The Eurofoum presented a series of academic papers, by key academics including Paul de Grauwe (LSE), Franck Vandenbroucke, UA; Erik Schokkaert and Paul Schoukens. It was followed by a dialogue with ‘ high-level discursants’, including senior officials from the Commission, but unfortunately no debate with the audience.
The general messages were a strong challenge to the EU’s current approach to austerity and economic governance. This included the comments from the President of the ECJ, who underlined that the current economic governance proposals, including the fiscal compact/six pack and two pack were on the edge of illegality, and that when if sanctions were imposed because of failure to reduce the deficit etc, he expected legal challenges from MS.Read more
All the papers can be found here on the KUL website.
See here below summary of main inputs:
Paul de Grauwe/LSE: Design Failures in the Eurozone – can they be fixed?
De Grauwe argued that with the exception of Greece, the crisis was a failure of private debt not public debt. That the monetary union never impacted on national dynamics of boom and bust, and even exacerbated them. Meanwhile the existing stabilizers were removed, leaving MS fragile and vulnerable, with no lender of last resort at EU level. He produced damning arguments for the failed policy focus of the EU and particularly the Commission, on austerity, showing data that demonstrated the link between austerity and recession with failure of their objective to reduce public debt Debt in relation to GDP has increased in real terms, and jeopardizing citizen backing for the EU project. With Governments switching off automatic stabilisers in reaction to austerity drive, which cannot continue to be imposed– ‘’people will not want to live in a system like that’’. He argued mainly for the ECB to become a lender of last resort and restoring symmetry to the macro-economic governance – with stimulus packages in countries with surplus.
The respondent was the Director General of DG ECFIN: Marco Buti – who defended the fiscal compact and adjustment programmes.
Maarten Goos (Utrecht School of Economics): Job Polarisation during the great recession
The input focused on the disappearing middle, with the labour market polarized into high paid and low paid jobs at the expense of the middling jobs. The paper argues that this is primarily a result of innovation rather than shocks and institutions approach. He argues that job polarization has been stronger during recession and can lead to a jobless recovery. He proposed 5 policy recommendation: no fiscal consolidation in the short run, more investment in innovation and education, reducing skill mismatch and tackling rising income inequality.
One of the respondents was: Eurofound Policy Director Brian Storrey, who disagreed fundamentally with Goos’s approach. Arguing that wage polarization set in in 2007, as a result of labour market reform in continental countries. Whilst technological change increases the demand for high skills, what happens at the botto is more to do with the institutional package on employment and social rights – ie minimum wages, wage floors etc. He underlined that this was not automatic but the result of a series of policy choices – the main objective of labour reform is to create more low-paid jobs. Lessons should be learned from Sweden who took another path, socializing the gains from rapid technogical change, and creating welfare, providing jobs in the public sector and maintaining an institutional framework that was anti-low pay.
Vandenbrouckes (UA): Excessive social imbalances and the performance of Welfare States in the EU
The paper started from the premise that the disparity and lack of convergence of levels of child poverty in the Eurozone signals ‘’exessive imbalances’’ that needed to be corrected, because they undermine cohesion, integration in the European Project, as well as signaling investment deficists that may be cause and effect in a vicious circle of underperforming labour markets and education systems. The paper presented an ‘efficiency ‘’ scoreboard of MS performance in terms of how effective their social spending is, and outcomes on child poverty. He raised some question about universality v targeting, undermining the Korpi-Palme ‘paradox of redistribution’ which highlighted that the less universal systems, lost support from the majority, and resulted in less social spending, increasing poverty and exclusion, and backing the Social Investment Package approach or intelligent combination of both. Vandenbroucke used the argument of social imbalances to argue that this must be an equal consideration, in the EU vision, and threatens economic recovery as well as political legitimacy. He reinforced the view that both social investment and social protection are necessary and complementary. and that it is the ‘’package’’ that works.
