Employment Policy and the European Union: Status

Quaestionis

Dear Minister of State, dear Vice-President of the EIB, dear fellow-

MEPS, dear representative of Mister Barnier, dear ladies and gentlemen,

SLIDE I

I would like to welcome you all to this conference and start my speech

with an interesting quote of mister Strauss-Kahn, president of the IMF of

mid-september:

“The rules of the game have changed,” “The global economy after the

crisis is not the same as before the crisis. So, in a nutshell, we need to

think differently. Why? Because the future of millions of people is at

stake. Because the future of our world—prosperity and peace—is at

stake.”

I fully agree with this quote. The economic crisis and its effects on the

labour market we are confronted with over the last 2 years, are rather

exceptional with high public deficits, growing debts and rising

unemployment figures. Citizens expect answers, clear answers of

politicians. This has been shown obviously during last week's massive

demonstrations of the trade unions. Job growth and social protection are

the main concerns of the European citizens today.

Slide: 2 unemployment rate in the Eu:

First of all, I would briefly like to point at the current economic facts. I

will not go too much into economic details as I am convinced Prof De

Grauwe will do that in an excellent way, but to start, just some general

figures and graph to make the situation clear:

unemployment figures in the EU: Eurostat 1 October 2010

Uitleg: quite obvious

Eurostat estimates that more than 23. million men and women in the

EU27 (or 9,6%), of whom almost 16 million were in the euro area

(10,1%), were unemployed in August 2010. Compared with August

2009, unemployment rose by 0.894 million in the EU27 and by 0.6

million in the euro area. Together with the rising unemployment figures,

we observe a huge rise in public deficits and of social expenditures.

Slide III

The following slide puts clearly all the elements together:

- impact of the crisis on the growth of GDP;

- rising unemployment rate;

- budget unbalance; and,

- as a consequence rising expenditure on social protection.

However, there is a huge difference between all the member States.

SLIDE IV: .How did we tackle the crisis till now?

A lot of national and European answers have been given.

On European level, the European Commission launched it's European

Economic Recovery Plan that sets out the framework for a proposed

injection of demand into the European economy. The total package was

said to amount to around € 200 bnp, which represents 1.5 % of the EU's

GDP, which is however quite modest, compared to 5% in China and

6.55% in the USA. Although this fiscal stimulus has been almost

universally welcomed, the target of 1.5% was only met by a few countries

and the amount of money is too low to finance both automatic stabilisers

and new discretionary investment measures. A real European recovery

plan should go further than only guaranteeing a ‘social cushion’ by

increasing the social allowances for persons directly affected by the

crisis. Therefore a more ambitious plas is needed to safeguard

employment and promote real smart green growth.

Since the start of the crisis, also the European Parliament (EP) played a

strong role in a more European answer to the crisis: thanks to the EP, a

strong financial supervision architecture was established and stricter

capital requirements were imposed to financial institutions. Further, the

EP adopted recently a strong report on the economic crisis and made

some clear recommendations. Moreover, on employment field, different

resolutions and recommendations have been adopted the last 2 years, like

on the Globalisation adjustment fund. This instrument was created to

provide one-off, time-limited individual support geared to helping

workers who have become redundant as a result of globalisation. It can

help the redundant workers to find new jobs as quickly as possible.

However, this instrument has not yet reached its full capacity. Untill now,

only €140m of the nearly €2bn that could have been spent by the

European Globalisation Adjustment Fund (EGF) since its inception in

2007 has been disbursed. Of the €140m, €26m has been returned to

Brussels because projects were poorly designed or delays in payment

meant intended recipients no longer qualified for the money.

SLIDE V: reactions on national level:

Besides the measures taken on European level, member states have also

reacted individually. Most Member States answered with a three-part

policy response focusing on:

(1) supporting aggregate demand through monetary and fiscal policy

actions, e.g. through financial support for financial sectors

(2) easing the pain in labour markets through short-term work

programmes that spread the burden of downturn more evenly across

workers and employers: a lot of companies consider the crisis as an

opportunity to deliver extra training to their employees. In this way, they

will be better prepared for the future.

(3) provision of unemployment insurance benefits and accelerate jobs

recovery through the provision of various types of subsidies such as

reduction of payroll taxes or targeted subsidies for vulneralbe groups on

the labour market (e.g. long-term unemployed or youth).1

1

As indicated before, all kind of measures, on the national and European

level has been adopted were necessary and helpful. However in the long

run, more structural reforms are needed to prevent such a crisis, and to

realize the objectives of the EU2020 strategy.

