Opinion of the Economic and Social Committee on "The employment and social situation in the central and eastern European applicant states"

(2001/C 193/19)

On 2 March 2000, the Economic and Social Committee, acting under Rule 23(3) of its Rules of Procedure, decided to draw up an opinion on "The employment and social situation in the central and eastern European applicant states".

The Section for External Relations, which was responsible for preparing the Committee's work on the subject adopted its opinion on 11 April 2001. The rapporteur was Ms Belabed.

At its 381st plenary session (meeting of 25 April 2001), the Economic and Social Committee unanimously adopted the following opinion.

1. Introduction

1.1. The enlargement process offers a unique opportunity to bring about the vision of a common European home and improve the lives of people throughout Europe. So far in the transition process, the applicant states have already made significant progress in transforming their economies and societies. However, a great deal remains to be done to make the vision of a common European home a reality and attain the goal of better living and working conditions for all.

1.2. The ESC's objective in its work on the enlargement issue is to stress that, over and above the Copenhagen criteria, the social consequences of EU enlargement must also be taken into consideration in order to make enlargement socially compatible for all concerned. Building on its information report on the stocktaking of the employment situation and the social situation in the applicant states(1), the ESC has decided to draw up a more far-reaching own-initiative opinion on this issue.

1.3. EU enlargement received fresh impetus from the Helsinki European Council. As a result of the Helsinki conclusions, bilateral negotiations started with Bulgaria, Latvia, Lithuania, Romania, Slovakia and Malta during the Portuguese presidency. At the same time, the applicant states are publicly stating that their aim is to join the EU as quickly as possible.

1.4. The ESC's information report on the stocktaking of the employment situation and the social situation in the applicant states (REX/015) makes it clear that despite the progress made in the CEEC, considerable problems still exist on the labour market and in the field of social development. These may even worsen in some sectors (e.g. steel, agriculture etc.) in the course of structural change, since pressure on the goods and labour markets will increase.

1.5. If enlargement is to be socially compatible, an all-out effort must be made to ease the social problems associated with enlargement and to accompany this with measures for involving the public more in decision-making. Otherwise, the economic and social cost of enlargement may be far beyond what the applicant states and the EU can afford.

1.6. Building on the information report, therefore, an attempt is to be made to map out the social and employment-related impact of the economic developments which accession is likely to bring about, drawing on economic analyses where available and past ESC work. Hence, the own-initiative opinion is also to address structural developments, employment trends and mechanisms for cushioning the effect of economic and social problems. It should be made clear from the outset that given the scale of the issue, this own-initiative opinion inevitably cannot provide a detailed picture of conditions in the applicant states. The Committee would therefore refer to its own work on the individual countries and to the work of the joint consultative committees.

1.7. On 16 November 2000, the ESC staged an enlargement conference in Brussels entitled Towards a partnership for economic growth and social rights. Representatives from the most diverse interest groups in the applicant states were invited to join the Committee in discussing the current situation in the CEEC and the impact of EU accession. Naturally, differences of opinion which exist in a number of areas were also addressed. For instance, some applicant state representatives feel that the EU (and the ESC) are not appreciative enough of CEEC progress to date in the transition and accession process. On the other hand, ESC representatives at the conference pointed out that the CEEC still have a great deal to do to transpose the Community acquis and develop an economic and employment strategy in preparation for integration into the single market.

2. Economic and social development in the CEEC to date

2.1. The collapse of the eastern bloc in 1989 wrought radical changes for the whole of Europe. Most affected, however, were the countries of the former eastern bloc themselves.

2.2. Virtually overnight, the CEEC lost their most important trading partner - the former Soviet Union. These countries were thus forced to forge new links and very quickly turned westward.

2.3. Furthermore, the system of so-called "real socialism" and its planned economy gave way to market economy and democracy governed by the rule of law. This triggered an unprecedented - and ongoing - transformation process affecting all areas of life - the economy, society and politics. For many, this process has brought not only benefits, and, accordingly, has had an adverse effect on the attitude of wide sections of the public towards the market economy.

2.4. The labour market and employment

2.4.1. During the communist period, unemployment problems were not officially recognised, although there was undoubtedly a significant degree of hidden unemployment.

2.4.2. Since the fall of communism, "open" unemployment is rife in the CEEC. Developments took a particularly dramatic turn in the early 1990s when unemployment rose substantially in all the CEEC within a short space of time. Jobless rates ran into two figures in virtually all countries. This upward trend was finally halted in the mid-1990s, and since then, unemployment patterns have varied very widely from country to country. Some countries managed to bring down unemployment from the mid-1990s onwards, while in others, jobless figures began to rise again.

Table 1: Trends in CEEC unemployment rates (in %)

>TABLE>

Source:

The Vienna Institute for International Economic Studies (WIIW), Countries in Transition, Vienna, 1999.

