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Opinion of the European Economic and Social Committee – Recommendation for a Council recommendation on the economic policy of the euro area (COM(2024) 704 final)

EESC 2024/03910

OJ C, C/2025/1190, 21.3.2025, ELI: http://data.europa.eu/eli/C/2025/1190/oj (BG, ES, CS, DA, DE, ET, EL, EN, FR, GA, HR, IT, LV, LT, HU, MT, NL, PL, PT, RO, SK, SL, FI, SV)

ELI: http://data.europa.eu/eli/C/2025/1190/oj

Date of document:: 22/01/2025; Date of vote
Date of vote:: 22/01/2025
Date lodged:: 20/01/2025

Author:: European Economic and Social Committee
Responsible body:: Section for Economic and Monetary Union and Economic and Social Cohesion, EESC_ECO
Rapporteur:: Juraj SIPKO
Form:: Opinion
Term of office:: 2015-2020
Internal reference:: AVIS-SECTION 2024/3910 FIN, ECO/656
Session:: 593

Treaty:

Treaty on the Functioning of the European Union

Legal basis:

12016E304

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52024DC0704 ESC Opinion

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Subject matter:

Directory code:

10.30.30.00 Economic and monetary policy and free movement of capital / Economic policy / Economic and monetary union

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Official Journal
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C/2025/1190

21.3.2025

Opinion of the European Economic and Social Committee

Recommendation for a Council recommendation on the economic policy of the euro area

(COM(2024) 704 final)

(C/2025/1190)

Rapporteur-general:

Juraj SIPKO

Advisor	Petr ZAHRADNÍK (to the rapporteur)
Referral	European Commission, 20.1.2025
Legal basis	Article 304 of the Treaty on the Functioning of the European Union
Section responsible	Section for Economic and Monetary Union and Economic and Social Cohesion
Date adopted in plenary	22.1.2025
Plenary session No	593
Outcome of vote(for/against/abstentions)	198/6/2

1. Conclusions and recommendations

1.1.

The EESC notes that the economies of the euro area Member States and the EU have faced systemic external shocks over the last four years. The measures taken to combat the COVID-19 pandemic and the energy crisis have gradually led to their stabilisation. Despite the steps taken, however, the economies of euro area Member States and the EU are facing external and domestic uncertainty, unfavourable population trends and unpredictable pressures on individual euro area national budgets.

1.2.

The EESC highlights the low labour productivity, competitiveness and economic growth in the euro area over the relatively long term. Against the backdrop of unfavourable labour productivity trends, the EESC highlights a whole host of measures that need to be taken and carried out to ensure sustainable and resilient economic growth in the euro area, especially when compared with its biggest competitors in the world economy.

1.3.

In order to restore the momentum of the euro area and EU economy, the EESC recommends deepening the internal market, adopting and putting in place measures for a jointly coordinated industrial policy and adopting and implementing national structural reforms without delay. In addition, the EESC stresses the need to address excessive administrative and regulatory measures, which have a significant negative impact on the rate of economic growth.

1.4.

The EESC also points out that, given the relatively low pace of economic growth in the medium term, urgent economic policy measures are needed to ensure economic and systemic resilience. In the light of this, it now appears necessary to interlink ensuring fiscal sustainability with the need to release funds, not only to restore economic prosperity, but also because it is in the public interest.

1.5.

In line with the European Commission’s recommendations, the EESC supports the focus on raising competitiveness, especially by closing the investment gap with the US and other major competitors in the world economy. The EESC also supports putting in place the conditions for venture capital, especially to support start-ups and to scale up firms and companies.

1.6.

The EESC is of the opinion that the economic policy of the euro area Member States is not only about stability, sustainability and fine-tuning key macroeconomic indicators, but also, and above all, about deep structural and institutional reforms.

1.7.

Given the relatively high uncertainty surrounding growth in the world economy, the EESC points to the need to build resilience to unforeseen external shocks. Institutional and legislative measures for labour market flexibility, real wage growth and labour productivity therefore need to be revised. Furthermore, and not least in the context of the dynamic growth of AI, social security will need to be bolstered, with support for inclusion and access to housing.

1.8.

