
III
III
207
III
-
The European semester and the new
coordination process of fiscal, economic and social
policies at European level
-
-
The new procedure of macro-economic
surveillance
-
-
The reform of the financial system and the
new supervision system
-
The Euro-Plus Pact as a new general and
political agreement for deepening the coordination
between the euro-zone members and the others
wanting to join
-
The coordination of national policies, not
only budgetary and macro-economic policies, but
also economic and social policies in general
III
-
208
209
III
III
5.
New compromises
surveillance:
regarding
macro-economic
-
reducing the imbalances of the deficit or
of the surplus countries? Both
-
reducing the current account and
competitiveness deficits or the unemployment
rates? Both
211
III
-
Changing countries behaviours with
sanctions or with incentives? With both
-
Overcoming imbalances by national
efforts, but also by better European coordination
III
convergence
- Social contributions and retirement age
harmonization or social flexibility? Social convergence
promoting active ageing and discouraging early
retirement
- automatic or discretionary rules for fiscal
discipline? Semi-automatic and smarter rules
-
higher or lower interest rate? Lower, I
assuming that public creditors are considered senior
-
-
sovereign default or not? To be avoided by a
stronger preventive action
-
strong conditionality or not? Strong but
balanced, considering fiscal consolidation and growth
-
larger euro-bonds issuance or not? Yes, with a
cap and an access price in line with the national risk
213
III
6. The
Mechanism
III
transition
to
the
European
Stability
-
regarding the financial base to ensure
AAA rating: national guarantees with senior status;
a provisional credit line by the ECB; joint guarantee;
own reserves and capitalisation (by buying and
selling bonds)
-
regarding
conditionality:
fiscal
re-balancing and banks restructuring; fiscal
consolidation, sustainable growth and structural
reforms
-
regarding the interest rate: higher than
German bund, but reasonable enough to enable
fiscal consolidation and recovery
-
regarding the amount of resources: large
enough to deter financial speculation
-
regarding its roles: control and prevent
sovereign debt crisis; support key investments which
cannot find other funding solutions; improving debt
management of the euro-zone members
-
regarding its instruments: providing
conditional credit lines and loans, buying in the
primary and secondary markets, issuing euro-bonds
to provide loans; issuing euro-bonds to buy national
bonds; special issuance of euro-bonds to fund key
investments; to turn a capped tranche of national
bonds into euro-bonds
-
their
Stability
and
Convergence
Programmes, indicating their medium term objectives
for fiscal consolidation and for macroeconomic rebalancing and their priorities to achieve them
214
-
their National Reform Programmes,
indicating their national targets to meet the EU2020
PROGRESSIVE POLICY MAKING FOR THE EUROPEAN UNION
215
III
III
-
tax sources and levels (common
consolidated tax base, minimum corporate taxes,
new sources of taxation)
-
promoting active ageing and the
employment rate, closing the gap between effective
and legal age, while considering professional
specificities
-
convergence of minimum social standards
(precarious work, minimum income schemes)
-
crisis management regime for banks at
the national and European levels
216
217
III
-
the Stability and Growth Pact (fines/ more
time to consolidate budgets)
-
-
the European Stability Mechanism (
access and interest rate to be paid to use euro-bonds)
-
the Community Budget (stronger
conditionality related to the structural funds, project
selection in the Community Programmes)
The Euro-Plus Pact defined in February 2011 was an
attempt to deepen this coordination and convergence.
Some progress was made, but it remained an imbalanced
and uncompleted framework. For a detailed assessment see
the Table 2 below.
III
8.
policy
-
If it chooses to move uniformly to
attain fiscal consolidation quicker, it risks internal
fragmentation, with many regions stagnating or
trapped by recession
-
In order to prevent such tensions,
the alternative scenario should combine fiscal
responsibility with stronger coordination of economic
growth policies and with new European instruments
to finance growth
improving
the
surveillance
regarding
fiscal
219
III
III
221
III
III
-
A European growth strategy combining
new investments with a coordinated agenda for
structural reforms.
223
III
III
at Federal level and the overall budgetary and macroeconomic policies are defined at Federal level.
c/ Public debt management:
-
In the current EMU, public debt issuance and loans
are managed by national agencies;
-
In a new EMU, debt issuance is also partially
managed by a European Public Financial authority (building
on EFSF-ESM); the ECB should also play the role of lender of
last resort;
-
We should bear in mind that, in federal systems, a
Federal Treasury can borrow and issue public debt.
d/ The Community budget:
-
In the current EMU, is mainly funded by national
contributions and can finance Community Programmes and
structural funds to reduce regional divergences;
-
In a new EMU, it can be more funded by own
resources. Moreover, structural funds can also be used for
macro-economic stabilization supporting specific regions
and groups;
We should bear in mind that in federal systems, the
federal budget has a much bigger size, is funded by federal
taxes and can finance Federal programmes supporting
specific regions to reduce structural divergences and macroeconomic imbalances.
