Building up a more sustainable and resilient European economy and completing Economic and Monetary Union (EMU) should be priorities for the next European Commission and European Parliament: these points emerged from a public hearing held by the European Economic and Social Committee (EESC) on 12 April 2019.
The findings of the hearing will feed into two EESC own-initiative opinions on the way ahead for the European economy, which are currently in the pipeline and are aimed at constructively influencing Europe's future decision-makers.
At the opening, Stefano Palmieri, EESC ECO section president, urged that future policies contribute to an economy ready to
face shocks and persistent structural changes without losing the ability to deliver societal well-being for current and future generations.
Policy-makers, academics, researchers and representatives from civil society organisations then discussed political initiatives that could lead to a more resilient and sustainable EU economy and work towards completing EMU during the next legislative period and beyond. They came up with a wide range of policy proposals.
Speakers considered it fundamental to align all EU policies with Agenda 2030 on sustainable development in order to move towards a more resilient and sustainable European economy. A mind shift in policies, including a revision of the current model of economic development, as well as political coherence, would be imperative.
We need to change the way we measure prosperity and use other indicators to measure well-being, going beyond GDP, said Maria João Rodrigues, MEP.
Another priority for the next legislative period should be to address the challenges of the changing international backdrop to economic relations and power, climate change and the fourth industrial revolution and seize related opportunities. In this regard, policy-makers should step up their ambitions and ensure that the necessary transitions go hand in hand with appropriate governance, financing and social fairness.
According to Enrico Giovannini, Professor at the University of Rome Tor Vergata, additional investment, especially in education and training, is needed to prepare for the energy and digital transition. Closing the current investment gap was crucial, also to avoid shocks caused by these transitions.
Macroeconomic policies would play an important role in freeing up new resources and enhancing investment and productivity as well as economic and social convergence. Further tax harmonisation and the creation of new own resources for the EU budget, including a digital tax, were proposed.
Policy measures should target political stability and a good business environment, as well as a strong social dimension and the resilience of individuals, believed Francesca Campolongo from the European Commission´s Joint Research Centre (JRC), based on recent JRC studies on resilience. Societies with fair gender treatment and high social protection would be more resilient.
Participants also called for further structural reforms in the education and training system, the social security system, the tax system and urban management. Creating a fair taxation system was considered important.
Completing the missing building blocks of EMU could also help strengthen the resilience of the EU economy. Participants took stock of EMU and discussed steps needed to move towards its completion.
They believed that completing the Banking Union and the Capital Markets Union (CMU) was of the utmost importance. In this context, reaching agreements on further risk reduction and risk sharing was considered essential for contributing to economic resilience.
We learned from the crisis that we have to diversify sources of funding, said Kai Wynands, Head of Commissioner Valdis Dombrovskis's private office, with regard to completing the CMU.
With regard to the Banking Union, it was mentioned that updated legislative proposals for the European Deposit Insurance Scheme could foster its implementation. Non-Performing Loans (NPLs) would remain an issue. Building a secondary market for them would be necessary, as would transparency and steps to prevent a build-up of new NPLs.
In the view of Mathias Dolls from the ifo Center for Macroeconomics and Surveys, risk sharing was the most important issue in the euro area. Banks would still hold too much sovereign debt and the no bail-out clause would not be credible.
Agnès Bénassy-Quéré, Professor at the Paris School of Economics, proposed that the stability and growth pact be redesigned. An expenditure rule could replace the deficit rule. At the same time, she questioned the European Semester for economic policy coordination at EU level and proposed using a rule of thumb on wage and credit growth instead.
With regard to the European Semester, others emphasised that delivery on country specific recommendations should be addressed. National ownership would be key, which could be fostered through incentives.
Mathias Dolls proposed an unemployment re-insurance scheme for the euro area. According to his simulations, this would have stabilising and redistributive effects. It should not, however, be seen as an isolated policy recommendation, but as a part of a broader reform package which combined elements to strengthen market discipline and risk sharing.
The Committee´s own-initiative opinions entitled Towards a more resilient and sustainable European economy and A new vision for completing the Economic and Monetary Union will be put to the vote at the EESC plenary in July 2019. After adoption, they will be forwarded to the newly elected European Parliament and European Commission and used to influence policy-making in the next legislature with the input of organised civil society.