Opinion of the European Economic and Social Committee ‘Towards an appropriate European legal framework for social economy enterprises’

(own-initiative opinion)

(2019/C 282/01)

Rapporteur: Alain COHEUR

Plenary Assembly decision	12.7.2018
Legal basis	Rule 32(2) of the Rules of Procedure Own-initiative opinion
Section responsible	Single Market, Production and Consumption
Adopted in section	28.5.2019
Adopted at plenary	19.6.2019
Plenary session No	544
Outcome of vote (for/against/abstentions)	159/0/1

1.   Conclusions and recommendations

1.1.

At a time when the European project needs fresh impetus, promoting diversity in types of enterprise is a factor in job creation, social innovation and cohesion, and competitiveness in Europe. EU law is based on a simplistic perception of the existing types of enterprise in the Single Market, such that social economy enterprises (SEEs) slip through the cracks, being neither capitalist-type for-profit firms nor not-for profit (financially altruistic) entities.

1.2.

Social economy enterprises and organisations are run according to shared features, values and principles such as the primacy of the individual and the social objective over capital, voluntary and open membership, and democratic governance. They seek not to maximise short-term profits, but to ensure their long-term viability. Profits are reinvested in creating and maintaining jobs or in developing activities that pursue the social objective, or else are distributed among the members on the basis of their personal contributions.

1.3.

EU law does not take account of the intrinsic nature of the social economy, in particular its different approach to profits. Article 54 of the Treaty on the Functioning of the European Union (TFEU) is interpreted as drawing a distinction between financially altruistic (i.e. not-for-profit) entities and companies whose operations are rewarded by financial gain. The latter category thus comprises all companies, without distinction and regardless of their legal form, which make a profit, whether or not that profit is distributed.

1.4.

The case law of the Court of Justice of the EU (CJEU) and the European Commission’s decision-making do not pay sufficient attention to businesses that are deemed ‘not-for-profit’ under their national law or that, irrespective of that classification, are founded on ownership, governance and profit-use criteria that clearly distinguish them from capitalist-type for-profit firms, particularly in terms of their conditions for accessing sources of financing. What is more, the need to unlock the potential of all types of enterprise, and the principle of neutrality of EU law in relation to the various company forms, should make it possible to avoid a situation where only one single business model develops.

1.5.

The EESC therefore: — proposes introducing into EU law a legal framework suited to better recognition of SEEs. This framework would be based on a new concept — limited profitability — which would apply to all enterprises that can make a profit but do not intend to distribute that profit to their owners, as their purpose is based on solidarity or the general interest; — urges the Commission to launch a study on the concept of limited profitability and on business models that operate in this way, in order to identify more precisely what is required, in terms of legal, financial and tax frameworks, for cultivating the competitive strengths of these enterprises and ultimately, where appropriate, to prescribe good practice; — urges the Commission to continue the efforts it indicated in its communication on the classification of State aid with regard to cooperative societies, by extending the relevant provisions to all SEEs; — also asks the Commission to draft an interpretative communication on Article 54 of the TFEU and on the Treaty articles relating to competition law, in order to clarify the concept of ‘not-for-profit’ in EU law; — finally, believes that a Protocol on diversity in types of enterprise should be annexed to the TFEU, along the same lines as Protocol No 26 on SGIs, and calls on the Member States to include this revision on the upcoming reform agenda.

2.   General comments

2.1.   Recognition of the social economy by policy-makers

2.1.1.

The social economy (SE) is a growing reality in the economy and territory of the EU. It comprises 2,8 million enterprises and organisations in different forms — including cooperatives, mutuals, social enterprises, associations and foundations — engaged in economic activity, representing 8 % of GDP in the EU and 13,6 million workers, or 6 % of employees in Europe. Social economy entities, from very small enterprises (VSEs) and SMEs to large groups, operate in every sphere of activity. Given its importance and the breadth of its activities, the SE is a major driver of innovative and enduring economic growth in Europe that is socially inclusive and environmentally sustainable.

2.1.2.