225
III
III
-
In a new EMU, is also based on a Eurozone
Government at PMs and ministerial level, with permanent
Presidents. In the current conditions, this is an unavoidable
complexity, in face of:
-
Federal systems with permanent President and
Ministers.
g/ The legislative power:
-
In the current EMU, is based on MStates
parliaments and governments, the EU Council of Ministers
and the European Parliament;
226
-
In a new EMU, it is also based on a Eurogroup Council
of Ministers; later on, a special committee for the eurozone
in the European Parliament, creating a stronger European
democratic legitimacy, beyond the national legitimacy
provided by MStates parliaments and governments. In the
current conditions, this is an unavoidable complexity, in face of:
-
Federal systems, where the central
democratic legitimacy comes from a Federal Congress
with a Senate and a House of Representatives.
In conclusion, the current reforms of the EU economic
governance should be shaped bearing in mind a more
comprehensive architecture for the EMU. A EMU more
fitted for the future should be equipped with:
-
A European strategy for a new growth
model, smarter, greener and more inclusive, to
be translated into national policies, budgets and
stronger European instruments
-
A Community budget, based on new own
resources and able to provide leverage to a longer
general re-allocation of resources focusing on the key
strategic priorities of the Union; also able to reduce
the regional divergences and the macro-economic
imbalances
-
A European public finance authority,
monitoring the national budgets in their quantitative
and qualitative objectives, ensuring coordinated
discipline and providing the basis for:
-
A European agency able to issue eurobonds to finance long term investment needs and to
improve debt management;
-
A European stability mechanism, able to
PROGRESSIVE POLICY MAKING FOR THE EUROPEAN UNION
227
III
Table 1:
THE REFORM OF EU ECONOMIC GOVERNANCECOMPREHENSIVE OVERVIEW
Fine-tuning its policy instruments to strengthen the
sustainability of the euro-zone
PRIORITIES FOR THE
EUROZONE SUSTAINABILITY
PROMOTING
A NEW KIND A
OF GROWTH
ENSURING
FISCAL
RESPONSIBILITY
ENSURING
FINANCIAL
STABILITY
INCREASING
INTERNAL
CONVERGENCE
EU2020 STRATEGY
Community Programmes
National Reform
Programmes
Beyond GDP
measuring
growth
3 Strategic
priorities
10 guidelines
7 flagships
Structural
reforms for
more effective
and efficient
public finances
Increasing the
attractiveness
for new investments
Generalising
the implementation of
the EU2020
Strategy
SINGLE MARKET
New market
opportunities
New sources
of taxation
Tax coordination
Financial
markets
integration
and reform
MACRO-ECONOMIC
SURVEILLANCE AND
CORRECTION
Create
conditions to
implement
EU2020
Coordinate
spill-over
effects
Facilitate
budget re-balancing
Strengthening
National
attractiveness
for new investments
Correcting
the macroeconomic imbalances with
a balanced
approach
EU BUDGET
Community Programmes
Structural Funds
EIB
Providing
additional
financial
support to the
EU2020
Reducing
national budgetary effort
Providing a
guarantee to
project bonds
EU support to
catching-up
STABILITY AND
GROWTH PACT
Ensure fiscal
space for
EU2020
investments
Stronger fiscal
discipline
Reward the
quality of public finance
New sources
of public
revenue
Credibility of
the Mediumterm objectives
Ensure fiscal
space for
catching up
investments
EU POLICY INSTRUMENTS
III
228
III
229
Last resort
solidarity against
sovereign default
Mutualisation of
debt issuance
EUROPEAN STABILITY
MECHANISM
Enable key
national public
investments
Make financial
system support Eu2020
objectives
Reducing
speculative
pressure on
public debt
Stess tests,
Regulations,
reserves, bonus to ensure
responsible
financial
investment
General
conditions to
promote
growth
Ensuring
stable conditions for low
interest rates
Inflation
control
FINANCIAL SYSTEM
REFORMS
EUROPEAN CENTRAL
BANK
Last resort
to ensure
access to
III
NEGATIVE
EMU DEVELOPMENT
GENERAL PRIORITIES
SPECIFIC PRIORITIES
COMPETITIVENESS
SPECIFIC PRIORITIES
EMPLOYMENT
SPECIFIC PRIORITIES
SUSTAINABILITY
OF PUBLIC FINANCES
SPECIFIC PRIORITIES
FINANCIAL REFORM
230
GOVERNANCE
FINANCIAL STABILITY
MECHANISM
More resources
New instruments( buying in the
primary market)
Possibility to reduce interest rate
POSITIVE
NEGATIVE
General approach
Greece
Stop Contagion
231
III
Main features
Current EMU
New EMU
Federal systems
National
budgetary
policies
-National budgetary
policies play the role
of macro-economic
stabilization under the
limits defined by the SGP
European
budgetary
and economic
coordination
-Surveillance of the
MS budgetary policies
according to the Stability
