For a European Semester that addresses inequalities

Against the backdrop of the major EU recovery plan that was decided in July, the […]

FEPS President

Against the backdrop of the major EU recovery plan that was decided in July, the European Semester will play a key role in the implementation of the national recovery plans, that are to be submitted by mid-October. The reform of the Semester process was already in the pipeline, but it now becomes essential to raise up expectations and transform this fundamental coordination tool into a useful instrument able to grasp those changes affecting vital aspects of our daily life: health, education and work.

The key recommendation we give is to start monitoring inequalities in the framework of the European Semester. At present, the statistics solely focus on absolute poverty and that does not offer information about the trends affecting the European middle class. Formulating country-specific recommendations to improve the life of the “squeezed middle class” can only be done if the indicators of the Semester are upgraded.

Monitoring work precariousness, households’ financial insecurities and access to key services like child and elderly care has to be part of the European toolkit for the coordination of the recovery.

Introduced exactly a decade ago, the European Semester process soon became the pivotal tool for economic coordination in Europe and in essence it epitomises the way to steer an economic doctrine across the EU.

Initially anchored in the jointly agreed targets of the Europe 2020 Strategy, it soon abandoned those shared goals to focus on the priorities of the Barroso Commission. It has been used, at least for the first few years, almost uniquely to serve the objective of fiscal consolidation. There is no need here to stress how much that has compromised the ability of the European public sector to counteract the different socio-economic emergencies and how much it has fuelled disaffection with the European project in particular and politics in general.

Indeed, the Semester has evolved and thanks to the political agenda and the Social Scoreboard enshrined in the European Pillar of Social Rights, we have started to see country-specific recommendations promoting social investment and social dialogue. Finally, green and climate concerns have become more central for an annual growth survey that now addresses sustainability as the backbone of a growth strategy.

That is however not enough, particularly in view of the dire consequences of the pandemic. With 6 million new unemployed and 20% of youth out of work due to Covid-19, European Institutions need to go beyond the provision of funds. The Next Generation EU and SURE are good news but we must dare to change the economic paradigm once for all. So that forward-looking investment, protection of incomes and quality of public services, such as health, are not only the response to a crisis but become the norm: the goal of the European public sector.

The EU can be a beacon of wellbeing and prosperity for this continent and the European Semester is the focal policy through which such a new course shall be established.

In line with the European Parliament report on ‘combating inequalities as a lever to boost job creation and growth’ we also believe that “inequalities threaten the future of the European project, erode its legitimacy and can damage trust in the EU as an engine of social progress”.

All too often, Europe has prioritised macroeconomic stability and failed to understand that social stability and cohesion are essential for economic and political stability. It is no longer possible to ignore the distributional effects of macroeconomic policy and EU recommendations.

There is overwhelming evidence that socio-economic well-being is a prerequisite for sustainable and inclusive growth as well as for political stability. We have learned to admit that too much inequality is bad for growth. It is now time to go one step further and recognise that equality is the foundation of the type of growthwe want for Europe and for Europeans.

It is no surprise that the Covid-19 outbreak has not affected countries and communities evenly. The pandemic, as well as its economic consequences, threaten vulnerable groups and people experiencing poverty and social exclusion particularly. A special effort is necessary if we do not want to see Europe emerging from this crisis more unequal than it was before.

Therefore, we recommend refocussing the European Semester strongly toward the fight against inequality – for a healthier society that delivers healthier economic outcomes.

The Policy Study on Inequalities and the European Semester offers an operational definition of inequality that could and should serve as a prism to rethink the European Semester.

The first consequence of this new approach would be to revise the indicators of the Semester to correctly monitor inequality. This would imply applying indicators of precarity, job and financial insecurity, and access to opportunities – such as childcare and social or health services.

A second consequence would be to start using the European Semester framework to steer the other side of national public finances: not the expenditure, but the revenue side. Personal income taxation, corporate taxation, wealth and inheritance taxes and environmental taxes are instead central mechanisms to address inequality and secure opportunities for all.

As the authors explain, by expanding the focus from poverty to inequality, from the bottom of the income distribution to the whole distribution of incomes and opportunities, our Union would be better equipped to address the sharp decline in socio-economic conditions that the European middle class is facing.

The economic governance of the European Union has changed fast to adapt to the unexpected pandemic and its effects. Now, a serious reflection has to be done to re-define the goals of the interventionism and coordination carried out by the EU via the European Semester. If we are serious about leaving to the next European generation a more sustainable, socially equitable and economically stronger Union, a full-fledged strategy to fight inequalities is the way to go.

*This text was originally published on Euractiv.

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