Official Journal of the European Union

C 81/216

Opinion of the European Economic and Social Committee on the ‘Euro area economic policy 2017’

(additional opinion)

(2018/C 081/31)





Plenary Assembly Decision:


Legal basis

Rule 29(A) of the Implementing Provisions of the Rules of Procedure

Section responsible

Economic and Monetary Union and Economic and Social Cohesion

Adopted in section


Adopted at plenary


Plenary session No


Outcome of vote




This opinion is part of a wider package of four EESC opinions on the future of the European economy (Deepening of the Economic and Monetary Union and euro area economic policy, Capital Markets Union and The future of EU finances)  (1) . The package comes in the context of the White Paper process on the future of Europe launched recently by the European Commission and takes into account the 2017 State of the Union speech by President Juncker. In line with the EESC resolution on the Future of Europe  (2) and previous opinions on completing EMU  (3) , this package of opinions underscores the need for a common sense of purpose in the Union governance, which goes far beyond technical approaches and measures, and is first and foremost a matter of political will and a common perspective.

1.   Conclusions and recommendations


These conclusions and recommendations are drafted to complement opinion ECO/423, which this opinion fully agrees with and builds on. They are also consistent with the three other opinions on the subject of the economic future of Europe referred to in the preamble.


The EESC welcomes the progress made in the development of euro area economic policy and is closely monitoring the circumstances shaping this development. However, it regards as particularly important the circumstances linking the euro area environment with fiscal aspects and the strengthening of its institutional framework.


The EESC considers it essential to have a balanced mix of euro area economic policies, with their monetary, fiscal and structural components properly interlinked. Given the foreseen regrouping of these policies in line with economic development, this is becoming an increasingly important factor.


The EESC disagrees with the European Council’s rejection of a positive fiscal stance and calls on it to reconsider this conclusion. In particular, the anticipated move away from the European Central Bank’s quantitative easing policy strengthens the arguments in favour of adopting a positive fiscal stance. At the same time, the EESC recognises that the scope of a positive fiscal stance must be properly directed so as not to increase the still high level of public debt and targeted at areas generating a clear long-term benefit.


The EESC notes the improving economic situation in the euro area and recommends that, in order to maintain and bolster this, crucial steps be taken to stimulate investment and carry out structural reforms that promote both higher productivity and quality jobs. Structural reforms should be implemented more strongly in line with the processes of the European Semester. Moreover, the EESC recommends that the need for structural reform be seen at the euro area or EU level as a whole, not just in terms of isolated structural measures in the various Member States.


The EESC strongly backs enhanced cohesion in the euro area in the form of both enhanced coordination of economic and fiscal policy and improving financial intermediation by completing financial union and ensuring the euro area’s greater influence in the global economy. To meet these challenges, the EESC recommends a corresponding strengthening of its institutional framework.


The EESC takes the view that the euro is the currency of the whole of the EU; the EESC is in favour of the improving economic situation in the EU leading again to the possibility of enlarging the euro area, with an anticipated positive impact on both the euro area and its new members.


The EESC notes that, because of Brexit and the poor predictability of the current US administration, due attention also needs to be given to political and economic developments worldwide.


The EESC is aware that there are limits to improving how the euro area operates within the current set of rules (above all, measures of a structural character); for some of the more fundamental aspects (involving, for example, improving its institutional framework or deploying new fiscal instruments), new rules have to be adopted.


In the context of the upcoming 2018 economic and policy recommendations, the EESC emphasises the need to launch a debate on:

creating a fiscal union,

strengthening Member States’ responsibility for and ownership of obligations vis-à-vis the euro area,

the need for structural reforms within the European Semester platform,

further strengthening of economic coordination and governance,

improving the system of financial intermediation, leading to the reinforcement of real long-term investment, in line with the United Nations Sustainable Development Goals (SDGs), by using the role of the EIB, EIF and EFSI 2.0,

the euro area exerting a greater influence in the world.


The EESC is aware of the strong need for increased investment activity to be reflected in wage trends and falling unemployment. It should also be geared to addressing the imbalances described in the opinion, which could be a fundamental obstacle to long-term growth if they persist and are not tackled.


In order to secure the vital support of citizens for the reconstruction of the euro area and the achievement of structural reforms in this regard, the social dimension of these reforms needs to be strengthened, and democratic, transparent forms of euro area governance, aimed at ensuring economic prosperity and a high standard of living, must be employed.