and Growth Pact
-The macro-economic
imbalances are not
under surveillance and
correction
III
Public debt
management
Community
budget
-Funded by national
contributions
-Financing Community
Programmes and
structural funds to reduce
regional divergences
European
growth strategy
-Coordinating MS
structural reforms plus
some small Community
programmes
-These Community
Programmes become
larger
Executive power
MS Governments
European Council
EU Council of Ministers
European Commission
Legislative
power
MS parliaments and
governments
EU Council of Ministers
and European Parliament
-Eurogroup Council
of Ministers;
-Later on also European
Parliament - special
committee for the
eurozone
-MS parliaments and
governments
EMU,
Quo
Vadis?
III
232
233
234
235
III
There are currently two different narratives about
the ongoing Eurozone crisis: a crisis in the euro-zone or a
crisis of the euro-zone.
According to the first version, the main problem
has to do with the lack of fiscal discipline in some
peripheral countries which led to unsustainable public
debts damaging the credibility of the euro. Hence, the
logic solution should be to strengthen fiscal discipline and
to impose austerity even at the cost of recession in these
countries, which should learn a lesson. Ultimately, if they
default, their negative effect can be contained because they
are peripheral economies.
III
237
III
deficits;
closer monitoring of the Member States
under financial assistance;
many new commitments to structural
reforms and spending cuts were made by the
Member States.
III
239
III
debt
levels
in
some
diverging levels of borrowing costs
between countries;
diverging growth trends, in several
instances negative;
a general trend towards recession and
rising unemployment;
increasing spillover effects for the global
economy: the Eurozone crisis has become a global
problem;
III
political opposition to further European
solidarity in some Member States;
political opposition to more structural
reforms, taxes and spending cuts in other Member
States;
a widespread sense of a loss of democratic control
over general living conditions. Europe is now perceived by
many as strongly shaping their lives, but not susceptible to
democratic influence at national level.
240
241
III
III
-
In the new process of macro-economic
surveillance, this one is mainly focused on the
macro-economic imbalances of each national case,
implicitly assuming that the ideal situation would be
each Member State to have a surplus in the current
account and even in the balance of payments as a
whole. This, if ever possible, would make Europe
a very competitive economy but also a worrying
factor of global imbalances This new process of
macro-economic surveillance is certainly very useful
to identify national problems to be addressed, but
should also consider the spill over effects notably
242
243
III
III
244
245
III
III
-
A stronger monitoring and coordination of social
reforms and jobs plans in the frame of the national reform
programmes
-
Stronger means for social investment to be
considered in the Community Budget and in the European
surveillance of the national budgets. These means for social
investment should be used as conditional incentives for the
progress in these social targets and reforms
-
A surveillance of the macroeconomic imbalances
and a better macroeconomic coordination, which should
also consider their social indicators and not only the
economic and financial ones
-
The development of a European Fund to cushion
major social macroeconomic shocks, if there is higher
coordination of euro-zone Member States regarding tax and
social contribution policies
Finally, these developments also require an adaptation
of the current institutional setting:
-
Meetings to improve the coordination of
Social ministers regarding the specific issues of the
eurozone, which should also involve the European
Commissioner for Social Affairs
-
A clear definition of basic social standards to be
respected in the euro-zone, and to be promoted in the
relationship between the EU and its external partners
-
A more active role of the European Parliament
in the different stages of the European semester and its
internal organization to deal with the specific issues of the
eurozone
-
A definition of targets for social progress in the
frame of the European growth strategy
-
The development of procedures of social
dialogue able to cope with the specific issues of the euro-zone
246
247
III
The development of a genuine EMU is now a
central process for the success of European integration.
Four integrated frameworks are being considered for this
development: financial, economic, budgetary and political.
