An economy that works – A priority for the people

Editor’s Blog: Produced in collaboration with the EU Buzz team 

Well before the coronavirus pandemic, European Commission President, Ursula von der Leyen promised European citizens a fair transition for all towards a green social market economy. She committed to foster an ‘economy that works for people’, and one which enhances the principles of the social market economy called for in Article 3(3) of the Treaty of the European Union (TEU). Of all the Commission priorities, this one has been hardest hit by the pandemic and despite adaptations to the initial proposals, delivering on an economy that works for the people is, at this stage, far from being achieved.  

In January 2020 the Commission launched a process of dialogue and consultation to prepare the ground for an action plan for the implementation of the European Pillar of Social Rights. In line with the United Nations Sustainable Development Goals (SDGs), the action plan outlines three targets for the EU, to be reached by 2030, on employment, skills, and social protection. Together with the EU’s political goals for the green and digital transitions, social indicators will help to focus policy efforts on achieving results, and offer an incentive for reforms and targeted investments in the Member States. 

Surprisingly, the action plan does not include the European Unemployment Reinsurance Scheme that was originally announced. However, an instrument for temporary support to mitigate unemployment risks in an emergency (SURE) was created to tackle the negative impact of the pandemic on the labour market. March 2021 figures highlight that SURE had provided €90.6 billion to 19 Member States and supported between 25 and 30 million people in 2020.

In February 2020, the Commission presented a review of economic governance, designed to mainstream the UN SDGs into the EU framework and opened a public debate asking stakeholders to what extent the different elements of the existing framework ensured sustainable government finances and economic growth, avoided macroeconomic imbalances; enabled closer coordination of economic policies; and promoted convergence in Member States’ economic performance. The public debate was extended due to the coronavirus pandemic and remains open.

The Commission has also put forward a directive on minimum wages to ensure that workers across the EU benefit from an adequate minimum salary wherever they work, and the Council adopted a recommendation on a bridge to jobs reinforcing the existing youth guarantee. A new occupational safety and health strategy framework is now due, to be followed by a comprehensive action plan for the social economy, scheduled for the end of 2021.

Social rights and climate-neutrality must go hand in hand with a competitive industry as confirmed in the political guidelines. Investment and financing have been recognised by the EU as a precondition for European industry to drive industrial transformation. The Commission has presented an update of the new long-term strategy for Europe’s industrial future and taken action to complete and enhance the capital markets union (CMU) to improve access to finance especially for small and medium-sized enterprises (SMEs). The new CMU action plan promotes three key objectives: ensuring that the EU’s economic recovery is green, digital, inclusive and resilient; making the EU an even safer place for individuals to save and invest in the long term; and integrating national capital markets into a genuine EU-wide single market for capital. 

A legislative package on capital markets recovery has also been adopted as part of an overall strategy to tackle the economic impacts of the pandemic. The package includes targeted amendments to the Prospectus Regulation, to the Markets in Financial Instruments Directive II (MiFID II) and to securitisation rules, aimed at reducing the administrative burdens faced by experienced investors in their business-to-business relationships, and at increasing the competitiveness of the EU’s commodity derivatives markets. 

To achieve a more growth-friendly fiscal stance in the euro area, the Commission announced its intention to make full use of the flexibility allowed within the stability and growth pact (SGP), and to simplify the SGP rules. The pandemic has, however, led to the need for a more drastic approach, resulting in the decision to suspend the SGP temporarily, by activating the ‘general escape clause’.

Strengthening the Banking Union was also a key priority for the Commission as part of the anti-money-laundering (AML) action plan to bring about EU-level supervision but 

due to the pandemic and the hit to the economy, these proposals have also been postponed, whilst a legislative initiative for a banking package increasing flexibility in prudential and accounting rules was adopted instead. The Commission also tabled a new Customs Union Action Plan and the EU Single Window Environment for Customs setting out a series of measures to make EU customs smarter, more innovative and more efficient.

The crisis caused by the pandemic has posed many challenges and the European Commission, Parliament and the Council have agreed on a major recovery plan for Europe to help repair the economic and social damage caused by the pandemic, kick-start European recovery, and protect and create jobs. The plan includes a boosted EU budget for 2021-2024 through Next Generation EU (NGEU), a new temporary recovery instrument worth €750 billion, funded with new resources raised on the financial markets through bonds to be issued by the European Commission on behalf of the EU. However, before the Commission can start borrowing, all Member States must ratify the new Own Resources Decision in line with their constitutional requirements. The ratification procedure is still ongoing in Austria, Hungary, the Netherlands, Poland and Romania, and until then the additional €540 billion economic package, agreed by European leaders at their 23 April 2020 meeting, remains on hold.

As most of the member states of the EU now begins to open their economies, citizens of the Union are not looking for communications, public debates nor good intentions they are looking for a productive and stable economy which works for them now. 

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