The EESC underlines the need to ensure macroeconomic and financial stability. When it comes to fiscal policy, given the higher spending to finance the transition, defence and the ageing population and the increased expenditure to meet borrowing costs and service debt, it is important to ensure a credible medium-term fiscal framework. Both national governments and the European Commission will therefore have to make a shared commitment, while at the same time respecting the established fiscal criteria.

1.9.

In an effort to ensure the medium-term sustainability of the public finances, the EESC points to the revenue reserves that could be mobilised in national budgets. These still exist mainly because relatively large amounts of money remain in tax havens. The EESC therefore backs the Commission’s efforts to make the public finances more efficient overall and to reduce the amount of money kept in tax havens. The EESC also supports the G20’s plans for corporation tax.

1.10.

The EESC stresses that the euro area economy is facing major ongoing systemic risks, both externally and domestically. The high level of responsibility that lies with all those involved in managing economic policy in the Commission and nationally should therefore be underlined. Here, it is essential to stress the need for additional accountability and commitment when adopting and putting in place the individual measures. To meet the extraordinary challenges ahead, all competent and responsible parties will, more than ever, need to engage in dialogue and work together to put the euro area economies on a sustainable and resilient path.

2. General comments

2.1.

The European Commission’s latest forecast does not offer a very positive outlook for the euro area economies and the EU as a whole. This stems from the cyclical development of the economy, characterised by very low labour productivity and weak economic growth, but also from entrenched structural problems that do not support medium and long-term economic growth, and even limit it.

2.2.

The economic performance of euro area Member States and the EU reflects moderate economic growth stemming from disinflation (which improves conditions for growth mainly due to more favourable energy prices). Economic growth is therefore relatively low (economic growth of around 1 % forecast in 2024 and 1,5 % in 2025 and 2026).

2.3.

The continuing disinflationary trend and, in particular, more favourable energy prices as key factors for consumption and households, industrial production and investment activities are a positive element in the future economic growth outlook. Inflation is expected to move gradually towards the European Central Bank (ECB) inflation target by mid-2025. The ECB could therefore continue to cut interest rates, lowering the cost of lending for households and the business sector. A gradual fall in inflation to two percent is expected in the second half of 2025. Currently, prices in services, which are relatively high but expected to fall in 2025, are preventing interest rates from being cut more quickly in the euro area.

2.4.

Despite relatively weak economic growth, unemployment in EU Member States is at a historic low (5,9 %), with similar (the same) figures set to last despite expected structural changes, especially in the manufacturing sector. So far, the disinflationary trend has contributed to clear growth in real wages, which in the previous period developed quite negatively from the point of view of employees and consumers.

2.5.

Consumers are fairly cautious, mainly as a result of unpredictable geo-economic trends and considerable uncertainty. However, the rather large amounts held in savings have not translated into the desired recovery in investment, as the mechanism for transmitting savings does not sufficiently allocate them to productive sectors with high added value.

2.6.

Nevertheless, both household consumption and investment activity are expected to recover in the near term, but this will be insufficient when compared with the largest global competitors. Given the persistent and growing geo-economic risks and uncertainties about future global and trading conditions, domestic consumer and investment demand could have a very positive impact on the economic recovery of the euro area and EU Member States.

2.7.

It should also be pointed out that one of the greatest risks facing some euro area Member States is not only relatively high fiscal deficits, but also the continued uptick in public debt, which may be unsustainable. In this context, it should be stressed that the newly adopted rules should form the basis for achieving macroeconomic stability and fiscal sustainability.

2.8.

In addition to the nominal economic indicators of the euro area and EU Member States not being very encouraging, another negative trend should be highlighted: the EU is structurally falling behind the global economic powers of the USA and China, especially when it comes to technological development. This is also one of the main reasons why the growth gap between the US and the EU continues to widen to the detriment of the EU, largely driven by relatively low labour productivity in euro area and EU Member States (since 2000 real disposable income in the US has almost doubled compared to that of the EU).

2.9.

The current geo-economic situation, with deglobalisation and fragmentation of the global economy, heightened security risks, as well as a gradual retreat of liberal trade and investment flows around the world, is playing a very important part in the economic conditions of the euro area Member States. What is more, the gradually growing position of the newly industrialised States in the world economy needs to be taken into account, with the EU playing a much more active role.

2.10.