If we want to ensure the long term sustainability of the EMU,
a social dimension should also be considered when defining
the content of each of these frameworks. The following
ideas can be added to next version of this document,
building on what is already underway.
How can the social dimension be considered in the items
already included in these four frameworks?
Integrated economic framework
III
-
The Europe 2020 Strategy for growth and jobs
is central in this framework and involves key-targets,
guidelines and measures at European and national level
which concern the social dimension, notably employment,
education and social inclusion. National job plans are also
being requested. Sustaining the European social model
should also be a central concern of this strategy.
-
The macro-economic surveillance is based on a set
of indicators which also include social indicators, notably
(un)employment rates and unit labour costs (labour costs/
labour productivity)
-
If there are contractual arrangements concerning
the implementation of the national reform programmes,
they should be based on a balanced approach also
considering the social dimension
-
The investment instruments to be develop at
European level to complement the national ones, should
248
249
III
-
The special fiscal capacity in the eurozone can take
the shape of European fund to deal with asymmetric shocks
and to complement the national efforts to re-balance a
country in economic and social terms
-
The instruments for joint management of the public
debt can create better financial conditions for an effective
reform of the welfare system rather than its downgrading.
Political framework
III
-
The enhanced role of the European Parliament
and the interface with the national parliaments should
also include the follow-up of the European semester
including the Europe 2020 strategy and the national reform
programmes
-
The eurozone governance should also involve the
Ministers of Labour and Social affairs
-
to disentangle the sovereign crisis from
the banking crisis. The ECB can play a key role by
intervening in public debt secondary markets and by
strengthening banks supervision;
-
at the same time, to shift to a better
balance between investment, growth and jobs
creation on the one hand and fiscal consolidation on
the other hand
-
to use these new conditions to pursue the
necessary structural reforms for a more sustainable
growth model with more political support and
strategic consensus between the key stake holders.
-
Social dialogue also needs to play a specific role in
this governance
6. The
Political
Processing:
Sequences and Treaty changes
Configurations,
251
III
-
a/ Fiscal responsibility coupled with a last resort
solidarity regarding sovereign debt
-
b/ A reformed financial system to ensure financial
stability and foster growth
-
c/ A stronger coordination of economic policies
combined with structural reforms to promote a new kind
of growth
-
d/ The reduction of the internal divergences. On the
long term it is difficult to ensure the nominal convergence
between the euro-zone members without increasing their
real convergence
-
III
A
252
A
Backstop
for
Divergences
in
the
Euro-zone
Maria Joo Rodrigues
May 2013
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2.
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Either a Eurozone of internal divergences
with deep internal contrasts regarding wages, social
benefits, unemployment rates and migration flows;
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Or a Eurozone of internal convergences,
with more coordinated reforms and investments, and
with upward trends in growth, employment, inclusion
and social sustainability.
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Improving the coordination of the major
structural reforms
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Improving the coordination of main
priorities of economic social policies (using the
integrated guidelines)
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Improving the framework conditions
for internal migrations wit better social integration
(portability of rights, etc)
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Developing forward-looking investments,
notably social investments in training, active labour
market policies, child care
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sufficiently integrated markets and
mobility of factors to facilitate a certain degree of
convergence between the competitiveness of the
Member States
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monetary integration must be coupled
with a considerable degree of fiscal integration.
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Defining the room of manoeuvre for these
investments in the investment rules of the SGP
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stronger European supervision on their
banks, if a common bank resolution and deposit
guarantee is build up
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stronger coordination of their economic
and social policies and reforms, if a fiscal capacity is
build up
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stronger sharing of sovereignty at
European level, if the decisions are taken in more
democratic terms.
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EUROPE AND
THE WORLD
How
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FOR
a
Global
New
Deal
For
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Introduction
1. A coordinated response to the recession
1.1 A budgetary stimulus for growth, jobs and
structural change
1.2 More ambitious policies for smart and green
growth
1.3 Social Policies to protect people and to support
change
2. Swift action to activate and regulate the
financial system
2.1. Urgent measures for financial stabilization to
support savings, investment and jobs
2.2 Regulating the financial system to support growth
and sustainable development
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Bibliography
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Introduction
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1.