The SE now needs to be recognised by policy-makers. Some progress has been made, as evidenced by the Luxembourg Declaration on the Social and Solidarity Economy in Europe — ‘A roadmap towards a more comprehensive ecosystem for social economy enterprises’ — the conclusions of the Employment, Social Policy, Health and Consumer Affairs (EPSCO) Council on ‘The promotion of the social economy as a key driver of economic and social development in Europe’ — adopted for the first time unanimously by the 28 Member States — the Commission’s renewal in 2018 of its Expert Group on the social business initiative (GECES), and the European Parliament’s call on the Commission to ensure that the features of the SE are taken into account when framing EU policies.

2.1.3.

The EESC has several times pointed out the advantages of recognising the SE, the need for EU legislation to take proper account of the diversity of social enterprise forms that exist, and the need to establish a specific action plan for the SE.

2.1.4.

The European Pillar of Social Rights cannot become effective without the participation of SEEs. It is therefore important to ensure, in practical terms, that they can take part in the EU’s economic and social development. While in times of crisis SEEs demonstrate greater resilience and act as a social shock absorber, in daily life they maintain and promote social cohesion and are sources of social innovation. Moreover, many of them reflect the objectives of the Pillar in their operational principles as well as their activities: they are by their nature intended to honour objectives such as promoting secure and adaptable employment, social dialogue and involvement of workers, and a healthy, safe and well-adapted work environment, or to offer innovative responses to certain basic social needs.

2.2.   Lack of legal recognition — a binary and simplistic vision of types of enterprise

2.2.1.

There is very little recognition of SEEs in EU law. Initiatives have been taken in the past to support the development of European cooperatives, mutuals, associations and foundations. But the only draft regulation that came to fruition was that on European cooperatives.

2.2.2.

Currently the approach of introducing statutes category by category seems to have been abandoned in favour of two alternatives: — firstly, promoting the concept of social enterprises at European level and implementing a number of financial instruments to address their financing needs; — secondly, non-binding Commission recommendations encouraging Member States to themselves promote SEEs in their countries, especially those that do not yet have national legislative frameworks.

2.2.3.

Moreover, while the European Parliament (EP), Council and Commission have announced that they will focus on the development of the social economy as a whole, their various actions are tailored to social enterprises and do not apply to all SEEs; similarly, these actions are liable to propagate a narrow vision of the social economy as being limited to activities with a social purpose.

2.2.4.

Above all, the legislation in effect and recent proposals ignore a key issue: that the whole body of EU law is built on a binary and thus simplistic understanding of economic actors.

2.2.5.

This dichotomy has been in place since the Treaty of Rome, and is now enshrined in Article 54 of the TFEU on freedom of establishment. Under that article, EU law recognises two types of entity: non-profit-making, comprising only organisations with financially altruistic activities, and companies/firms, generally constituted under civil or commercial law, and which include cooperatives.

2.2.6.

All enterprises — be they cooperatives, mutuals, social enterprises or associations — that undertake financially viable activities and in certain cases produce surpluses, are equated with capitalist-type, for-profit companies. However, SEEs do not pursue the objective of maximisation of profits or return on capital, but rather a social objective.

2.2.7.

This failure to take proper account of the particularities of SEEs is also reflected in competition law, which equates SEEs to other companies, i.e. entities engaged in an economic activity in a market, regardless of the legal status of the entity and the way in which it is financed. This blindness to the legal nature and objectives of SEEs, and thus to the specific constraints they operate under from an economic and financial point of view, is sometimes reinforced by court and legal literature interpretations that regularly convey the idea that the standard market operator is a for-profit company that seeks to maximise profits or return on capital.

2.2.8.

The model of a capitalist-type, for-profit company pervades all of European law. Thus, despite the general interest benefits from such entities’ existence in the EU Member States, and with the exception of the identification of services of general economic interest, neither association and company law, nor public procurement law, nor tax law distinguish between SEEs and other types of enterprise.

2.2.9.

Thus genuine political recognition can no longer dispense with legal recognition, enshrined in the Treaty on the Functioning of the European Union. This necessarily means eliminating the fundamental historic confusion.

2.2.10.

EU law features a principle of neutrality with regard to property ownership systems in the Member States. This implies that the ownership of enterprises does not fall within the EU’s remit; but it also implies that EU rules should not lead to prescriptions about ownership systems.

2.2.11.