2.4.3. It must be remembered however that unemployment statistics also depend on how they are drawn up. For instance, the drop in Hungary's jobless rate from 1993 is due, among other things, to the removal from the statistics of the long-term unemployed(2).

2.4.4. Major regional disparities also exist on the labour market. In Poland, for instance, some urban areas enjoy virtually full employment, while in most rural regions, the situation is quite the reverse. A particular difficulty is that these regional disparities are growing not shrinking. This process is accelerated by the striking disparities in education between town and country(3).

Table 2: Regional unemployment in the CEEC (2nd quarter 1999; in %)

>TABLE>

Source:

Eurostat.

2.4.5. If we consider individual economic sectors, it is generally true to say that economic restructuring has led mainly to a drop in the workforce in traditional industrial sectors, which are not very competitive and in construction and farming. The mining, iron and steel industries have been particularly hard hit by government measures and action taken by individual companies. Together with the chemical industry, these sectors still have major overcapacity from the planned economy era. Poland, whose overall economy is showing very strong growth thanks to speedy and consistent reforms immediately after the fall of communism, did manage to cut unemployment to some extent in the years up to 1998. In 1999, however, jobless figures rose again as restructuring in the coal, steel and shipbuilding industries led to mass redundancies.

2.4.6. All countries have seen a considerable decline in the level of public-sector employment. One reason for this has been the consistent privatisation of state-run manufacturing and service industries in a bid to establish a market-driven economy. Another reason, however, is simply the difficult public-sector budget situation.

2.4.7. The decline in employment could not be offset by the establishment of a large number of new small businesses and the growing need for jobs in trade, banking and services. Consequently, the first half of the 1990s saw a drop in the overall level of employment. However, this downturn has since eased.

Table 3: Share of people employed in the various economic sectors (in %), 1990 and 1998

>TABLE>

Source:

The Vienna Institute for International Economic Studies (WIIW), Countries in Transition, Vienna, 1999 (*1992).

2.4.8. Agriculture is a particular problem in some countries. In Poland, Bulgaria and Romania, for instance, the proportion of the workforce engaged in farming is well above the EU average. Although the percentage figure has been falling in some applicant states for a number of years, it has increased still further in those states which already have a disproportionately high share of jobs in farming. One reason for this is that, because of growing unemployment in urban areas, many people are returning to their families in the countryside. It may therefore be assumed that there is a high proportion of hidden unemployment in the agricultural sector in these countries.

2.4.9. This trend is a matter of concern inasmuch as - in keeping with the trends in industrialised countries - it can be assumed that, in the CEEC too, structural change will lead to a steady decline in the percentage of the workforce employed in agriculture. The trend is felt more strongly in areas with an above-average share of agricultural workers. In particular, countries where a high percentage of the workforce are in farming are likely to experience a sharper rise in unemployment unless appropriate and timely counter-measures are taken. (The political unrest in Poland brought on by the situation in farming shows that this trend must be taken very seriously.)

2.4.10. One issue which often receives less attention is the illegal employment of foreign workers in the CEEC. Just like the EU, where estimates put the annual figure for illegal workers from the CEEC at some 700000(4), this problem also affects the applicant states themselves. In their case, however, it mainly involves workers from Europe's easternmost regions (e.g. Ukraine and Belarus).

2.4.11. The poor budget situation in the transition countries exacerbates conditions on the labour market. A demand-led employment policy is virtually impossible to finance. In many countries, budget austerity is also affecting active labour market policy. In the Czech Republic, for instance, further cuts have been made in spending on labour market activities and retraining measures, despite rising unemployment figures. Every applicant state has started to introduce active labour market policies and establish a network of regional and local employment offices. From an overall standpoint, however, there is a need to press ahead with the process of establishing modern labour market institutions, flanked by education and training measures.

2.5. Income and purchasing power

2.5.1. Measured as per capita GDP in purchasing power parity terms, incomes in most central and eastern European applicant states have improved steadily since 1993. In Bulgaria and Romania, however, income trends are stagnating at a consistently low level, and the same has been true of the Czech Republic since 1996.

Table 4: Per capita GDP in purchasing power parity terms (in ECU)

>TABLE>

Source:

Eurostat, Economic Accounts of the European Union, 1998.

2.5.2. Apart from in Bulgaria, Romania and the Czech Republic, CEEC growth rates have been higher than the EU average, slowly leading to income convergence.

2.5.3. In some CEEC, per capita GDP in purchasing power parity terms already stands at more than 50 % of the EU average. Slovenia leads the field with around 70 %. Comparing incomes in terms of exchange rates, however, produces a very different picture. Here, the differences between the CEEC and the EU are considerably greater than when comparing in terms of purchasing power parity (see table 5).