2.   Background


As part of the regularly recurring European Semester process, the European Commission published documents in November 2016 for the Council Recommendation on the economic policy of the euro area, as well as a Communication (‘Towards a positive fiscal stance for the euro area’). The EESC drew up opinion ECO/423 on these documents, which was adopted at its February 2017 plenary session. Since then, the development of EU economic policy as well as activities by some Member States have meant that the issue has evolved considerably. This additional opinion focuses on reflecting the most important of these developments:

Council Recommendation on the economic policy of the euro area (March 2017),

Spring economic forecast (May 2017),

Communication on country-specific recommendations 2017 (May 2017).

In parallel, a White Paper on the Future of Europe and a Reflection Paper on the Deepening of the Economic and Monetary Union and on the future of EU funding were published during the period in question, which were further developed by the president of the European Commission, Jean-Claude Juncker, in his speech on the State of the Union in September 2017. Moreover, a visible development in terms of how the euro area functioned with regard to its fiscal aspect could be observed. The present opinion thus takes account of economic development in 2018 and reflects the EESC’s proposals for the Recommendations on the economic policy of the euro area for 2018.


The current economic recovery is marginally faster than expected; however, the euro area still needs stronger investment, which could also be assisted by a measured fiscal stimulus that avoids worsening the level of public debt in the long term. The effects of the crisis and the policies deployed continue to impact on unemployment, poverty and inequality and are also a cause of economic and social disparities between Member States. It is therefore essential to boost growth prospects with greater support for investment in the euro area, accompanied by a social policy that curbs poverty and inequality. According to the European Commission’s spring economic forecast, investments accompanied by corresponding wage developments and a continuing decline in unemployment rates, which in this way contribute to the strengthening of domestic demand, are a key factor in sustaining the economic recovery.


Moreover, the euro area needs to become more cohesive. This could be helped by completing the financial union, with its expected beneficial effect on investment, which could be done under the current rules; additional strengthening of economic and fiscal policy coordination oriented towards a fiscal capacity of the euro area and the creation of an autonomous euro area budget; and a stronger institutional architecture for the euro area that allows better internal and external representation as well as strengthened responsibility of its individual members now requires new rules to be introduced.


One of the scenarios in the White Paper on the Future of Europe considers the possibility of a multi-speed Europe, with the euro area as a possible important dividing line. However, in this case the EESC is of the view that the euro is the currency of the EU as a whole. Creating incentives for non-euro-area states to consider joining the euro as one of the priorities of their internal policies would therefore be desirable.


The European Commission’s winter and spring forecasts focus on a situation of ‘high uncertainty’ regarding both internal and external risks to growth arising from commercial, financial and geopolitical factors. In its spring forecast, it expressed concerns at developments in the US and UK (Brexit) possibly adversely affecting the (modest) recovery in Europe. The Trump administration is even less predictable than it initially appeared and the persistently high current account surplus of Germany and the euro area is an issue for it. This could prompt the US to take unfavourable trade policy measures, with damaging effects for the EU and the euro area. Brexit is also difficult to read: the long prelude to negotiations gives no confidence as to the ultimate result, while the June election suggests that there will be complications and delays in the progress of negotiations.


The latest spring economic forecast by the European Commission suggests that its recommendation and the EESC’s opinion (ECO/423) that supported a positive fiscal stance in the euro area as a whole for 2017 — now rejected by the Council’s recommendation of 10 March 2017 — was on the right lines. The EESC disagrees with the European Council’s decision and believes that the risks that have arisen since then, and the Commission’s spring forecast, confirm the appropriateness of maintaining a positive fiscal stance on budgetary policy.

3.   General comments


The importance of the EMU as a key European integration priority was underlined in connection with the commemoration of the 60th anniversary of the signature of the Rome Treaties and the subsequent debates on the EU’s future. It was also declared that, despite the remaining and as yet unresolved problems, it would be wrong to adopt an overly defensive tone where the euro area was concerned. Instead, it would be better to take a more ambitious view of its future and work for specific measures to better harness its potential. The EESC endorses this view.


With regard to the prosperity of the EU economy and the fair redistribution of income and wealth that it creates, opinion ECO/423 underlines that it is important for a balanced economic policy mix to contain monetary, fiscal and structural instruments, and measures focused on enhancing financial market functionality and efficiency, including adequate regulation to prevent irresponsibly risky behaviour by some financial institutions. The EESC is convinced that developments over the last few months have in many ways made this more important.