+ Unprecedented initiative of global coordination to rescue the
financial system and sustain global demand
+ Emergence of the G-20 at leaders level, which can provide important
mechanisms to govern the global economy
+ The Framework for strong, sustainable and balanced growth defined
by the G-20, launching a process of mutual assessment of policy
frameworks and their implications for the pattern and sustainability
of global growth, while trying to identify potential risks to financial
stability. The 20 members will agree on shared policy objectives for
fiscal, monetary, trade and structural policies to collectively ensure
more sustainable and balanced trajectories of growth
+ A Charter of core values for sustainable economic activity (macroeconomic policies for long term objectives, rejection of protectionism,
regulation of the markets for sustainable development, financial
markets serving the needs of households, businesses and productive
investment, sustainable consumption and production, internationally
development goals, need of a new economic and financial architecture
+ A Global Jobs Pact was adopted by the ILO and underlined by the
G-20 and UN Assembly
- The fundamental crisis is not over. Many developed and developing
countries were badly hit. The recovery process will be long. What is
at stake is not only to recover but to renew the foundations of our
development model. Deep transformational reforms are needed in the
financial system, corporate governance, welfare systems, patterns of
consumption and production and global governance
- Will the G-20 remain a consultation forum or can it become a
driving board for economic governance? In this case serious issues of
legitimacy and effectiveness should be addressed in connection with
the reform of the UN system
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Tax credits/government premiums on
energy efficiency related household investment (high
energy efficient heating systems, building isolation,
solar panels). These measures would be very positive
for jobs in the building sector - being hit very hard by
the crisis now - and in the industries producing these
materials;
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Tax credits/government premiums for
cleaner cars and collective transports;
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Power generation and storage: Renewing
electricity power generation capacity, including
renewable energies, will require investment in
interconnection into energy grids, with emphasis
on facilitating decentralized production and links to
and from regions rich in renewable sources like wind
or solar. All these infrastructure projects will create
high-value jobs;
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Energy efficiency: investments and tax
incentives are now needed to renovate public
and private buildings and housing, increase the
efficiency of lighting, heating and cooling systems,
developing inter-modality transports and promote
new technologies for energy efficiency in goods and
services.
+ The G-20 agreed on reducing fossil fuel subsidies
- Most of the key decisions for this transition towards a low-carbon
economy are still blocked.
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1.3 Social Policies to protect people and to support
change
Social policies should be clearly adapted to cope with
the recession, protecting people while supporting them
to move to more promising employment and living
conditions. Fairness in the response to the recession should
be our main guiding principle and a special concern should
be kept for the most vulnerable, those who always suffer
more during a crisis. Against this background, the priorities
for social policies should be:
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To promote access to employment, particularly
to young workers, requiring stronger proactive action, as
a central priority, based on a better coordination of labour
market, education and industrial policies;
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Wage developments should be monitored and
supported in order to ensure sustained private consumption.
Wages should continue to be aligned with productivity gains
and protecting purchasing power. The Social Partners have
a key role to play. Fair wages, stable jobs, stronger collective
bargaining and more equality in pay are central for the
recovery process;
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Access to new skills for new jobs should be the goal
of major programmes providing tailor-made solutions of
education and training to those who will need a knowledge
lift to get a new job. Schemes to enable employers to
prevent job cuts, such as combining reduced working time
with publicly-subsidized training programmes, should be
implemented;
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To submit planned mass lay-offs to a stronger
supervisory scheme, ensuring that all other alternatives
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Finally, older workers and elderly people require
special attention. Priorities should include the protection
of their savings by guaranteeing bank deposits, enabling
a better assessment of financial products, through the
implementation of consumer information and protection
measures, and ensuring the sustainability of their pension
schemes in the three pillars of the social protection system,
particularly the first pillar.
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+ With the Global Jobs Pact, decent jobs were put at the heart of the
recovery and reform process
- The worst can still come because there is a time lag between
economic recession and unemployment rise. The ILO foresees more
59 million unemployed in the world by the end of 2009. More than
200 Million can fall into extreme poverty and the working poor can
rise up to 1,4 Billion
- Negative developments + Positive developments
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Special credit facilities should be created
for SMEs to be provided, if necessary, by regional
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development funds;
+The G-20 decided to adopt contingency and resolution plans for
systematically important financial firms
- The G-20 was unable to define a common approach to stress tests
on banks
- Negative developments + Positive developments
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Tax havens and off shore financial centres
that are free of regulation and legislation must be
covered by regulation through a new international
initiative. We must fight tax evasion resolutely;
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A new strong standard of transparency and
disclosure for all financial players. This has to be done in an
efficient and comprehensive way and is a first step towards
effective regulation. Transparency and disclosure will allow
regulatory authorities to track the actions of financial
players in a better way. Transparency is a means to better
regulation and not an end in itself;
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New and more transparent financial accounting
standards are needed so that operations are clearly stated
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To build new equipments for renewable
energies;
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To develop a network for more intelligent
collective management of the available energy;
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To spread the access to low-carbon
collective and individual means of transport;
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To encourage the construction of public
and private buildings with better energy efficiency.