Table 5: Per capita GDP/exchange rates (in ECU)

>TABLE>

Source:

Eurostat, Economic Accounts of the European Union, 1998.

2.5.4. The major disparity between income and wage levels in terms of exchange rates and purchase power parities (e.g. more than 1:4 in Bulgaria and around 1:2 in the Czech Republic and Hungary [see table 4]), indicates that considerable adjustments will be needed in the course of EU accession.

2.5.5. Such differences are unlikely to continue in a common market with relatively tightly linked currencies in the run-up to monetary union. The prices of tradeable goods will have to adapt. Increasing real wages to offset these price increases will undermine the CEEC's wage advantage, and with it a key element of their competitiveness. The dilemma between cutbacks in real wages or a collapse in exports can be resolved only through an appropriate increase in labour productivity which, despite rising wages, will lower unit labour costs (productivity-driven wages policy) - or at least put a brake on them. EU schemes must help support the requisite investments in education, fixed assets and infrastructure.

2.6. Social security and health

2.6.1. As a result of high unemployment and with a view to easing budgetary pressures, the CEEC found themselves obliged to adapt their social security systems to the changed situation. The social security and pension systems in particular are suffering as a result of the difficult conditions brought about by tight budgetary policies. Attempts are therefore being made in all of the applicant states to supplement state insurance systems with company and private care schemes.

2.6.2. Pensioners are also hit by the trend in prices for basic consumer goods. However, governments should refrain from introducing price controls to solve the problem.

2.6.3. Unemployment insurance also changed radically in some countries over the past few years. Both the payment period and the level of benefit have been cut and the eligibility criteria are now more strictly applied.

2.6.4. On the whole, despite the moves made so far to reform social security systems, considerable effort is still required, since, in the words of the European Commission, "standards in the applicant states are generally low"(5). Governments in central and eastern Europe thus face a twofold difficulty: the establishment of a social security system which (a) can be financed and (b) is of a high standard.

2.6.5. In addition to social protection, health services have also deteriorated overall as a result of massive savings in public budgets. In all the CEEC, for example, the number of hospital beds has fallen markedly over the past few years. Apart from Slovenia, where overall public health care is comparable to EU levels, all the other applicant states must do much more in the drive to improve their health systems.

2.7. Other economic developments

2.7.1. Schemes to stabilise and liberalise the economy as well as moves towards privatisation have generally improved economic conditions in the applicant states, allowing companies to operate within a free market. Decisions about what, how much and for whom to produce are no longer taken, as they were a decade ago, by public authorities and planning boards; nowadays, the market decides.

2.7.1.1. Virtually all countries have experienced very rapid, large-scale privatisations. According to a World Bank study(6), the results have varied markedly depending on country, sector, size of undertaking, selected method and the legal and institutional environment.

2.7.1.2. Privatisations have tended to be more successful in places with a sufficiently well developed legal and institutional environment and where few core shareholders and foreign investors have had stakes in the privatised companies. The privatisation of small businesses (small-scale privatisation) has also been relatively successful.

2.7.1.3. Results have been poor where the primary aim has been to privatise as many companies as possible as quickly as possible, without giving adequate consideration to the legal and institutional environment required and the macroeconomic impact of privatisation on jobs and income trends. Moreover, in the course of privatisations, it was often not the best bidder whose offer was accepted, but people and companies with close links to the awarding authority.

2.7.1.4. In many cases, therefore, although privatisation has boosted individual companies' productivity, this has often been paid for by a rise in unemployment and growing income disparities. A frequent problem has been the failure to establish the requisite legal and institutional framework in sectors providing public services (such as energy); this may result in the emergence of monopolies. In both cases, back-up measures are needed to counter any adverse developments. Overall, however, it may be said that privatisation has been a key tool in the requisite structural change.

2.7.2. Economic restructuring has also had a positive impact on price trends. The strong inflationary pressure - so much in evidence at the start of the transition period because of the ending of subsidies for basic consumer goods and because companies were unable to respond quickly enough to changes in demand by broadening supply and renovating or expanding their production plants - has for the most part been reduced.

2.7.3. The central banks fostered this positive development by pursuing a responsible interest rate and monetary policy. All the CEEC ended up by making great strides forward in the fight against inflation, although, in the case of the Czech Republic, a very restrictive approach in the second half of the 1990s meant accepting a fall in growth, accompanied by a rapid rise in unemployment.

2.7.4. The stabilisation of economic and political conditions in the CEEC has generated a continuous inflow of foreign direct investment (FDI). Investors providing capital or setting up new businesses in the CEEC have two main goals in mind. One objective in setting up new business establishments is related to the market (i.e. tapping into new market outlets) and proximity to customers, a factor which companies see as particularly important. Another is cost-related (taking advantage of the relatively low production costs); this plays a predominant role mainly in the manufacturing sector. For the CEEC, however, both effects are welcome. The impact of (i) market entry or expansion and (ii) lower manufacturing costs (the result not least of the wage differential between country of origin and country of destination) benefits the CEEC by creating jobs and boosting prosperity.

