MEPs told challenges remain for economic turnaround

Parliament's employment and social affairs (EMPL) and economic and monetary affairs (ECON) committees have held a joint economic dialogue and exchange of views on the 2015 annual growth survey.

By James O'Brien

03 Dec 2014

The growth survey, which was discussed with three commissioners, outlines the ambitions of the new commission with regard to the EU's economic priorities for the year to come and is a component of the investment plan outlined by commission president Jean-Claude Juncker.

Vice-president of the commission with responsibility for the euro and social dialogue Valdis Dombrovskis, commissioner for employment, social affairs, skills and labour mobility Marianne Thyssen, and commissioner for economic and financial affairs, taxation and customs Pierre Moscovici, were keen to emphasise that while some progress has been made, there was no room for complacency.

"[The commission's] economic and social ambitions depend on a balance between budgetary credibility, ambitious investment policy and courageous structural reforms" - Marianne Thyssen

Dombrovskis told MEPs that the recovery was "still fragile" and noted the economic recovery in Europe had been slower than other major economies, "reflecting structural weaknesses of our economies".

He said that large macroeconomic imbalances and divergences between member states were "a reason to be cautious" but was keen to highlight that there were also positive developments. Next year's forecasts show that for the first time since the onset of the crisis, there will be economic growth in all EU member states.

Dombrovskis added that the current levels of low growth, low inflation and high unemployment were the commission's "primary concern" and that the 'Juncker investment plan' was just one component in addressing this, in addition to "structural reforms and fiscal responsibility".

Thyssen outlined that the commission's "economic and social ambitions depend on a balance between budgetary credibility, ambitious investment policy and courageous structural reforms".

She told MEPs that based on the September figures, unemployment had fallen from 10.8 to 10.1 per cent, but this still meant 24 million people remained out of work. Half of all those unemployed are now long-term unemployed.

While there has been a 1.9 per cent improvement in the rate of youth unemployment, it remains "incredibly high", at 21.6 per cent, and "we cannot accept that".

Thysson also spoke of the increase in the poverty income gap as a result of the economic crisis. She told MEPs, there are 20 million poor people in Europe so we "cannot stand still, pat ourselves on the back and say we are doing ok". She said this was "a real challenge" for the EU's "welfare mechanisms".

Moscovici informed MEPs that the survey identified imbalances in the budgets of France, Spain, Hungary and Ireland. The survey said these countries "imbalances [are] in need of decisive policy action".

He added that Belgium, Germany, the Netherlands, Finland and United Kingdom would continue to be monitored due to previously identified imbalances and in-depth reviews for Portugal and Romania will take place for the first time in 2015.

France, Italy and Belgium have been granted more time to comply and must follow through on their commitments, which will be revaluated by the commission in the spring.

Dariusz Rosati, a member of parliament's ECON committee, asked what the balance between each of the three pillars in the growth strategy would be. The three pillars of the plan are investment, fiscal responsibility and structural reform.

He queried if there was any relationship between the slow progress of structural reform in countries at risk of a budget imbalance and fiscal responsibility.

Sergio Gutiérrez Prieto, substitute member of the EMPL committee, said, the new economic semester "sounds pretty good" but queried whether plans were ambitious enough.

The S&D MEP added that the annual growth survey does not mention divergence between member states and levels of inequality between citizens.

He said that a "major mistake" in the past was that there was no correlation between the deficit reduction calendar set by the commission and the efforts undertaken by member states.

Gutiérrez Prieto said there was much to be done to improve competitiveness but queried what he views as an "obsession with labour market reform". He highlighted that there has been a wage devaluation of up to 15 per cent in some member states.

"70 per cent of European SMEs only do business in national markets [and] EU level investment programmes do not affect their operating environment in the short to medium term" - Alfred Sant

Alfred Sant, a member of the ECON committee, said, "70 per cent of European SMEs only do business in national markets [and] EU level investment programmes do not affect their operating environment in the short to medium term".

He added, "what they need is a stimulus and expansion of the national market in the short term, yet fiscal consolidation has drastically limited the room for national governments to push for economic expansion".

Sant asked if "what is being proclaimed at European level is being contradicted by the consequences of these proclamations at national level".

In response to MEPs, Dombrovski stressed that all three pillars were important and the commission "would not attach a proportion to each pillar".

He said the commission does not have the competency to introduce an EU minimum wage to address inequality but it was "encouraging" member states to set a minimum wage "in line with productivity".

Thyssen told MEPs that for growth to occur there is a need for investment and highlighted that SMEs have been "the engine of growth in recent years" creating 85 per cent of new jobs. However, she added that this is declining, which is a cause for concern.

Moscovici also identified investment as being key to any successful strategy. He said "the reason for this is the challenges the commission is trying to tackle […]. We have low growth, low investment and high unemployment and politically, economically and socially this is unacceptable".

He concluded that investment "is the key to the growth deficit" but added that 20 per cent less is now being spent on an annual basis than in 2008.

 

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