This will require a long term effort in research and
innovation, standardisation, finance and assistance in order
to:
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Diffuse existing low carbon technologies,
developing near commercial technologies and
creating breakthrough technologies;
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Define
standards
globally
coordinated
energy
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Coordinate public funding in all countries
and targeted concessional finance for developing
countries around sectoral programmes.
3.2. Effective and fair mechanisms to share the costs
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5.
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This new development trajectory should
be designed to create new opportunities and to
ensure social justice for all
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The global governance structures should
be reformed to include the relevant actors in order
to be able to define, implement and monitor this
Global Deal.
It is also important to stress that Global New Deal will
be necessary to sustain the national new deals where they
have been or can be achieved.
8.2 The Global New Deal as a win-win game
The possible content of a Global Deal to be convincing
need to be defined in terms of gains to be obtained and
contributions to be given by three different kinds of
partners: developed countries, developing countries and
emerging countries.
To pave the way for sustainable growth with social
cohesion and respect for the environment, this Global Deal
requires:
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From developing countries, a growing
integration in the global economy, accompanied
by programmes aimed at building their national
capacity in economic, technological and educational
terms, ecological control, fight against poverty and
enhancement of working conditions which often
have as a prerequisite a democratic governance and
the respect for human rights;
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From developed countries, the opening
of their markets to developing countries exports, the
correlate redeployment to other activity areas, the
strengthening of the cooperation and the financial
aid to developing countries, and the change to
sustainable consumption and production patterns.
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From the emerging countries, their
deeper integration in the global economy coupled
with their convergence with better standards in
the environmental, social and intellectual property
areas, to be supported by a stronger mobilization of
national and international financial and technological
means.
8.3 The policies at the heart of a Global New Deal
Therefore, this Global New Deal should be translated
into new orientations for the international policies mainly
regarding: the financial system; trade; environment and
energy; development; labour, employment and migrations.
What is at stake is:
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To define global rules to manage
international interdependency and the global public
goods notably environment, knowledge, macroeconomic and financial stability, human health,
global and regional commons;
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To promote an agenda for sustainable
development in all countries;
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To correct the deep asymmetries of
world development.
Some building blocks of this Global Deal have been
under elaboration notably since 2000:
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The Millennium development goals,
adopted by the General Assembly of the United
Nations, in 2000 (UN, 2000);
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The Monterrey consensus, which defined,
in early 2002, a commitment to improve the financial
instruments for development;
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The new round of negotiations in
international trade, launched in Doha in 2001,
with the commitment to focus more on developing
countries(WTO, 2001);
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The progressive recognition of the Decent
Work agenda at all levels of the UN system (ILO,
2001);
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The current negotiations to prepare the
post-Kyoto agreement on climate change, energy
and environment, according to the road map defined
in Bali, 2007.
Nevertheless, the progress in these areas has also faced
many opponents: States which resist opening up their
markets (such as some European countries and the USA);
countries which resist increases and enhancement in their
direct aid to development (idem); companies which persist
in environmentally and socially unsustainable behaviours;
holders of technological rights which block the diffusion of
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9.
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We assume that the G-20 will become more relevant than the G-8 or even the G-8+5
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employers federations
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The international platforms of NGOs
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The universities and academia
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The globalized media
When building this coalition, these actors, beyond their
representation in the official multilateral bodies, should
also be involved in international networks to deal with
particular global issues with a purpose of advocacy or of
policy-making. Finally a policy coherence initiative should
be developed with a good selection of these actors in order
to test the possible content of a Global New Deal.
The implementation of a Global New Deal combining
these policies will require a major overhaul of the global
governance structures, giving more voice and influence to
emerging and developed countries, involving civil society
and rebalancing the four major areas of global regulation:
finance, trade, environment and labour.
Bibliography
AGLIETTA, Michel and BERREBI Laurent(2007).
Dsordres dans le capitalisme Mondial, Paris, Edition Odile
Jacob
ATTALI, Jacques (2008), La crise, et aprs?, Paris:
Librairie Arthme Fayard.
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FOR
A
PROGRESSIVE
EUropean
EXTERNAL
ACTION
___________________________________
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Maria Joo Rodrigues
December 2010
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1.