By the same token, Union law does not impinge on any decision to adopt either a capitalist-type for-profit structure for a company, where power depends on the amount of shares (or equity) held, or a social economy structure under which power is distributed on the basis of people rather than capital, and in which redistribution of surplus is strictly limited or where all the surplus is reinvested in the social objective.

2.2.12.

However, when neutrality leads to non-recognition of whole swathes of the economy and allows a certain type of enterprise to be imposed as the reference standard or model for law-making, the principle in question is being misapplied.

2.2.13.

In an own-initiative opinion published in 2009 on diverse forms of enterprise, the EESC noted the need to recognise economic diversity in the Union.

2.2.14.

The entire legal order of the EU needs to be revised to better incorporate the specific role and operating methods of enterprises that have a general interest purpose and whose use of the revenue generated by their activities is strictly in line with the pursuit of social objectives.

2.2.15.

One way therefore would be to provide for recognition of SEEs as a third category of economic operators, alongside for-profit companies and enterprises with altruistic objectives, that limit their profit-making in order to prioritise other ends.

3.   Specific comments

3.1.   Limited profitability: a shared characteristic of SEEs

3.1.1.

Introducing the concept of limited profit would allow a focus on the key difference between SEEs and capitalist-type enterprises. Qualifying an entity as limited-profit makes profitability a means and not the objective of its operations.

3.1.2.

First, it is understood that activities must be financially viable, i.e. not dependent on subsidies or donations for the books to be balanced.

3.1.3.

Second, if activities generate any surplus, then all or the bulk of that surplus, depending on the structure of the entity, must be set aside or ploughed back into the operation to ensure that activities are sustained and developed through investment. For example, cooperatives may distribute part of their surplus to their members in the form of dividends or interest, but only a limited portion of the surplus may be distributed, and that amount theoretically depends on members’ transactions rather than their share of the capital.

3.1.4.

Third, profitability cannot be the only purpose of the activities. The purpose of an SEE’s activities is to meet objectives other than those of a return on capital invested or maximisation of profits. These objectives consist in serving either the interests of the enterprise’s members or the general interest, while in many cases pursuing other objectives relating to social, territorial or environmental cohesion.

3.1.5.

The operational and management constraints that are integral to an enterprise’s purpose are formalised in its statutes. However, EU law must also provide for the existence of entities that adopt these particular types of enterprise and must allow them to develop within the internal market.

3.1.6.

Using the concept of limited profitability makes it possible: a) to avoid limiting recognition of the social economy to social enterprises, i.e. entities with selected social operations, when SEEs across all sectors address economic, social and territorial needs. Any surplus that is created primarily benefits the members of cooperatives or mutuals, and local users of associations providing services. It will never be channelled into hedge funds or to investors on the other side of the globe; b) guarantees that national variation in types of enterprise will be respected, with due regard for the subsidiarity principle.

3.2.   Horizontal application

The concept of limited-profit enterprises should become established in different EU policies.

3.2.1.   Freedom of establishment

3.2.1.1.

In relation to freedom of establishment, a simple re-drafting would allow the existence of limited-profit enterprises to be recognised.

3.2.1.2.

In other words, Article 54 TFEU and freedom of establishment provisions could cover companies or firms constituted under civil or commercial law, including cooperative societies and other legal persons governed by public or private law, regardless of whether these are for-profit or limited-profit entities.

3.2.1.3.

Freedom of establishment is a real issue for certain types of SEE. Because legal forms vary widely between Member States, exercising this freedom in most cases obliges enterprises, when they set up in a Member State, to adopt a form there that is at odds with the rules of operation laid down in their Member State of origin. No equivalent to the European company concept exists for SEEs. Very basic recognition of SEEs — for example via an interpretive communication on Article 54 TFEU — would make it possible both to take better account of their specific features in EU law and at the same time to begin a debate on the different potential responses to the establishment issue, for example via enhanced cooperation.

3.2.1.4.

That would be the first step in a broader process of becoming aware of the social economy and supporting its promotion at EU level. The process should involve both the EU and the Member States, which must be encouraged to create their own national social economy frameworks that accommodate flexible structures for limited-profit companies.

3.2.2.   Competition law

3.2.2.1.

Limited profitability should also become a concept in competition law, without prejudice to the rules applicable to services of general economic interest under Article 106(2) TFEU and its supplementary and interpretive texts.

