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A European Social Union: Unduly Idealistic or Inevitable? Frank Vandenbroucke ABSTRACT This article summarises a lecture delivered at the EIB on 5 March 2015 idea of Union The main argument is that basic consensus social model has become an existential necessity for EU must be reached respective roles institutions and national governments in policy general objectives standards Greek crisis which not resolved moment writing highlights complexity challenge but also its urgency To illustrate potential such reference made to report published by think tank Friends Europe ‘Unequal Europe: Recommendations more caring EU’ Reference some elements recent ‘Towards Economic – Convergence Prosperity Cohesion’ Presidents five major Institutions known as Five Presidents’ Report shows growing awareness need incorporate dimension our thinking future However underestimates education agenda confronts Finally it argued drama illustrates first foremost ‘deficit common purpose’ rather than democratic deficit sense purpose notably with regard essential Eurozone survive * Professor Katholieke Universiteit Leuven 2 founding fathers project were convinced economic integration would contribute development prosperous welfare states leaving concerns essentially level History proven them wrong least until mid-2000s experience forces us reconsider question: how can successful union flourishing states? It obviously necessary restore growth this short-term cannot isolated from imperative develop concept i e should state itself restoring sovereignty Member States strictly confining role monetary call heard option unless we are ready trade illusions Hence coherent conception even if may like expression core summarized follows: support systemic their key functions; guide substantive indicating ways means implement left due respect different historical legacies ‘social union’ does refer separate pillar added existing pillars aims clarify what point One could say describes contract’ needs between citizens Rather focusing terminology contribution about political communication let alone marketing my aim here focus Although sound unduly idealistic not: allows piecemeal progress often characterizes politics I will relate Completing Europe’s Monetary now been 1 discuss globo only show serve benchmark direction take incomplete so conceived desirable partly based functional implications Well-known theory explains benefits drawbacks unification terms trade-offs Members currency area confronted trade-off symmetry flexibility Symmetry refers movements was drafted Institutions: commission Council Central Bank Eurogroup Parliament 3 output wages prices Flexibility relates wage interregional international labour mobility determine country’s internal adjustment capacity case asymmetric shock Less necessitates flexibility: less there countries single – g productivity greater required adaptability order beneficial In traditional textbook analysis ‘adaptability’ understood mainly and/or There second trade-off: shocks absorbed through fiscal transfers member then reduced Obviously they permanent temporary reversible require readiness organise solidarity among members Since 2008 have learned description these insufficient understand Design failures EMU unstable fragile: lacked both banking central bank lender last resort President’s adds Euro stabilisation function Indeed indispensable one functions stabilization times implies way other remains very generic Admittedly raises complex technical questions options pursued therefore urgent Fundamentally completion (which issues mutual insurance) organization kind insurance against adverse circumstances) signals acute organize requires trust Solidarity basis rational most individuals engage do each sufficiently quality fabric deliver competitiveness public finances What since exposure market produced discipline On contrary implemented invited ‘lack discipline’ We witnessed divergence convergence lead visible hand pursues increases Moreover coordinate increases: effective note arguing mark departure current principles practice Six-Pack Macroeconomic Imbalance Procedure2 deliberate attempts strengthen set legislative measures bundled into ‘six pack’ regulations introduced 2010-2011 introduce macroeconomic surveillance Procedure part Six-Pack; specific mechanism identify risks early 4 makers But put one-sided emphasis account deficits addressed surpluses organized instead around instance ‘golden rule’ linking acknowledge positive results come coordinated bargaining within Instead encouraging decentralization collective steps encourage facilitate coordination tables proposal linked revamp systems bargaining: proposes system ‘Competitiveness Authorities’ thereby referring Belgium example good happens Belgian watchdog embedded derives authority precisely being parcel ‘good practice’ broadened embedding authorities Bearing mind observations importance across return long-term catch-all concept: includes regulated markets absorbing mechanisms Kurzarbeit Germany3 highly skilled versatile force All features provide achieve combined according preferences For ‘high road’ skills work opposed ‘low mere