The Social Dimension of the Eurozone
In addition to proposals for paying closer attention to social and employment indicators in Eurozone countries, more sweeping ideas for a financial transfer within the monetary union are also being examined.
In early October, the European Commission published a Communication on “strengthening the social dimension of the economic and monetary union”. The 19-page document represents the European Commission’s contribution towards the debate on a better design of the social dimension of economic and monetary union. Following European Council opinions at the summits of last December and June in favour of building a stronger social dimension and the invitation to the European Parliament in June to devise a social pact among monetary union countries, a more detailed consideration of the issue by a central European Institution now needs to be undertaken.
The document was strongly contested within the Commission. The present version proposes introducing a range of social indicators. These should be taken into account in the future in the process which has become known as the ‘European semester’ for monitoring national budgetary and economic policies. Specifically, these cover the employment rate, the number of long-term unemployed, the level of youth unemployment and the risk of poverty resulting from a number of different factors.
In the context of the European employment report that is produced every year in parallel to the ‘European semester’ process, it is proposed that there be a further indicator that should measure social inequality trends. This will relate the total income of the fifth of population with the highest income to that of the fifth with the lowest income. If previously established or averaged indicator values are exceeded or not complied with, this would not, however, lead to sanctions against individual states. It is merely a means of analysing data. During the course of the discussions within the Commission, the Commissioners moved away from the idea of laying down binding employment and social standards for monetary union countries.
Furthermore, the Commission is formulating, with some caution, the possibility of organising large-scale social transfers within the Eurozone. The existing Treaty provisions conceive merely of the creation of a system, that could, as a “convergence and competitiveness instrument”, provide individual member states with compensatory financial assistance in order to implement sustainable structural reforms. This assistance at European level, however, could only be organised to a very limited extent and on the basis of very stringent contractual agreements between the state concerned and the other members of the monetary union.
The Commissioners consider that more ambitious proposals, under which - on the model of the U.S. system - federal funds make a proportionate contribution for a specified period to the payment of long-term unemployment benefits, in order to absorb macroeconomic imbalances, could only be carried out after fundamental Treaty reform, which would also include political union .
We cannot tell from an initial reading of the new document whether the European Commission itself deems this type of Treaty revision to be absolutely essential in order to exclude a breakup of the monetary union or whether it is simply hypothesising with ideas to which it will not commit.
We can only speculate about the reasons for this cautious positioning. In any event, its own political autonomy and its commitment to the European common interest would have made it possible for the Commission to express an opinion on this key issue for the future of Europe without, however, having to prejudge the final decision. Anyhow, the latter point is relevant only to the European citizens spread across 28 different countries, and each of these 28 will have in the end to agree separately, if a political union in the Eurozone is to be achieved. This looks unlikely at the present time but that is exactly what is involved.
Translated from the original text in German