2.7.5. The decision taken at the Helsinki European Council to start bilateral accession negotiations with Slovakia, the two remaining Baltic states, Bulgaria and Romania further boosted foreign investors' interest, not only in these countries but also in the central and eastern European applicant states as a whole.

2.7.6. Growth rates in the individual CEEC are, with few exceptions, higher than the EU average. However, overall economic growth is lower than anticipated in Agenda 2000. Hence, the gap in economic performance between the CEEC and the EU will narrow much more slowly than predicted just a few years ago.

2.8. Equal opportunities

2.8.1. Legislation in the individual applicant states is largely consistent with the key requirements of EU law relating to the equal treatment of women and men. Unfortunately, practice often differs. As in the Union, the main problems arise above all because economic difficulties affect women and men in different ways(7). Moreover, awareness of the importance of equal opportunities for men and women remains low.

2.8.2. Equal opportunities, however, relate not only to the relationship between men and women, but also to the avoidance of any kind of discrimination based on "racial or ethnic origin, religion or belief, disability, age or sexual orientation" (Article 13, EC Treaty). With regard to the situation of minorities in particular (e.g. Roma), there are still considerable problems in the applicant states.

3. The opportunities of EU enlargement and potential problems

3.1. The political changes in eastern Europe at the end of the 1980s and the resultant transition process presented major challenges for the CEEC. To date, these countries have undergone many positive developments and successful reforms. The reform process has however also been marked by rising unemployment and budget-related cuts in social protection and health care.

3.2. The EU met its responsibility in the first instance by supporting the reform process in the CEEC with funds (Phare) and trade agreements (Europe Agreements). Then, at the 1993 Copenhagen European Council, the EU heads of state or government also agreed that the CEEC would be able to join the Union if certain criteria were met. Accession negotiations were finally officially opened in March 1998.

3.3. The opportunities of enlargement

3.3.1. Cooperation between the Union and the CEEC to date has already brought many advantages to both sides.

3.3.2. Up to now, the EU has benefited in particular from trade with the CEEC and has a significant trade surplus with these countries. Trade with the CEEC as a percentage of the EU's overall external trade reflects the CEEC's relatively low gross national product. A further rise may be expected, particularly as a result of growth in both the CEEC and in the EU.

3.3.3. The CEEC benefit above all from the relatively unhindered access to the EU market, from the various EU support measures (financial aid, political dialogue etc.) and from the substantial involvement of many companies in eastern Europe. Foreign direct investments to date have had a largely positive impact on both jobs and the economy. Furthermore, western European companies operating in the applicant states generate a considerable share of CEEC foreign trade.

3.3.4. In addition to these benefits which have emerged for both sides since the opening-up of eastern Europe, enlargement also presents a range of further opportunities. On the one hand EU enlargement to include the CEEC is a contribution to peace and security in Europe. On the other, enlargement is, as the ESC reiterated in earlier opinions, an "historic opportunity" which should not be missed. It will bring together all the peoples of Europe within a "common home", bring stability and prosperity to the European continent forever, and strengthen the political, economic, social and cultural influence of Europe (in the widest sense) throughout the world(8).

3.4. Problems

3.4.1. In taking this long-term view, however, it is important not to forget that developments in the CEEC will still be accompanied by many problems in the medium term. This is due to the huge "double burden" facing the accession states: while still having to cope with the process of transition, they have undertaken to adopt the entire EU legal acquis.

3.4.2. The tight budget situation in the CEEC, weaknesses in their systems of public administration and law(9) and increasing pressure on labour markets will make it even more difficult to manage this "double burden". Integrating the CEEC into the EU internal market will also heighten competition in these countries.

3.4.3. It is worrying that the economy is split between competitive, clearly export-oriented sectors that are relatively productive and supported by foreign investment and sectors serving the domestic market that are not very competitive, have low productivity and above all inadequate technology. Rapid integration of the latter into an open and competition-oriented system is particularly problematic(10).

3.4.4. Lack of capital - and the resulting lack of innovation - poses a particular problem for many companies. This concerns SMEs in particular, which are a pillar of the transition process and make a large contribution to GNP and employment(11).

3.4.5. These weaknesses may exacerbate the situation in trade and industry in view of emerging merger trends. At the moment the degree of concentration in the retail sector is very low, but pressure from foreign retail chains on the eastern European market is intensifying. This means that in both the retail and other sectors, such as consumer and business services, many companies will face a higher risk of failure and closure and will be more subject to structural change(12).