Respondent: Andre Sapir gave a strident attack on the paper, saying that he could not see the relevance of a focus on child poverty, and the argument should have focused only on employment and its contribution to reducing macroeconomic imbalances. He also ridiculed EU social policy saying that it didn’t exist – there were no powers ‘’ no policy on child poverty – just declarations’’, and the social investment package – ‘’ is there really a social investment priority? Where’s the budget?””
Respondent: Joaquin Palme: – argued, that it is the combination of policy instruments that is crucial. He underlined weaknesses in the analysis, with the indicators chosen and went on to defend his hypothesis, backed by recent research by Kenneth Nelson, that the more encompassing the universal services are, the more effective and more public backing. That targeting should be more about tailoring policies to specific needs, avoiding means-testing. More research needs to be done on what constitutes a positive social fabric.
Vandenbroucke made a very strong response to Sapir’s attack, saying that he should read Van Rompuy’s letter before the December Council, and perhaps tell Van Rompuy that there was no such thing as a social dimension to the EU.. That the interference of the Troika, with its MOUs was direct intervention into the social policy and welfare states of member states with no respect for subsidiarity. That EU governance had to be about ‘’ governments who can govern’’ ie unless they can get the backing of the voting population, the theoretical model and even treaty basis are irrelevant. The divergence – social, economic etc in the EMU is making the EU ungovernable.
Erik Schokkaert (UA),: Beyond GDP: Measuring Social Progress in Europe
The paper looked at how to move forward on indicators to measure social progress, and carried out a critique on current multiple indicators including the human development index. It called for the need for a single indicator to mirror GDP. He proposed six principles to measure social progress: 1) well-being of the individual, 2) focus on outcomes, 3) account for accumulative deprivation, 4) respect for individual ideas of a good life, 5) avoid happiness focus which leads to an oversight on physical conditions and neglect, 6) Inequality aversion – the aim should be to reduce inequality.
He advocated a single indicator: ‘’equivalent incomes’’. This involved fixing reference values for all non-income indicators in terms of what people would be willing to pay ( eg to have good health).
Respondent: Marleen de Smedt, European Commission/Director of Eurostat
Welcomed the paper and the approach, and particularly the aim of a single indicator, with a solid base in agreed principles. She highlighted that the Commission will laungh in 2013 its own first Quality of life indicator with 9 dimensions – it will not be composite but a dashboard. The single indicator is attractive, but difficult to sell to the public – ie what is equivalent income? Happiness is easier to understand, although very misleading and inequality averse.
Paul Schoukens: From soft monitoring to enforceable action: a quest for new legal approaches in the EU fight against Social Exclusion
The paper explored the legal boundaries in the EU fight against social exclusion, and how far Europe 2020 has enlarged the competences. He showed how the poverty target, and more particularly Guideline 10 within the employment guidelines, meant on the one hand a potential strengthening of the EU role, with scope for enforceable action, but contradicted by the tendency to focus only on employment – for example in the CSRs. The paper argues for a more coherent legal approach, respecting the horizontal social clause ( Art 9 TFEU) and fundamental social rights, in ensuring that the economic and employment guidelines are not to the detriment of social inclusion. He also backed the strong views of the conference, that the EU is interfering in social rights, with obligatory guidelines. This was particularly true in the Troika countries. He examined the MOUs, and argued that there is a clear role to insist on Art 9, and could legal action be explored? Ie should MS refuse to pay the fine, saying that it will lead to more poverty and social exclusion and is against the Treaty clauses? However, he concluded that the current EU Treatys are biased towards imbalances from economic to social and the ECJ tends to back this.The recent decision of the Council of Europe which convicted Greece for violating Art 12 is a crucial precedent. He argued that more attention should be given to Article 21 on Citizenship, as the right of residence in any country, implicitly applies to all, including non economic active, and this could lay the legal base for EU frameworks on minimum income and minimum wage.