deregulation At sight might irrelevant various arrangements adopted sustainable union: seen functionally equivalent models long yield workers responsiveness constraints all regulation equally well National much policies matter concern choice relegated totally domain That mean counsel detail limit diversity accommodated details fundamental parameters Neither nor socially neutral choices implied upon participating proposals remain vague timid recognition fact ‘standards prevent emergence harmful imbalances correct already place makes possible German firms reduction activity diminish regular working hours (instead firing them) compensation paid security markets’ combine make operational Here important homework Marianne Thyssen Commissioner Employment Affairs Integration EU28: ‘balancing act’ Some arguments favour active apply whole well-known holds without harmonisation induces downward pressure advanced past spectre large-scale dumping never materialized today’s enlarged blatant cases illegal conditions exploitation occur resulting interplay gaps domestic implementation employment protection legal absence heterogeneous group crucial condition opinion accept migration fit order; undermine Whether minimum protected context free movement services salient Reconciling four freedoms cohesion industrial relations insurmountable feasible: Unequal suggests practical initiatives balancing act just Both openness (under certain conditions) types shared notion foregoing discussion two perspectives pan-European upward scale needed sustain rights improve own lives State nationals; patients benefit under medical care residence income redistribution balance obligations dual perspective inherently multifaceted no denying imply certainly short term legitimacy depends avoid negative words zero-sum game yet virtuous circle Sustaining primary objective As revisit goals Treaty Rome 1957: simultaneous pursuit 6 (through gradual states) Union) optimistically assumed supranational cooperation together instruments raising standard living later brought EU’s ‘economic territorial’ policy) boost create convergence; redistribute fruits while remaining prerogative Consecutive enlargements demanding ‘the dynamics convergence’ associated enlargement others same time forms far no-go Over few years displayed exact opposite scenario convergence: increasing Excessive threaten excessive risk caught trap: badly when becoming difficult vicious cycle investment How whereby enhanced? (i cohesion) presupposes human capital driver prosperity ECB (2015) mentioned investing pursue OECD PISA tests indeed huge disparity youth weak average scores Romania Bulgaria Greece Slovakia; mediocre Portugal Italy Spain number countries; relatively high Finland Ireland Netherlands Estonia Germany Poland particular Southern compared recognises challenge: 2020 singles out school-leavers headline targets Commission developed comprehensive training issued excellent recommendations modernization educational carry sufficient weight highest levels decision-making setting budget priorities Real expenditure lower 2013 before 10 including those spending measured simplistic education; seems hard significantly disinvesting 7 Figure 1: worrying displays data evolution real black bars compare country over 2006-2008 (deflated GDP deflator): 25 review decline 29% Hungary 18% 16% Latvia 15% 14% Meanwhile significant increase 10% Denmark Czech Republic Luxemburg Slovakia (always comparing 2006- 2008) demography plays role: grey demographic change calculating per inhabitant younger 19 old Per young diminished ‘only’ 12% Hungary; contrast 21% effort spectacular taking With generating further Data retrieved Eurostat website; author’s calculations Successful well-designed complementarity ‘developing capital’ activation ‘protecting (cash health care) (notably wages) Based Hemerijck Palier (2011) called EU-wide ‘Social Investment Pact’ Package launched February presents similar thus provides orientation ‘package’ ‘pact’ pact underscores reciprocity required: -60% -40% -20% 0% 20% 40% 60% United Kingdom Slovenia Lithuania France Sweden Austria Luxembourg vs 2006-08 Spending % demogr adj 8 committed respond Simultaneously efforts –notably experiencing budgetary problems supported tangible When reforms reform Alas dramatic earlier removed today Surprisingly useful unifying barely Report: adequate passing child gap construction clear-cut outlined precondition: build stronger corollary amongst democratically elected inevitably protracted negotiations going extremely find compromise democracies spirit democracies; maintain agree burden sharing commonly agreed extent domains pooled constitutes underestimated clearly rethink institutions: organizes management invites polarisation escalation More processes go contention problem ‘democratic deficit’ Institutions; References F B Needs Pact OSE Paper Series Opinion paper No May Brussels: Observatory From muddling Marin (ed ) Future Welfare Global Ashgate: Aldershot UK pp 433 464 (downloadable version Euroforum Policy www kuleuven be/euroforum) Final HighLevel Group Union’ Brussels Spring J -Cl Juncker close D Tusk Dijsselbloem M Draghi Schultz June euro area: evidence Bulletin Issue 30-45