How to improve preparedness for future cost of living crises

Democratic politicians in the US recently asked voters to rank their priorities by making a choice between two proposals. Each time, they had to choose between ‘making ends meet at the end of the month’ and a number of other concerns: cost of living came ahead of all other concerns, even abortion or the defence of democratic institutions. Only health was rated higher. This should not come as a surprise to observers of the political scene on both sides of the Atlantic, as time and again candidates who took up the role of champions of household budgets have beat incumbents who had the ill fortune to be in power in times of inflation. The political relevance of the issue is self-evident.

Recent developments suggest that the inflation spike is a thing of the past and no longer an urgent matter as wages are catching up. However, the work undertaken by the ECO section with Elena Calistru (Group III) as rapporteur makes sense: the ambition is to be better prepared for the next crises, taking into account the aspects that are dealt with in other EESC sections, including the costs of housing and energy. All this fits into the Committee’s overarching project of expressing coherent views on this range of concerns through opinions drawn up by the sections and an umbrella opinion that will provide added value to them. The ECO section organised a hearing of institutions and civil society organisations, which left its mark on the outcome of the study group's work. Participants in the hearing expressed confidence in the underlying strengths of Europe as a strong foundation for improving preparedness.

The ECO study group focused on measures ensuring a resilient, cohesive and inclusive economy. When talking about “measures”, one may expect or fear interference with the normal functioning of markets. That functioning is obviously sensitive, and panic or price controls could disrupt a healthy, longer-term balance between supply and demand.

The opinion follows a logical pathway. It starts with the need to collect data about supply chains and prices and the most vulnerable categories of households or regions. The data should be collected as far upstream as possible, with a focus on twenty key indicators, if only to give visibility to this tracking exercise. This information is key for an early response to stress situations, respecting the following principles:

• a market economy is the primary mechanism for setting prices,
• enforcement of competition law should prevent abuse of economic power, and
• growth should not be jeopardised.

Therefore, and taking into account lessons learned from past crisis situations, any measures should be strictly temporary and targeted and acknowledge that Member States have competence for social policy. At the same time, the measures considered should help stabilise the economy, tap available funds and investments and not lose sight of the need to keep debt at a sustainable level and reduce red tape, particularly when swift action is required.

Wauthier Robyns, EESC Employers' Group Member and Member of the Study Group of Opinion ECO/661 Leaving the crises behind – Measures for a resilient, cohesive and inclusive European economy.