3.2.2.2.

Even if the only criterion for falling within the scope of competition rules is that an entity operates a business in a market, at the point of applying the rules adjustments could be made so as to take account of certain specific features of SEEs.

3.2.2.3.

Thus in relation to state aid, the CJEU has recognised the specific situation of cooperatives compared with for-profit companies as regards the constraints they face in accessing financing for their activities. In a legal judgment, the Court stated that tax advantages granted to cooperative societies could not be described as giving them a selective advantage since the respective situations of cooperatives and for-profit entities were not comparable. The Court of Justice based its reasoning on the specific characteristics of cooperatives: their control structure and the fact that relations with their members are not purely commercial, their limited access to equity markets, and their necessary dependence on their own capital or credit financing for growth.

3.2.2.4.

In its Notice on the notion of State aid, the Commission took note of the CJEU’s position on cooperatives, and pointed out that preferential tax treatment for cooperatives cannot qualify as state aid.

3.2.3.   Freedom to provide services and public procurement

3.2.3.1.

The Commission has identified SEEs’ access to public procurement as worthy of attention, pointing out that it is difficult for some of these entities to take part in tenders.

3.2.3.2.

Reserved contracts are a priori out of reach. However, there is a blanket exception for economic operators whose principle purpose is to support the social and professional integration of disabled or disadvantaged people. Directive 2014/24/EU also allows contracts relating to health, social and cultural services to be reserved by the Member States for limited-profit enterprises meeting certain operational criteria.

3.2.3.3.

However, it should be noted that the tendering process, where a competition is set up between enterprises based on the free market and private enterprise model, does not always put limited-profit enterprises in a comfortable competitive position. Here again, their sometimes modest size and their more tenuous access to sources of investment financing can be a competitive handicap, whatever the type of activity envisaged. Thus, the division of tenders into lots and award criteria based on the most financially advantageous tender should take account of this difference in situation.

3.2.4.   Taxation

3.2.4.1.

With regard to taxation, in 2013 the Commission still recognised that a favourable tax framework rewards the social impact of social enterprises. There should be a discussion about a preferential tax framework that offers a more generous reward for the social impact of all enterprises with regard to social, environmental and territorial cohesion.

Opinion of the European Economic and Social Committee ‘For better implementation of the Social Pillar, promoting essential services’

(own-initiative opinion)

(2019/C 282/02)

Rapporteur: Raymond HENCKS

Co-rapporteur: Krzysztof BALON

Plenary Assembly decision	24.1.2019
Legal basis	Rule 32(2) of the Rules of Procedure Own-initiative opinion
Section responsible	Transport, Energy, Infrastructure and the Information Society
Adopted in section	22.5.2019
Adopted at plenary	19.6.2019
Plenary session No	544
Outcome of vote (for/against/abstentions)	128/3/6

1.   Conclusions and recommendations

Conclusions

1.1.

Principle 20 of the European Pillar of Social Rights introduces the concept of ‘essential services’ into the EU, something which does not exist as such in the Treaties but which provides that ‘[e]veryone has the right to access essential services of good quality, including water, sanitation, energy, transport, financial services and digital communications. Support for access to such services shall be available for those in need’.

1.2.

Given the examples of the services described as ‘essential’ in principle 20, the EESC considers this to be a reference to services of general economic interest (SGEIs), which are already covered by EU law, in particular by Protocol 26 on services of general interest which is annexed to the Treaty on the Functioning of the European Union (TFEU). Although its interpretative provisions go further than a mere guarantee of access to quality, some of them – to widely varying degrees – are insufficiently regulated and implemented in the Member States.

1.3.

The EESC therefore welcomes the fact that principle 20 of the European Pillar of Social Rights reaffirms the right to access essential services/SGEIs. These are a vital component of social justice and are underpinned by the principle of equal treatment of users, prohibiting any kind of discrimination or exclusion whatsoever, and by the principle of universal access to services of a high level of affordability and quality.

Recommendations

Right of access

1.4.

In order to give effect to the stated principle that ‘everyone has the right to access essential services of good quality’, it must be backed up by tangible measures in relation to sustainable development and social cohesion, while also ensuring that: a) the principle is guaranteed through legislative or regulatory provisions that define it and establish how it will be applied in each area; b) it is specified what compensation people can claim if the principle is not respected; c) legal redress, appeals or complaints are possible if the principle is breached.