One of the most important reasons why the euro area is lagging behind internationally is the EU’s relative (in)ability to keep pace with technological change (mainly since 2000), but also the fact that the EU did not embrace the dawn of the digital revolution, which has contributed significantly to labour productivity growth elsewhere. The fact that it is falling behind is largely explained by the innovation gap and the lack of technological progress.

2.11.

High volumes of investment in priority areas are needed to bridge the investment and innovation gap: digitalisation, decarbonisation and defence. In this context, a strategy to increase investment by 5 % (to more than 25 % of GDP) should be drawn up and implemented. The mobilisation of private capital alongside the use of public guarantee schemes, with the continuation of NextGenerationEU, as well as additional sourcing of investment through bond issuances and the adoption of a targeted sustainable debt management strategy, can contribute to this objective.

3. Specific comments

3.1.

The EESC supports the resumption of economic growth underpinned by structural reforms. This could be achieved by doing the following:

(a)	reducing the innovation gap with the US and China, especially when it comes to advanced technologies (strengthening the transition from innovation to commercialisation, with regulatory measures being a key limiting factor and one of the biggest brakes on how the EU functions);

(b)	promoting decarbonisation and competitiveness: taking a realistic approach to achieving decarbonisation, with close coordination between different policies and activities, without which this process will not lead to greater competitiveness and economic growth;

(c)

ensuring security and reducing dependency: ensuring economic, energy and food security is a prerequisite for sustainable economic growth. At the same time, it should be pointed out that the current heightened geo-economic risks are deepening uncertainty and threatening future investment. It is therefore worth considering a reappraisal of the EU’s foreign economic policy.

3.2.

The EESC notes that major funding is crucial for the investments that the EU needs. According to the report by Mario Draghi (1), this amounts to at least EUR 750-800 billion of additional annual investments. The investment gap between the US and the EU started to gradually appear in the aftermath of the global financial crisis, particularly in private productive investment. This shortfall was not offset by increased government and public investment (as was expected primarily in the 2021-2022 period), where the EU is also falling behind its main competitors.

3.3.

The EESC believes that one option for bridging this investment gap might be to involve the private sector using public aid (through guarantee schemes, for example) to finance development investments of strategic importance. In this context, fiscal incentives for private investment could be essential. The incentives provided for these investments may have some short-term impact on the public finances, but the long-term benefits of productive investment could reduce fiscal costs.

3.4.

The EESC supports the idea that providing private investment of 4 % of EU GDP through capital markets could lead to financing costs being reduced by around 250 basis points. Lowering the cost of private investment is often associated with efforts to make capital markets more efficient, for example through the completion of the Capital Markets Union.

3.5.

The EESC points out that one of the key reasons why financial intermediation in the EU is less effective is the ongoing fragmentation of capital markets and limited flows of savings towards capital markets. The European Commission has put in place a number of measures to create a Capital Markets Union. Nevertheless, three problem areas remain:

(a)

The EESC notes that there is no uniform supervision of the securities market at EU level or a uniform basis for all capital market trading (the current situation is characterised by considerable diversity, various approaches to supervision and interpretation of individual rules). For example, the use of clearing in trading is far less unified in the EU than in the US. Apart from recent progress on withholding tax, the tax and insolvency systems of EU Member States remain fundamentally very different from one another.

(b)

The EESC stresses that capital markets are also significantly undersized due to low levels of long-term available capital, mainly from pension funds. Most EU households rely on pay-as-you-go public pension systems and pension assets are highly concentrated in only a few countries with developed pension systems.

(c)	Another reason for financial intermediation not being effective enough is the overreliance on funding from the EU banking sector, which is less well suited to financing innovative projects, while also facing a number of constraints.

3.6.

The EESC points out that EU support for both public and private investment is also limited by the size of the EU’s budget/fiscal capacity. For financial intermediation to work effectively, EU funds should be more focused on its strategic priorities. Moreover, the EU budget is highly fragmented and covers a large number of programmes (50), which, objectively speaking, does not help reach a sufficient number of large-scale EU-wide projects.

3.7.

The EESC notes that access to EU funds is relatively complex and administrative barriers exist. It should be pointed out here that the possibilities to take on new political priorities and receive financial support from the EU are limited. The possibility to react dynamically to unforeseen and unexpected developments is limited too.

3.8.