The EESC fully supports the completion and deepening of EMU by 2025. In this sense, this opinion is consistent with the package of other EESC opinions on the economic future of Europe referred to in the preamble. The EESC believes that particular attention should be given to the following areas:


strengthening and further coordinating fiscal, economic and structural policies with the aim of creating an effective mix of these policies, with a view also to implementing the euro area’s strong (dedicated) budget line within the framework of the EU budget. For the first time at such a high political level, the Reflection Paper on the Deepening of the Economic and Monetary Union uses the term ‘fiscal union’. A ‘fiscal union’ in a homogeneous monetary and economic environment and within a functioning internal market would also include a common or closely coordinated fiscal policy (both in terms of tax and expenditure) that supported fair taxation and a systematic and effective stance on tax evasion and fraud;


a crucial prerequisite for improving the euro area environment is — within a comprehensive understanding of EU economic governance, particularly the European semester process — the responsibility of individual actors: the individual responsibility and obligations of the Member States should be maintained or even enhanced in all existing economic governance mechanisms, including objective monitoring, application of all preventive and corrective measures, and finally sanctions, if necessary;


Productivity Boards are recommended as an appropriate tool, based on the active participation of all relevant social partners, which can facilitate the implementation of structural reforms that, in addition to improving the economic capacity of individual Member States, substantially contribute to increasing the functionality and homogeneity of the single market as a whole by removing certain regulatory obstacles and barriers, without prejudice to established social and labour rights;


substantial improvement in the efficiency of financial intermediation by using the whole spectrum of financial market participants in line with the idea of the Banking Union and the Capital Markets Union; the priority focus in making financial intermediation more effective should be on real investment and not increasing the volume of the virtual financial sector;


for a strong and respected EMU — within the context of the changes taking place in the global economy — its external representation is also very important; it is vital to have not only an agreed-upon accord of individual Member States vis-à-vis their global partners where the EU is acting with one voice, but also to take steps towards an appropriate institutional structure that corresponds to this common interest in the global context (4);


additionally, the possibility of enlarging the current euro area should have been taken into account in reasonable cases; some countries — especially those in Central and Eastern Europe — show very positive economic performance indicators and are very positively evaluated within the European Semester; it seems that they could support the euro area’s functioning and could increase the weight of the euro area within the EU;


finally, citizen support for the new EMU project requires instruments to be created so as to ensure that economic governance decisions are democratic and that the single market is complemented by a strong social pillar.


The EESC considers the promotion of higher investment and the realisation and implementation of structural reforms that could have been promoted even more within the European Semester process, especially having taken the single market framework into account, to be quite central to the euro area’s functioning. Investments financed by the EIB, the EIF or EFSI show positive results, including needed regional projects. However, their volume is still not enough to bridge the investment shortfalls that occur especially in times of crisis. These instruments should help to create a sufficiently robust system that enables a sharing of public and private sources of finance. The managed flexibility in the Stability and Growth Pact should be harnessed for this to allow use of the golden rule according to which investments and associated current spending should be implemented in such a way as to achieve future benefits and effects. The focus of structural reforms should be clearly moved from the level of individual Member States to the overall functioning of the single market.


The aim of structural reforms should first and foremost be to eradicate existing imbalances and to create favourable conditions for long-term development, in line with the UN sustainable development goals (SDGs). Among these imbalances are the growing differences within the EU and within Member States. Structural reforms should lead to the adoption of measures that take on board the pan-EU context and not just the partial needs of individual Member States.


In the EU context, the reforms should be geared not only to domestic political priorities, but also viewed from the EU perspective as a whole: from the perspective of strategic projects that are able to create robust EU added value.


Structural reforms should also be accompanied by the promotion of quality jobs with an emphasis on appropriate wage levels and full respect for social justice.


Many reforms are still needed to improve regulations that are able to support business development and ensure adequate protection for citizens. Examples of areas for carrying out structural reforms include: rules relating to starting a business, construction permits, obtaining credit, paying taxes, trading across borders, registering property and harmonisation of tax policy, which will assist the sound functioning of the internal market and at the same time limit the occurrence of harmful competition in it. The public/political climate (i.e. efficiency and integrity of the public sector, certainty and stability over the lifetime of the project) also plays an important role. Not least in terms of public acceptance of these reforms, it should be noted how complicated the process behind implementing these reforms is and that their macroeconomic outcome depends on the functioning of many intricate processes at a microlevel. Explaining these ramifications is an important prerequisite for getting public support for these reforms. This support requires that the instruments created to help the euro area operate in future are decided on in a legitimate, democratic way that strikes the right balance between the economic and social pillars.


There is space for a reinforced relationship between the need for structural reforms, the European Semester, the multiannual implementation framework of the ESI Funds (or the EU budget more generally) and a more developed and effective euro area. The strengthening of the relationship between structural reforms and the EU budget, which aims to promote convergence in the medium to long term, is closely linked to the anticipated restriction of the ECB’s quantitative easing policy, when a tightened monetary policy will create more room for the use of fiscal flows.