INTRODUCTION
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a new approach is being developed in
trade policy in connection to the Europe2020 agenda,
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in the multilateral agenda, to reform
the financial system, to re-balance BWs institution
governance, to achieve a trade agreement in
the Doha Round and to strengthen multilateral
governance for environment;
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in the regional agenda (enlargement and
neighbourhood), to foster convergence and catchingup
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in the development agenda, providing
aid for trade, fight poverty, deepening the strategic
dialogue for sustainable development and improving
policy coherence in development strategies;
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in the transatlantic agenda, to progress in
regulatory convergence in TRIPs, financial markets
and energy;
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more generally, in the agenda with strategic
partners, deepening the strategic cooperation for
sustainable development, encompassing climate
change, environment, energy, social inclusion and
creating a win-win game in trade;
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in the agenda with the macro-regions,
the same plus deepening the dialogue on regional
integration.
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2.
WORKING WITH THE EU EXTERNAL PARTNERS
FOR A SRATEGIC CONVERGENCE
2.1. An international convergence?
The Europe 2020 strategy defines a European way for
greener, smarter and inclusive. Knowledge has become the
main wealth of nations, companies and people, but can
also turn into the main factor of divide. Hence, investing
in research, innovation and education, developing a
knowledge-intensive economy society is now the keyleverage for competitiveness and prosperity.
Many other countries are making the same choice. Not
only the USA and Japan, the first to start, but also India,
China, South Korea, Brazil and many others. There is an
international movement in the same direction, as this report
intends to illustrate:
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Japan is preparing a very comprehensive
Plan for Innovation focusing on citizens needs;
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India has created a Knowledge Commission
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this is the right choice to make in order to
develop these countries;
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this is also the European interest because
Europe cannot implement this agenda isolated,
it needs other partner countries to go in the same
direction.
Nevertheless, a central question is now emerging: under
which conditions can we have a win-win game? How can
we have a race to the top and not a race to the bottom
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2.
Thirdly, a discussion on new ways of
cooperation for capacity building in order to spread
better standards;
3.
Finally, a discussion on the implications
for international relationships, mutual opening of
markets, for global standards and global governance.
This process of strategic dialogue should be developed at:
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high level, involving top representatives
of the Council and the Commission, who should
meet on a regular basis, define the agenda and
discuss selected topics;
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multi-stakeholders level, involving key
stakeholders of civil society, meeting in different
arrangements (workshops, conferences, fora).
Some key assumptions should underlie this dialogue:
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the dilemma between globalisation and
protectionism should be overcome by an effective
multilateralism combined a strategic regionalism;
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Europe as a civilian power, should use its
external policies to project its internal policies;
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in the exchange with partner countries,
access to knowledge and institutional learning
should play an increasing role;
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a typical example of win-win game can be
created by combining mutual opening of the markets
and access to knowledge on the conditions of raising
standards in the environmental, social, intellectual
property rights and political fields.
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2.3. Preparing
development
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DEVELOPMENT STRATEGY
- Do you have a political agenda defining a long term
development strategy?
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GLOBAL GOVERNANCE
What are the implications of this development strategy
for the international coordination of economic, social and
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5.
Innovation is:
not only in processes but also in products
and services
not only technological but also in
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e.
Development aid must be stepped up
to meet the target of 0.7%GDP and transnational
schemes for cooperation with developing countries
should be urgently implemented by reducing the
co-financing of recipient countries. All multilateral
development banks should be assured of more
capital resources. New international financing
instruments should be developed to pursue the
Millennium Development Goals.
f.
Credit lines to support trade must
be expanded. Protectionist reactions should be
prevented by a new momentum to conclude the
WTO Doha Round. EU efforts to conclude free trade
agreements should also be pursued.
g.
The need to push forward with
ambitious plans towards a safe and sustainable
low-carbon economy should also reinforce efforts
for a progressive climate agreement after the Kyoto
protocol.
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A regular monitoring and assessment of the
recovery plans and their international coordination is
necessary, to be followed by the UN and Bretton Woods
institutions. Recovery efforts should be based on medium
to long term adjustments towards more sustainable
consumption and production patterns, sounder financial
schemes and a more balanced structure of global demand.
More generally, what is at stake is to pave the way for a
Global New Deal, reshaping the global order, which should
combine a coordinated recovery, a regulation of financial
markets, a global agreement to fight against climate
change, a multilateral agreement to open markets, stronger
development policies and a worldwide extension of the
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the discussion of a more comprehensive
strategy for development;
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the choices for focalisation;
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the measures to enhance the knowledge
base and the technical expertise to support the
policy making process.