Slide VI: the way forward: structural reforms on 3 levels:

In order to this achieve the EU2020 objectives and to evolve towards a

more sustainable economic framework, structural reforms on 3 levels

are necessary:

- on economic governance level:

- EC reforms of 29 September 2010:

-core: Focus on GSP and restore balances: fiscal

consolidation, European semester

- Focus on competitiveness unbalances

- discussions of the Van Rompay High level Wg

- our critics: balance needed between fiscal consolidation and

growth and employment: too much focus on cutting deficits and

debts, no focus on growth: deficit: 3% is important, but what's

behind the 3%??? same with 60% public debt: what's behind?.

- on financial regulation level

The last weeks/months, mainly thanks to the EP, big steps have already

been taken to improve the financial regulation framework. A financial

supervision package has been adopted as well as a changed capital

requirements directive. Other important financial files are still under

discussion, like the regulation on hedge funds and derivatives. From an

institutional point of view, the EP lead the discussion towards stronger

regulation, quite often against the will of the capitals.

- on corporate level.:

- debate started on remunerations in the financial sector and listed

companies: mentality change urgently needed: remunerations should be

more based on enforcable principles: supervision, better risk assessment,

independence of auditors, better relation between fix and variable part of

the remuneration; strong remuneration committee: capital requirements

directive took these on board. Strong step

-the corporate governance debate with the green paper of the European

Commission: companies have to be managed better: stricter rules applied

to composition of boards, number of mandates in a board etc

-

SLIDE VII: EUROPEAN GROWTH AND EMPLOYMENT PACT:

As indicated, the coming weeks, major political decisions have to be

taken on the reform of the macro-economic construction of the EU. This

package should mainly focus on growth and employment policy. Indeed,

to soften the impact of the crisis on the employment market, a European

growth and employment pact is needed, addressing 4 major economic

issues:

- first, the need for structural reform of the GSP by adding explicitly

social indicators,

- second the stimulation of job creation by supporting big European

public investments

- third, a more pro-active role of the European Commission in cross-

border restructurings,

- and finally, more European attention should be paid on quality of work,

investment in innovation and fighting youth unemployment.

Tackling the jobs' crisis is essential for a meaningful global economic

recovery. If we want to achieve the EU2020 objectives, we cannot afford

a new failure. We cannot afford to spill talents any longer.

First of all, the EC proposals on economic governance of last week and

the discussions in the high level group around President Van Rompuy

expedied the discussion around the reform of the GSP. However many

questions remain open. Indeed, too much unilateraly focussing on

sanctioning ....without eg monitoring closely the private debt; does not

seem to be a sustainable solution to the crisis we experienced. Further, the

package seem to continue to focus on deficit and debt as decisive criteria

to judge the sustainability of economic policy. Why not focussing

explicitely on the criteria of job creation.; reduction of youth or elderly

unemployment; reduction of poverty? If we take the objectives of

EU2020 seriously, we should take these criteria serious as well. And

despite of its theoretical merits, the open method of coordination proved

not to be the most effective instrument to achieve progress in these fields.

Therefore, we should plead to set up some enforceable objectives. Why

3% public deficit and not, let's say, maximum of X% youth

unemployment and y% 55+ working? The EU should take care that the

Member States translate this seriously into their national employment

policies. The political momentum is there, with the EC proposals towards

more economic governance now on the table. Of course, Europe can’t

afford to pay only attention to the quantity of new jobs, but has also to

focus on quality of jobs which are created. This should be monitored

closely. Only by creating really sustainable added value jobs for young

and elderly people, Europe can remain/or become again competitive with

the rest of the world.

Secondly, we need massive (public) investments. The European recovery

plan was a first step. But we should go further on a structural base. Public

investment should lead to a win/win situation: creating jobs and creating

growth. The potential for new job creation is enormous: developping and

installing renewable energy production units, spreading low carbon

technologies, efficiënt and electric cars, strengthening public transport,

smart urban planning, health and care services aso. In all these fields, a

massive number of jobs could be created. To create growth, high priority

should further be given to investment in the European industry. Indeed,

European industry needs high quality infrastructure, including stronger

trans-European energy and transport networks.

Despite of this huge European investment challenges, the recent difficult

discussions on the European budget show MS willing to cut rather into

the contributions to the European budget instead of massively investing

into big European infrastructures with added value.