At the same time, we need renewed efforts for upward convergence in living and social standards and wages within and between Member States as a minimum condition for increasing trust in the EU and securing the future of Europe. The European Pillar of Social Rights should support convergence.


This context suggests that we need policies that will strengthen domestic demand in the EU and the euro area in general, and in countries with high current account/trade surpluses in particular, so as to rebalance within the euro area and with the rest of the world.


EU Member States should not base their competitiveness strategies on the assumption that wage levels will remain low. An effective mix of economic policies should lead to a revival of investment activity in infrastructure, and increased spending on education, research, training and skills should be reflected in productivity growth and stronger wage and income growth, reflecting at the same time the course of the life cycle, career development and changing living costs. However, the EESC respects the different situations of individual Member States and their primary responsibility for tackling this through modern collective bargaining methods.


The labour market situation in a number of euro area countries indicates that the pending structural reforms in this area should focus on reducing high levels of temporary, involuntary part-time work, and low wages, and on promoting good quality jobs with a workforce that has higher levels of training and skills. The soundness of social dialogue and collective bargaining based on the autonomy of the social partners should be the basis for a new type of labour reform. Doing so, not only improves social justice but also fosters the productivity of the economy.


Particularly measures to do with carrying out structural reforms and tightening coordination of economic and fiscal policy can be executed under the present system of rules; they can be further strengthened by the next multiannual financial framework after 2020. On the other hand, further consolidating the euro area with a common budget policy or stronger presence of the euro area on the world stage require creating completely new rules.

4.   Specific comments


For the reasons mentioned in this opinion, the EESC calls on the European Commission and the Council to incorporate an appropriate positive fiscal stance in the Recommendations on the economic policy of the euro area for 2018. This proposal is particularly crucial in terms of the need for adequate and sustainable economic growth and ensuring a functioning mix of economic and monetary policy whose expansionary character cannot be prolonged indefinitely.


We think that in implementing the Investment Plan for Europe, which we endorse, the priority should be projects that respect the sustainable development goals and take into account social and environmental responsibility.


The EESC is convinced that the latest developments of the EU economic policy paradigm in the last several months make it quite clear that political support for the approach that leads to a fiscal union based on the euro area platform is increasing; in this connection, the EESC recommends monitoring it very carefully and is fully prepared to join the process of strengthening the fiscal emphasis as a precondition for a more homogeneous euro area environment; it is also crucial to observe how this development is reflected in possible changes in institutional structures and regimes.


The EESC continues to believe that at a time when deepening the EMU is once again a top priority, it is very important not to underestimate the processes connected to a more effective and better functioning single market. An effective and functional single market is a basic requirement before we can even think about a deepened EMU. The EMU can only fulfil the expectations regarding its benefits if the future opening and liberalisation of the single market is to continue, its homogeneity is strengthened, and visible and hidden national protective barriers are eliminated.


The EESC supports the opinion that the environment of a deepened EMU must also chime with the process of financial intermediation. The salient points of the financial union are represented by the Banking Union and the Capital Markets Union. The Banking Union primarily concerns stable and predictable behaviour of the banking sector. It must also be backed up by adequate financial resources to cope with possible banking failures. The Capital Markets Union, meanwhile, is understood as broadening the possibilities for allocating financial sources and is still in an early period of its development. Improved functioning of financial intermediation, for its part, should be more evident in the sphere of real investment activity.


The future of the EU also depends on strengthening its integration and consolidating its role in the global context. This is one of the few key priorities, particularly at present, and is a matter of common interest for all EU Member States. In order to achieve this goal, it may be beneficial to strengthen the EU’s joint representation on the international stage and, at that level, to promote and respect common values, principles and policies, such as political and economic freedom and equality and social justice, the value of free business in trade and investments, the creation of conditions for a fair and open competitive environment, and elimination of illegal and criminal practices in business such as by abusing tax systems or public procurement procedures; additionally, respect for social and civil rights and elementary requirements for environmental standards are absolutely essential.

Brussels, 19 October 2017.

The President of the European Economic and Social Committee

Georges DASSIS

(1)  The package includes EESC opinions Euro area economic policy 2017 (additional opinion), Capital Markets Union: Mid-term Review (see page 117 of the current Official Journal), Deepening EMU by 2025 (see page 124 of the current Official Journal) and EU finances by 2025 (see page 131 of the current Official Journal).

(2)  EESC Resolution on OJ C 345, 13.10.2017, p. 11.

(3)  OJ C 451, 16.12.2014, p. 10 and OJ C 332, 8.10.2015, p. 8.

(4)  For more details, see e.g. OJ C 177, 18.5.2016, p. 16.