3.4.6. The demise of regional industrial giants that are no longer competitive is ongoing and threatens the livelihood of whole regions. If it is not possible to set up smaller businesses with marketable products, then the wide local disparities already to be found will be further exacerbated.

3.4.7. In 48 of the 50 regions of eastern Europe, per capita gross domestic product is less than 75 % of the EU average. This situation is typified by the enormous regional differences in income. At the bottom end of the income scale is the Polish region of Swietokryskie, with just 24 % of the EU average. But income levels are also relatively low in the Baltic Republics, Bulgaria and Romania (25 %-34 % of the EU average). Regions of the applicant states on the EU's future external borders face particular problems as a result of their exposed location. At the other end of the scale are above all the urban centres of central and eastern Europe, in particular the Prague region, where income trends actually lie above the EU average(13).

3.4.8. As the ESC already mentioned in its information report, the situation in the CEEC presents certain risks that should not be played down. On the one hand "there is the danger of a 'brain-drain' because of the existing considerable discrepancy in incomes between the EU and the applicant states; this may also have a damaging effect on the economic catching-up process in these states. On the other hand, it is likely that certain groups will have to face major social hardships brought about not only by the ongoing process of radical change but also triggered, in particular, by EU enlargement since both the consumer goods and the labour markets will come under increasing pressure".

3.4.9. In Agenda 2000 the Commission also noted that the applicant states will not be able to enjoy the benefits of accession immediately, and that these benefits will not be distributed evenly. For a long time after accession these countries will face enormous adjustment pressures which may generate economic, social and political tensions.

3.4.10. These tensions may also be felt in certain EU Member States, especially those that border on the CEEC, since the huge income discrepancies create the probability of increased labour migration and company relocations. This may heighten pressure on the labour market. In the absence of adequate transitional arrangements governing the free movement of labour and services and specific measures to address the problem, this will lead to higher unemployment in these neighbouring Member States.

3.4.11. It is therefore essential to seek a socially sustainable accession, in order to ensure social peace in Europe and in particular in the applicant states. A rapid accession without the necessary structures to cushion against social hardship could jeopardise the whole process of integration. Moreover, without adequate measures to ensure sustainable employment in the CEEC there would be a further increase in pressure on labour markets in the Member States.

4. Making the enlargement process socially sustainable

4.1. The basic condition for accession to the Union is fulfilment of the "Copenhagen criteria". These include: (1) establishment of democratic principles and structures, (2) development of a functioning market economy, and (3) acceptance and transposition into national law of the whole EU legal acquis (e.g. social and employment standards, environment and consumer protection measures).

4.2. However, meeting the Copenhagen criteria is in itself not enough, because accession is not just an administrative and technical matter, but rather a major sociopolitical process(14). This means that closer relations with the EU's eastern European neighbours and Community support measures must not be restricted to legal matters or to economic, technical and financial areas. At issue therefore is not only what enlargement means from an economic or legal perspective, but above all what benefits enlargement can bring for the people of Europe.

4.3. It is agreed that enlargement offers a major opportunity to bring Europe together and to improve people's lives. However, this process is not automatic and does not happen of its own accord. For many people in the applicant states, for instance, the transition process to date has brought not only benefits. This has not only influenced the attitude of wide sections of the population towards the market economy, but is also reflected in the considerable scepticism among people with regard to EU enlargement. Growing scepticism in the applicant states indicates that people in the CEEC have not yet been adequately informed or that they expect accession to bring disadvantages. Recent surveys also indicate a similar mood in the current EU Member States(15).

4.4. An important role must therefore be assigned to the social dimension in the European integration process(16). Only if the EU and governments take the concerns of people on either side seriously and pursue with them a political discussion about these concerns, can the enlargement process be free of serious political conflict. This also includes dialogue with the public - in other words an appropriate information and communication policy on both sides channelled towards citizens' needs. In this connection, the Committee welcomes the initiative announced by the Commission to develop a communication strategy.

4.5. In the short time since the fall of communism in 1989, considerable progress has been made in the CEEC towards developing stable democracies and functioning market economies. The ESC nevertheless concludes that in order to make the enlargement process socially sustainable, there is still a great need for action to reduce regional economic disparities (not only between and within the applicant states, but also between the EU and these states), to avoid social hardship, to take more account of the social dimension, and finally to create effective social partnership structures and strengthen social dialogue.

4.6. Promoting economic and social cohesion

4.6.1. Since the continued success of the transformation process depends on management of its economic and social impact, the economic strategies used to effect the transition to a market economy must be socially sustainable. Market-oriented and social measures must always go hand in hand(17). Adverse social and employment trends could cause internal political problems in the CEEC and threaten integration.

