There is no way out of the crisis without a boost in public and private investment, says the EESC

Taking into account the disastrous social and economic impact of the COVID-19 crisis, the EESC has adopted two additional opinions on the Annual Sustainable Growth Strategy and on the euro area economic policy.

The European Economic and Social Committee (EESC) has outlined its views on the current economic crisis and on recovery perspectives in the euro area and the EU as a whole. On the one hand, the advisory body considers the Commission's proposals for a Next Generation EU plan to be both welcome and timely. Any undue delay in approving and implementing the plan risks severely undermining the EU's economic recovery. On the other hand, EESC members warn that Member States need to boost public investment and create synergies with private investment: the escape clause of the Stability and Growth Pact and maximum flexibility in State aid rules should apply at least until broad-based economic recovery has been fully established and unemployment has fallen significantly. Overall, the EU needs a shift towards prosperity-focused and solidarity-based economic governance, as a return to austerity would dwarf any benefits from Next Generation EU.

The advisory body provided its policy input to the next cycle of the European Semester in two follow-up opinions, respectively on the Annual Sustainable Growth Strategy and on the Recommendation for the economic policy of the euro area. The two documents were adopted by the plenary session in October, which inaugurated the new 2020-2025 term of the EESC and elected the members of the new presidency. They are addressed to the European Commission and the Council within the scope of the upcoming Autumn Semester Package of the European Semester process.

Prosperity: promoting public and private investment

According to the EESC's conclusions, the EU institutions and national governments should use all available means to promote public and private investments, during both the crisis and the recovery period. In this regard, the EESC supports the position of the European Fiscal Board, which stated that greater and more long-lasting fiscal support will be needed in 2021, as the easing of lockdown measures is going to be slower than initially expected and consumers are likely to build up precautionary savings. Members warn against further systemic risks accompanied by a severe economic slump, such as financial market instability or deflationary tendencies.

The EESC therefore believes that the EU must use the momentum created by the pandemic to strengthen its competitive advantages and take a leading role in vitally important areas: the digital sector, AI, technology, decarbonisation and sustainable circular growth. For the same reason, the EESC is concerned about the next Multiannual Financial Framework's cuts to investments in innovation and research, digitalisation and the Just Transition Fund: the moment to act is now and not whenever the pandemic might be over.

In a recovery scenario, the EESC believes that the Green Deal must also be an Economic and Social Deal. On the one hand, it should give businesses and consumers incentives to shift to sustainable products. On the other, it should improve the quality of life of EU citizens by preventing "harm" caused by climate change and transition.

EESC rapporteur, Philip von Brockdorff, said: The EESC sees the Annual Sustainable Growth Strategy as an opportunity for the dominant economic model to become far more resilient and sustainable, and to give equal weighting to both economic and social objectives.

Solidarity between citizens and Member States

Against the backdrop of an increase in unemployment, income and wealth inequalities, poverty and social exclusion, the EESC calls for solidarity between Member States and between citizens, taking into consideration the impact of the crisis on disadvantaged groups. To promote a sustainable and inclusive recovery, the EESC believes that:

• completing the Single Market and ensuring it is fully functional should remain one of the top priorities, which includes enforcing the 20 principles of the European Pillar of Social Rights;

• the Banking Union should be completed immediately, including the implementation of a European Deposit Insurance Scheme. The EESC also stresses the importance of an efficient financial market regulation in order to achieve financial market stability;

• governments need effective and well-resourced public health measures to prevent further contagion, to implement well-targeted policies to support social security systems, and to protect the incomes of vulnerable social groups;

• the euro area Member States need increased cooperation and specially-designed instruments to improve their resilience and their capacity to absorb symmetric and asymmetric shocks;

• it may be necessary for the European Commission to further support capacity-building and efficient fund absorption by the Member States, as well as the process of identifying projects and productive investments, to ensure proper implementation of the MFF and the Next Generation EU plan.

Judith Vorbach, co-rapporteur of the opinion on Euro area economic policy 2020, stressed: "In order to minimise and avert the severe impacts of COVID-19 and climate change, the EESC recommends prosperity-focused economic governance, stepping up investment in sustainable growth, enforcing the European Pillar of Social Rights and reforming tax policies."

Reform of tax policies

Tax evasion, base erosion, profit shifting, money laundering and the fight against corruption are still sensitive and politically difficult topics for many Member States. The EESC calls for a decisive and accelerated timeframe of reforms of tax policies that would close loopholes and combat evasion across the Union. Moreover, due to COVID-19, fair taxation has assumed greater relevance as governments face huge financial pressures to support emergency measures. A rethink of tax policy within the EU is necessary, not least to support public investment in infrastructure, education, healthcare and social protection.

Background

The EESC follow-up opinions on the Annual Sustainable Growth Strategy 2020 and on the Recommendation for the economic policy of the euro area provide the European civil society contribution to the upcoming Autumn Semester Package of the European Commission and the ensuing inter-institutional discussions. Their aim is to update and elaborate on previous EESC proposals, taking into account the latest developments, the COVID-19 impact and recovery process, as well as the various reports and recommendations published within the current European Semester.