The EESC underlines that the ability of the EU budget to mobilise private investment through risk-sharing instruments is somewhat hampered by a relatively low level of boldness and a reluctance to carry out risky projects. InvestEU is currently the largest risk-sharing tool, but implementing partners remain focused on the relatively low-risk typology of investments. The question of the long overdue decision on new EU own resources remains open.

3.9.

The EESC stresses the need to ensure common safe assets, which would make it much easier to complete the Capital Markets Union, meet its initial objectives and reflect the spirit behind it.

4. Specific comments on economic policy and other related areas

4.1. Private capital and completion of the Capital Markets Union

4.1.1.

The EESC recommends putting in place favourable conditions for private capital for productive strategic investments in the interest of the EU, which could contribute to the creation of a genuine Capital Markets Union supported by a strong pension system.

4.1.2.

The EESC stresses that the key role of the Capital Markets Union should be to ensure a transition from coordination of national regulators to a single common regulation of all capital markets in the EU (similar to the US, carried out by the Security Exchange Commission (SEC). Another important task is the harmonisation of insolvency frameworks, which will help eliminate fragmentation at national level.

4.1.3.

The EESC further recommends setting up a united central platform (UCP) and a united central securities depository (UCSD) for all trading in securities. More effectively channelling household savings towards productive investments, for example by using long-term savings and pension products, is also crucial to revitalising and strengthening the capital market. One alternative is strengthening the second pillar of pension systems.

4.2. Securitisation and completion of the Banking Union

4.2.1.

The EESC supports boosting the banking sector’s financial capacity. The EU should therefore focus on revitalising securitisation and completing the Banking Union. In the first instance, the prudential requirements for securitised assets should be adjusted. In the case of the Banking Union, a specific jurisdiction is proposed for banks with a high proportion of cross-border operations that would exclude them from the scope of national regulators and supervisors, as well as from the application of crisis rules and procedures.

4.3. The role of the EU budget/financing

4.3.1.

The EESC recommends that the EU budget/financing be reformed to focus more on efficiency and creating better leverage in the private investment environment. EU financial resources should be earmarked for jointly agreed strategic projects with the aim of achieving the highest possible added value.

4.3.2.

The EESC supports efforts to create competitiveness pillars for the next multiannual financial framework (MFF). These should be geared towards the funding of priority projects identified by the Competitiveness Coordination Framework. As part of this process, the EU should focus on a sufficient number of strategic projects and streamline access to resources for beneficiaries.

4.3.3.

The EESC recommends that the number of programmes under the MFF be reduced. A well-targeted financing scheme should be drawn up to bridge the investment gap for technology scale-ups and processing capacities in preferred areas, such as clean technologies. In addition, the EU budget should be made more flexible, with the possibility to re-allocate resources more easily across programmes where there is a legitimate need.

4.3.4.

The EESC agrees that the EU budget should also strengthen the leverage effect in supporting private investment through different types of financial instruments and support for riskier projects with the involvement of implementing partners. It would also make sense to increase EU guarantees for InvestEU, which should focus on financing riskier scale-up investments.

4.4. NextGenerationEU development model

4.4.1.

The EESC supports the EU’s efforts to set up a regulatory framework for common safe assets and facilitate investment projects within EU Member States, which could also help integrate capital markets. The EU should also develop a model based on NextGenerationEU using common debt instruments. Such a model could lead to the creation of a deeper and more liquid bond market and thus to the integration of capital markets in the EU.

4.4.2.

The EESC believes that creating common safe assets would enable corporate bonds and financial derivatives to be valued in a uniform way using a common benchmark and thus allow financial products to be standardised within the EU, making markets more transparent and easier to compare. It would also be a good idea to create a type of collateral that could be used in any Member State and in all market segments, including cross-border transactions (which should be encouraged).

4.4.3.

The EESC notes that a common safe asset could ensure a large and liquid market that may be attractive at global level, allow for lower capital costs and make EU markets more efficient. It could also significantly help maximise labour productivity growth and finance common European public goods.

Brussels, 22 January 2025.

The President

of the European Economic and Social Committee

Oliver RÖPKE

(1) Draghi’s report on the future of European competitiveness: a blueprint for Europe’s demographic and regional cohesion .

ELI: http://data.europa.eu/eli/C/2025/1190/oj

ISSN 1977-091X (electronic edition)

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