4.6.2. The European Parliament also emphasises the role of investment in developing improved social structures in the countries of central and eastern Europe(18). The European Parliament considers development of an effective social dimension to be a basic pre-condition for averting the potential undesirable effects(19) of integration into the internal market(20).

4.6.3. Questions relating to employment, which under the Amsterdam Treaty now play a much more important role in Community policy, should also be addressed more specifically in negotiations with the applicant states. Both in agriculture and industry, there are likely to be considerable structural changes, which could threaten many jobs. Appropriate macroeconomic and regional and structural measures should therefore be taken - taking into account the different degrees of transition and different structures in the applicant states - with the aim of developing new employment opportunities and obviating the impending increase in unemployment with all its implications. Given the state of the applicant states' budgets, however, discussions are needed on the financing of such measures.

4.6.4. Border regions are particularly affected by the expected changes. The best way for them to deal with these changes is through cross-border cooperation (e.g. by using existing EU programmes). The Committee welcomes the fact that the Commission is already working on a communication on the development of border regions.

4.6.5. Agriculture in the CEEC is a particularly difficult area. No matter how big an effort is made, the structural problems faced by agriculture in many applicant states will take more than a few years to be overcome. It can be assumed that, above all, small farms with very low productivity (e.g. in Poland) will not be able to survive the enormous competitive pressures of the internal market in the foreseeable future. It will take a long time to make the necessary structural adjustments and strengthen the competitiveness of agriculture in the CEEC(21).

4.6.6. It must also be borne in mind that the value of farms should not be seen in purely economic terms. As well as their importance for environmental protection and the upkeep of the countryside, their capacity to relieve the social burden must also be recognised as long as it is not possible to create enough alternative jobs outside agriculture(22).

4.6.7. The Committee thus welcomes the establishment of new policy tools as part of the pre-accession strategy (Sapard, ISPA) and the decision of the employment and social affairs ministers on 9 March 1999 to increase the emphasis on employment and social policy in the Phare programme. EU Commission moves to help the applicant states draw up an employment strategy consistent with the Luxembourg process should also be highlighted. As part of this, the Commission is drawing up - individually with each applicant state - a joint assessment paper (JAP), which forms the basis of the employment policy review process provided for under the accession partnerships. This makes it possible, when laying down employment objectives, to cater as far as possible for the individual requirements and particular national circumstances of each accession state.

4.6.8. It should be noted, however, that, at the ESC enlargement conference, many participants from the applicant states were critical of EU schemes in general (in terms both of application and access), accusing them - despite Commission improvements - of lacking transparency and involving excessive red tape (e.g. in twinning arrangements). The Committee would therefore ask the Commission to address these criticisms accordingly.

4.6.9. A key pillar of any employment strategy in the CEEC must be the development of business. As the Committee already indicated in its information report on the employment situation and social situation in the CEEC, enterprises make an essential contribution "to the creation of new jobs and the generation of income, which are prerequisites for further economic and social development. Appropriate measures will therefore have to be taken, e.g. in the fields of training and technical assistance, to develop efficient enterprises".

4.6.10. Without such measures there is a risk not only that insufficient new jobs will be created, but that existing jobs will be threatened, unless businesses in the CEEC are prepared for the further structural changes made necessary by complete integration into the internal market and the accompanying increase in competitive pressure.

4.6.11. Another point concerns social service systems. Here, too, the ESC has already noted that as part of the pre-accession process more account must be taken, under Article 16 of the Amsterdam Treaty, of such systems which work more specifically to strengthen social cohesion and alleviate the distress of the socially most disadvantaged. These systems must therefore not be allowed to succumb to privatisation pressures; rather their importance in meeting present-day needs must be recognised(23).

4.6.12. The problem of a growing "brain drain" in the CEEC, which may make it more difficult for their economies to catch up, was discussed at the enlargement conference on 16 November 2000 referred to above. It was clear opinions vary on the matter. While some are warning of a growing exodus of human capital from the CEEC, moves are being made in the Member States to meet manpower requirements in certain areas (such as IT) by taking on skilled labour from the applicant states. Some applicant state representatives also argue that the "brain drain" has for the most part already taken place. They therefore propose staging a joint seminar together with the ESC on this issue. In this context, the ESC welcomes the call from the Commission and the Council to the applicant states to provide an assessment of anticipated future migration movements and their impact on labour markets and the economy.

4.6.13. Lastly, the problem of corruption and the combating of fraud should be mentioned here. As is made clear in the regular Commission reports on the applicant states' progress on the road to accession, the CEEC still have a great deal to do in the fight against corruption.

4.7. Strengthening social dialogue

4.7.1. The ESC has already noted on several occasions that developing relations between employers and employees as autonomous social partners (while maintaining the role and responsibility of government) is a crucially important part of the accession process(24).

