EESC suggests key additions to the EC's recommendations on the economic policy of the euro area for 2022

The current socio-economic situation in euro area countries is characterised by a high level of uncertainty, an unprecedented accumulation of public debt and the rise of inflation. Despite initial encouraging expectations for a recovery in the real economy, it seems that the process is more complicated due to the rapid spread of the COVID-19 pandemic and the appearance of new variants. During its plenary on 19 January 2022, the European Economic and Social Committee (EESC) adopted an opinion on the European Commission's (EC) recommendations on the economic policy of the euro area for 2022, according to present-day reality.

The EESC welcomes the most recent recommendations on the euro area economic policy, however, it underlines that the Stability and Growth Pact is no longer appropriate to the current conditions in the euro area. Progress in the completion of the Capital Markets Union is required, and there is an urgent need to develop appropriate indicators of inequality and poverty. Vital measures should be taken to fight climate change, safeguard the stability of the financial system and avoid potential other viral crises.

In a broader context, the Committee supports the need to increase both public and private investments, and underlines that the resources of the NextGenerationEU framework have to be used effectively. The EESC also finds that the current process of introducing restrictive measures as a result of the pandemic could have further negative impacts on real economic growth and the already unsustainable level of public debt in some Member States.

Rapporteur Juraj Sipko comments: Further to the ever evolving COVID-19 pandemic and the new variants, the main challenges for the euro zone economy are how to deal with the accumulation of high public debt, the high level of inflation and how to continue the transformation process towards a green and digital economy, while also focusing on social stability.

Debt and public finances

COVID-19 has taken a heavy toll on public finances, interrupting a process of correction of macroeconomic imbalances by most countries in the euro area. The efforts to reduce debt-to-GDP ratios are jeopardised, while housing prices accelerate, suggesting an overall aggravation of macroeconomic conditions. The EESC is of the opinion that the Stability and Growth Pact is no longer appropriate to this situation. Fiscal rules of the legislative framework should be revised to ensure correction of macroeconomic imbalances and a gradual consolidation of public finances. Simplification of the rules and better monitoring will be key.

A real financial union

The completion of a financial union is a prerequisite for a well-functioning European Monetary Union. Despite the progress made in building the banking union, the EESC emphasises that the adoption and prompt approval of further action is needed. The fragmentation of capital markets in the Member States does not create sufficient scope for easier access for businesses to financial resources in the single capital market within the framework of the Capital Markets Union. Therefore, further progress in its completion is needed.

The Committee also points out potential insolvency problems in the euro area, especially for small and medium-sized enterprises. This could be disruptive to stability in the financial sector, mainly the banking industry. The EESC calls for more consideration to be given to introducing the necessary measures to safeguard the stability of the financial system.

In addition, the Committee welcomes the European Central Bank (ECB) and Commission's decision to open discussions on the introduction of the digital euro. A digital euro can bring such benefits to euro area citizens and businesses as faster, more effective, lower-cost payment and clearance operations.

Rising divergence among Member States

This phenomenon is deepening and worrisome. Economic policies that make effective use of available domestic resources (both public and private, including the financial resources created within the framework of the NextGenerationEU and its centrepiece, the Recovery and Resilience Facility) should be adopted. Their implementation could lead to the suspension of these divergences between euro area countries and support the restart of a convergence process.

Social instability, climate change and health

COVID-19 only further exacerbated existing inequalities and the growth of poverty. Sufficient measures to fight these were never adopted and implemented following the global financial crisis. There is an urgent need today to develop appropriate indicators so that inequality and poverty can be adequately monitored.

Climate change also has a big impact on macroeconomic, financial and social stability. The EESC calls for urgent measures to be taken and implemented to fight climate change, including the development of basic indicators to measure its socio-economic consequences.

Finally, the Committee stresses the need to prepare for other potential viral crises. Policies aimed at building a strong immune system among the population can create conditions for reducing healthcare expenditure caused by the spread of disease and, simultaneously, create better health conditions for all workers involved in creating value in society.