Moereover, regarding the implementation phase, new
governance mechanisms should also be developed in order
to:
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strengthen ownership of all the relevant
stakeholders;
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build coalitions for change.
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monitor and evaluate the impact of public
policies in economic and social change.
Further elaborations can lead to more policy
coherence by formulating more comprehensive
development strategies, beyond the traditional poverty
reduction strategies or even the more recent decent work
strategies. The following references built on the European
experience can provide some useful inputs for this process
of enriching the agenda:
a.
the employment policy is, by definition, a
central bridge between social and economic policies
because it combines the factors influencing labour
supply with those influencing labour demand, such
as trade, industrial and macroeconomic policies;
b.
the social protection policy provides also
a central bridge because it should be envisaged as a
productive factor and also because it should take its
financial sustainability into account;
c.
the implications of trade cannot be
dissociated from capacity building policies such as
infrastructures, innovation, industrial and education
and health policies. The policies concerning the
transition to a knowledge society should always play
a central role, whatever the level of development.
d.
The macroeconomic policy should aim
at combining macroeconomic stabilisation with
capacity building to increase growth potential.
These are some of the central ideas underlying the
Lisbon strategy, meaning the European agenda for growth
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a.
to define how could WTO take into
account the ILO role;
b.
to create a Committee on Trade and
Decent Work in WTO;
c.
to define the role of specific indicators to
introduce in the negotiation process;
d.
to go further by deciding that the
ratification of the ILO core labour standards should
be a pre-requisite for membership of WTO.
In conclusion, the implementation of a new
development agenda is challenging the consistency and the
coherence of the external action of the European Union.
The consistency, because if the Union is trying to
improve the consistency of its internal policies for economic,
social and environmental, the degree of consistency
between policies prompted by the EU external action in
partner countries should also be improved.
The coherence, because the action of the EU to
reform the multilateral system and to improve the basic
rules for globalisation requires a much stronger coordination
between the EU and its Member States in the multilateral
arenas.
This will be central challenges for the implementation of
the Lisbon Treaty in the years to come.
What
Will
Be
EUROPES
POSITION
IN THE
World?
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Maria Joo Rodrigues
January 2012
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THE OPPORTUNITIES
Beyond the current euro-zone crisis, and when compared
with USA and Japan, the European economy taken as a
whole keeps stronger economic fundamentals it can build
on: a balanced current account, a low inflation, sufficient
internal savings, relatively lower levels of public deficit and
debt.
Europe remains the most creative and effective
laboratory for a new growth model driven by innovation
with concern for sustainable development, in its
economic, environmental and social dimension. Despite
several important internal problems, it provides the best
combination of advanced and sustainable competitiveness,
environmental balance, social cohesion, quality of life and
well-being in general. In particular, Europe remains in the
leading position for the next industrial revolution towards
low-carbon economies.
Due to the international convergence towards a
common humanity values and the concern with
sustainable development, Europe keeps a relevant influence
at international level as a possible role model. This might
decrease the international competitive pressure based on
lowering social and environmental standards. The regulation
of the international competitive pressure can also be
enforced by a more effective EU action in the multilateral
and bilateral agreements.
This international convergence of standards can
open new market opportunities to be used by Europe
in the framework of mutual interdependence and of an
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re-organizes
the
euro-zone
governance,
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To what extent should Europe depend on its external
partners to overcome its internal euro-zone crisis?
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Editor:
Maria Joo RODRIGUES was Minister of Employment in
Portugal and has been a policy maker working with the
European Institutions since 2000. The main outcomes she has
been working for are:
The EU Strategy for growth and jobs, the Lisbon Strategy
followed by the EU2020 Strategy.
The EU agenda for globalization and the strategic
partnerships with the USA, China, Russia, India and Brazil
for a new growth model.
The development of several policy areas: employment,
education, innovation, research, regional and industrial
policies.
Special EU initiatives: the new Erasmus for mobility, New
Skills for New Jobs
The responses to the euro-zone crisis.
The final negotiation of the Lisbon Treaty.
In academic terms, she is professor of European economic
policies in the European Studies Institute - Universit Libre de
Bruxelles and in the Lisbon University Institute. She was also
the chair of the European Commission Advisory Board for
socio-economic sciences.
Maria Joo RODRIGUES was Minister of Employment in Portugal and has been a policy
maker working with the European Institutions since 2000.
She collaborates with FEPS for 5 years.
Publisher:
FEPS - Foundation for European Progressive Studies
Edited by Maria Joo RODRIGUES
Brussels, 20 October 2013
ISBN 978-2-930769-00-4
This book is edited with the financial support of the European Parliament