4.7.2. Enlargement will succeed only if it is underpinned by a broad social consensus. This consensus requires a socially acceptable process in which the social partners and other interest groups (e.g. consumers, voluntary organisations) are involved(25).

4.7.3. As the Commission progress reports show, social dialogue is developing in very different ways in the applicant states. According to the Commission, a tripartite dialogue (between government, employers and employees) is developing satisfactorily in Estonia, and Slovenia, whereas in other countries there is room for improvement.

4.7.4. The ESC was also able to ascertain in various talks with social partners in the CEEC (e.g. through the joint consultative committees), that there are considerable difficulties on the social dialogue front; these concern both the social partners' dialogue with governments and among themselves and structural weaknesses and problems within particular social partner organisations.

4.7.5. In the light of these talks, it is apparent that, in some applicant states, workers' rights are not monitored, there is not enough focus on social dialogue and the social partners are not adequately involved in preparing and drawing up reports for the Commission. Certain governments are also very reluctant to grant the social partners an autonomous role. And in some CEEC there are major disparities in the degree of organisation and development of employers' and employees' bodies. For instance, in some countries employers are much less well organised than employees. From the unions' point of view it is difficult to conclude sector-wide collective agreements owing to the absence of a negotiating partner. Most wage agreements are therefore reached primarily at company level(26).

4.7.6. These problems must be overcome before there can be effective social partnership structures that are equal to the challenges of the transition and enlargement process. But this also requires that the social partners have sufficient understanding of the characteristics and problems of a market-oriented economy, privatisation and business restructuring policies, the basic principles and techniques for concluding wage agreements, labour market organisation, vocational training, etc.(27).

4.7.7. Against this backdrop, it is important for the applicant states that their social partners discuss these matters with their EU counterparts, given their many years of experience with a market economy and with EU policies. The Communication from the Commission on adapting and promoting the social dialogue at Community level, in which the Commission also focuses specifically on the applicant states, underlines the role of social dialogue and provides for support measures, is a positive step in this context(28). At this point, the Committee would also refer to the Nice European Council conclusions on strengthening the social dimension of enlargement, where the EU heads of state or government stressed support for the role of social dialogue in the context of enlargement.

4.7.8. Companies from EU Member States operating in the applicant states should also lead by example in fostering social dialogue and industrial relations by, for instance, authorising works councils or helping establish viable employers' organisations in the CEEC and playing a part in these organisations.

4.7.9. For several years already the ESC itself has been widely involved in promoting social dialogue with representatives from the applicant states. Various hearings have been held with representatives of CEEC economic and social interest groups (e.g. in Brussels, Warsaw, Tallinn) and bilateral relations have been established with individual countries, e.g. through the Joint Consultative Committees, which comprise members of the ESC and members of similar interest groups in the applicant states(29).

4.7.10. CEEC representatives at the enlargement conference pointed out, among other things, that the work done by international organisations operating in their countries should be better coordinated and proposed that a role be given to the Committee in that context.

5. Conclusions and recommendations

5.1. As the ESC has already said, eastward enlargement of the EU represents an historic opportunity to unite all the peoples of Europe in a "common home", thereby ensuring lasting stability and prosperity in Europe.

5.2. However, the benefits of EU enlargement will not be enjoyed equally across the board. Enlargement is likely to be accompanied by fiercer competition and increased structural change in the CEEC, which will step up pressure on goods and labour markets. For certain groups this many result in social hardship that should not be underestimated. Against this background, growing scepticism among the general public in the applicant states can be seen as an indication of the fears shared by many.

5.3. The ESC therefore emphasises the importance of the social dimension in the enlargement and integration process. The enlargement process cannot take place without major political and social conflicts unless sufficient attention is paid to the social dimension. But this means taking very seriously - perhaps much more seriously than hitherto - the fears of those considered to be more vulnerable or perceived as being the losers(30).

5.4. Against this backdrop, the Committee welcomes the Commission communication entitled Social Policy Agenda which sets out the Commission's objective "to contribute to preparing the enlargement of the Union under conditions of balanced economic and social development"(31).

5.5. Moreover, the Committee feels that, before successful accession can take place, it is essential to adapt the EU cohesion and structural programmes and the common agricultural policy so that the applicant states can accede on an equal footing.