And of course, to create jobs and growth costs money, a lot of money.

Therefore, different measures should be taken:

As indicated before, the GSP should be reformed, but not as fast as

foreseen by the EC and not as fast for every MS. Further, instead of

saving all the money, public investments and high sustainable

consumptions should be encouraged. The EU should also fully invest in

setting up a mechanism of Eurobonds, as announced by Barosso in

September. We should also set up a system of FTT. Indeed, a small tax

of 0,05 % on all financial transactions should be introduced in all EU

Member States. Further, the idea of a European carbon tax should be

developed. The capital base of the EIB should be increased to go further

in its support for investments in infrastructure, green technologies,

innovation and SME’s. Finally, a European strategy for good banking

needs to be launched as matching the financing need of the economy and

serving the well being of society is the ultimate role of a good banking

system. These additional financial ressources should allow to finance

huge European sustainable infrastructure works.

Investment of European- as all public money- should be realised in a

rational and sustainable way. Therefore, there is may be some room for

improvement in the investment of European funds as done today. We

mentioned already the EGF. Further also the European structural funds

must be better prioritised and made more effective. Reprogramming of

these funds must allow investment to counter the crisis, such as

immediate job creation and frontloading the funds and their

implementation must be streamlined to increase impact. In achieving

higher investment, not only the public authorities, but also huge pension

funds have a big responsability.

Thirdly the EU; and in particular the EC, could and should do much

more on labour market policy. Between 1 April 2010 and 30 June 2010

the ERM recorded a total of 214 restructuring cases, of which 141 were

cases of restructuring involving job loss. Total announced job losses

totalled approximately 50,000.... Too often the EC remain silent and

passive. The Opel case was a good example. While the EC shows, based

on its competition law powers real 'tanden' in mergers and acquisition, it

remains very silent in cases of cross border restructurings. No merger was

safe. And we welcome this active approach of the EC. But this active

approach is so unbalanced. Why can’t we observe such an active attitude

from the EC in huge restructuration files? Why does the EC hide herself

in such files behind ‘the company plan’? Why doesn’t it dare to

intervene here in such cases where thousands of employees are fired?

Why as underlined in the Berez crisis report of the EP, not an - ex-ante

assessment by the commission of transnational restructuring operation to

address the question of their impact employment, with clear rules and

monitoring mechanisms similar to those that exist in respect of mergers

and acquisitions with regard to price competition

Of course, thanks to the EU, certainly after the Renault crisis, trade

unions have a stronger voice in restructuring of companies, but in the end,

too often, companies can restructurate without taking too much care of

the social cost. Wouldn’t it be better if the EC plays a more pro-active

role? If it could interfere faster in such processes, let’s say from a certain

number of jobs involved, the EC should have the right to investigate on

which criteria restructuring decisions are taken and, if necessary to block

this operation?. In line with the competences of the EC in merger cases, it

should have the same power in European cross border restructurings.

Finally, according to the latest figures, the financial crisis hits the youth

very strong. (numbers of youth unemployment: today at almost 21%

according to Eurostat). This is unacceptable. Figures show us clearly that

in the EU by 2020, 35% of all jobs will be high qualified jobs, compared

to 29% today. This means that in 10 years, 15 million more jobs needs

high qualification. Compared to our main competitors, the USA

(40%) and Japan (50%), in the EU only 31% has a higher degree.

Therefore, youth unemployment should be high on the EU policy agenda.

The EC initiative, ‘youth on the move’ is a first important step. However,

we should go further. Why not go further an making of reducing youth

unemployment a high political priority by imposing MS yearly binding

targets? Why not setting up a youth guarantee offering young people a

job, training or further education within four moths of leaving schools?

Why not strengthening the labour market for young people by creating

more jobs, including tailor-made jobs for young people and creating

incentives to hire young people.

To conclude

With more than 23 millions of Europeans currently unemployed, we need

radical reforms on 3 levels: on macro economic level, on financial

regulation level and on on corporate level. Instead of unilateraly

focussing on austerity of public budgets, a more balanced approach with

the main focus on growth and jobs is urgently needed.

Despite of some important steps taken during last months, some major

measures should be adopted to counter the huge impact of the crisis on

the labour market. Therefore, we need a European growth and

employment pact, consisting of 4 pilars. Only by imposing enforcable

social indicators to Member States, by promoting huge public

investments, by increasing the role of the EC in cross border restructuring

and by tackling the challenge of youth unemployment; the EU can

overcome this social crisis.