In two newly adopted opinions, the European Economic and Social Committee (EESC) gives updated views on the Commission's Annual Sustainable Growth Survey 2022, which outlines the upcoming economic and employment policy priorities for the EU, as well as on the Recommendations on euro area economic policy for 2022. The EESC calls for a balanced approach that does not jeopardise the EU's social and environmental goals. With energy and food prices rising, a social safety net for the most vulnerable should be established. In addition, with inflation at an all-time high, the European Central Bank (ECB) should analyse the side-effects of its monetary policy, for example on growth and employment. Regarding the increase in public debt, progress is needed on the reform of the Stability and Growth Pact.
The situation has changed dramatically since the EESC adopted its first opinions on the Annual Sustainable Growth Survey 2022 and on the Recommendations on euro area economic policy for 2022. With war raging in Ukraine, the continued prevalence of COVID-19, and increased geo-economic fragmentation, all key objectives of a prosperity-oriented European economic policy are under pressure.
We call for a balanced policy approach, which must protect fairness and environmental objectives, particularly in times of crisis, comments rapporteur Judith Vorbach.
This approach is the basis for the EU's past, present and future prosperity and competitiveness, and for greater convergence and resilience.
Rapporteur Juraj Sipko adds:
All countries and competent international institutions must work together to address the unprecedented systemic shocks, risks and threats that the world is currently facing. Delaying the adoption and implementation of measures may have far-reaching consequences, not only in terms of material loss, but also in terms of human life.
The EESC calls for systemic measures to tackle the ongoing pandemic and expresses its support for ending the war in Ukraine. This could create the conditions for resilient, inclusive and sustainable economic growth in the euro area countries and across the EU Member States more generally.
Protecting the most vulnerable and fighting inflation
On the one hand, with regard to rising prices, there is an urgent need to protect the most vulnerable citizens and the most exposed companies, particularly SMEs. In addition, the EESC stresses that it is vital to safeguard the purchasing power of low and medium-income households, who account for a major share of economic demand. We therefore recommend that national economic policy-makers set up a functioning, effective and fair social safety net.
On the other hand, inflationary trends in the EU are fuelled by rising commodity, food and energy prices, and by supply chain disruptions. The EESC believes that a monetary policy that is too tight may increase the recessionary risks and delay urgently needed private investments in the energy transition. The EESC therefore recommends that the ECB conduct an adequate proportionality assessment, carefully analysing the side-effects of its monetary policy and the impact on long-term price stability targets.
Growing public debt
The fiscal response by the Member States to the current systemic risks and the contraction in output have led to a significant increase in government debt ratios. The EESC is concerned about the situation and calls for efforts to ensure public debt sustainability through a gradual reduction of public debt.
The Committee points out that activating the general escape clause of the Stability and Growth Pact as a response to the COVID-19 pandemic, thereby allowing the Member States temporary exemptions from the budgetary constraints that normally apply under the EU fiscal framework, in exceptional circumstances, was the right decision. Moreover, the EESC welcomes the decision to keep the escape clause activated throughout 2023. The EESC also has reservations concerning the limitation of the growth of nationally financed current expenditure below medium-term potential output as well as the intention to assess the pertinence of initiating excessive deficit procedures in spring 2023.
The EESC therefore expects the European Commission to prepare, without delay, specific steps to reform the Stability and Growth Pact, and points to its respective opinions.