5.6. In addition to the objectives and actions set out in the Social Policy Agenda, the ESC calls on the Commission to give greater attention to the following issues during the accession negotiations and to consider how they can be appropriately addressed:

- the urgent need to formulate appropriate, socially- and environmentally-sustainable, development strategies for key problem areas (e.g. heavy industry, agriculture) building on an overall approach;

- the need for training measures at every level, but especially for economically disadvantaged regions, so that the economic gulf between town and country can eventually be narrowed. Such training measures are also needed in agriculture and heavy industry to accompany structural change and cushion the effect of adverse employment trends; the Committee feels that the importance of training in the CEEC cannot be stressed often enough and would refer in this regard to its information report on the European dimension of education: its nature, content and prospects(32) and to the conclusions of the Lisbon European Council on education policy;

- improving conditions for SMEs by promoting entrepreneurship (including access to credit facilities), setting up processing and marketing organisations, providing for technical assistance and training measures and establishing an appropriate microeconomic environment, with the aim of encouraging economic growth and creating permanent jobs;

- promoting social dialogue at the various levels and raising awareness among the social partners and civil society organisations, so that they organise themselves more effectively on their own;

- establishing social service systems that help to strengthen social cohesion and alleviate the plight of the socially most disadvantaged;

- the need to step up dialogue with civil society about preparing for EU accession and the consequences of accession;

- fostering equal opportunities for all, especially between men and women and in relation to minorities;

- greater transparency in the application and use of EU programmes and other possible forms of support.

Brussels, 25 April 2001.

The President

of the Economic and Social Committee

Göke Frerichs

(1) The employment situation and the social situation in the applicant states, throughout this paper, the term CEEC refers exclusively to the applicant states.

(2) EP, Working Paper: The social dimension of enlargement, p. 85.

(3) Poland on the road to accession, OJ C 51, 23.2.2000.

(4) Warsaw Voice, 28.5.2000, p. 15.

(5) Agenda 2000, Vol. 1: For a stronger and wider Union, Vol. 2: The challenge of enlargement, p. 59 (COM(97) 2000 of 15.7.1997).

(6) John Nellis: Time to rethink privatisation in transition economies? World Bank, 1999

(7) Agenda 2000, Vol. II: The challenge of enlargement (impact study), p. 46 (COM(97) 2000)).

(8) OJ C 19, 25.1.1993 and OJ C 129, 10.5.1993 - EC/CEEC relations (Bulgaria, Romania and the Baltic states) and OJ C 75, 10.3.1997 - Implications for CAP of the accession of countries of central and eastern Europe.

(9) Cf. various progress reports of the EU Commission.

(10) Hungary on the road to accession, OJ C 117, 26.4.2000, p. 38.

(11) EU Magazine 5/2000.

(12) EU Magazine 5/2000.

(13) Eurostat News Release No 48 of 18.4.2000.

(14) OJ C 51, 23.2.2000.

(15) European Commission, Eurobarometer, report 53, October 2000.

(16) Cf. ESC: OJ C 339, 31.12.1991 and OJ C 129, 10.5.1993, as well as A3-0189/92: European Parliament Resolution on the strategy of the European Union to prepare for the accession of the countries of Central and Eastern Europe, with a view to the European Council in Essen (9-10 December 1994); European Parliament Resolution of 17 April 1996 on the White Paper: "Preparing the associated countries of Central and Eastern Europe for integration into the internal market of the Union" (OJ C 141, 13.5.1996).

(17) OJ C 129, 10.5.1993.

(18) European Parliament Resolution of 17.4.1996 on the White Paper: "Preparing the associated countries of Central and Eastern Europe for integration into the internal market of the Union" (OJ C 141, 13.5.1996).

(19) György Farkas, deputy Secretary-General of the Hungarian Chamber of Commerce, estimates that one third of the 600000 SMEs in Hungary would not survive a rapid accession (Wirtschaftswoche No 13, 25.3.1999, p. 30).

(20) European Parliament Resolution of 17.4.1996 on the White Paper: "Preparing the associated countries of Central and Eastern Europe for integration into the internal market of the Union" (OJ C 141, 13.5.1996).

(21) OJ C 51, 23.2.2000.

(22) OJ C 51, 23.2.2000.

(23) Cf. European Parliament Resolution of 17.4.1996 on the White Paper: "Preparing the associated countries of Central and Eastern Europe for integration into the internal market of the Union" (OJ C 141, 13.5.1996) and CEEP 99/PECO 3: Written position on the EU's enlargement.

(24) OJ C 129, 10.5.1993.

(25) Cf., for example, Reinforcing the pre-accession's strategy, OJ C 157, 25.5.1998, p. 58, Social policy: the social dialogue, OJ C 95, 30.3.1998.

(26) ESC opinion "Poland on the road to accession", OJ C 51, 23.2.2000.

(27) Economic and social organisations in the countries of central and eastern Europe - consultative mechanisms, OJ C 19, 23.1.1993.

(28) COM(98) 322 final. Cf. speech given by Commissioner Flynn in Warsaw on 18.3.1999 (Speech/99/48).

(29) OJ C 157, 25.5.1998, p. 58.

(30) OJ C 51, 23.2.2000.

(31) COM(2000) 379 final.

(32) The European dimension of education: its nature, content and prospects.