Universal access

1.5.

The EESC asks for the concept of universal access to SGEIs to be clarified, and for legislative measures to be introduced obliging Member States to establish universal access indicators for each SGEI (density of service access points, maximum distance to an access point, service regularity, etc.) with a view to preventing services that are of essential general interest for users (for example public transport, post offices, bank branches) – particularly in suburban, rural or low density areas – from being cut or under-maintained and, should this be the case, to ensuring that equivalent alternatives are found.

Universal service

1.6.

As regards electricity, electronic communications, postal services and banking, the universal service from which they benefit is not synonymous with universality since it only guarantees limited access to basic services. This applies specifically to electronic communications, where the services included in the universal service have been largely overtaken by technological developments, are no longer suited to the modern communication tools available on the market, and only serve to widen the digital divide between remote areas and major urban centres.

1.7.

The EESC therefore calls for the universal service to be adapted to guarantee the provision of state-of-the-art services and offer full geographical coverage for all network industries in general and for electronic communications more specifically.

Affordability

1.8.

Given that affordable access is, increasingly, no longer guaranteed by means of a ‘reasonable’ social tariff, but through social assistance which is exclusively reserved for the poorest people, and given that the poorest are not the only ones who have serious financial difficulty in accessing SGEIs, the EESC reiterates its call for affordability to be determined by identifying a basket of services considered essential. The financial contribution of a household for each of these services should be set as an acceptable proportion of the social wage/minimum income, above which prices are deemed to be inflated and require regulatory measures, or should confer an entitlement to public aid.

Quality of service

1.9.

In the light of the poor service quality of different SGEIs in some Member States (delays or cancellations in public transport, poor or insufficient geographical coverage in electronic communications, etc.), the EESC asks the Member States to select indicators for SGEIs that focus on perceived satisfaction, covering for example speed, punctuality, reliability, comfort, availability, competence and helpfulness of service providers, as well as other aspects such as the environment, working conditions and consumer protection.

1.10.

As regards the compensation provided for under European legislation in the event of insufficient quality (delays or cancellations of trains or aircraft, items that are lost or damaged in the post), the EESC is left with the unavoidable impression that some service providers prefer to pay (modest) compensation rather than invest in quality. It therefore asks for the current amounts of compensation to be reviewed and, as a general rule, for appropriate compensation to be introduced for all SGEIs in the event of a breach of public or universal service obligations.

Evaluation

1.11.

In order to guarantee access to quality services, it is essential to develop a method for evaluating the performance of these services. To this end, the EESC calls on the decision-making bodies to clearly define as a first step the concepts, objectives and missions of all services of general interest (economic and non-economic).

1.12.

The EESC therefore calls for an evaluation of services of general interest at national, regional or local level in the Member States; for this evaluation to be independent, pluralist and balanced; for it to cover economic, social and environmental aspects; and for it to be based on a set of criteria and conducted in consultation with all stakeholders, using a new harmonised evaluation methodology at EU level based on common indicators.

European semester

1.13.

Key indicators on SGEIs are lacking in the Social Scoreboard of the European semester, which is supposed to help assess the situation with respect to the social rights proclaimed in the European Pillar. The EESC therefore calls for the essential services under principle 20 of the European Pillar of Social Rights to be made an integral part of the European semester’s Social Scoreboard.

2.   Introduction

2.1.

Through the Gothenburg Declaration of 17 November 2017 on the European Pillar of Social Rights, the European Parliament, the Council and the Commission committed to fulfilling the promise, set out in the Treaties, of a highly competitive social market economy, aiming at full employment and social progress.

2.2.

The 20 key principles of the European Pillar of Social Rights seek first of all to close gaps in the Treaties and in this way they help structure the European legal order, manage how fundamental rights are exercised and contribute to aligning the values that apply within national and European orders.

2.3.

The European Pillar of Social Rights reaffirms some of the rights already set out in EU law and adds new principles that address the challenges arising from societal, technological and economic developments (1). This follows from the recognition of the fact that as things stand, social rights, or at least a portion of them, are – to varying degrees depending on the Member State – not sufficiently regulated and implemented.

2.4.

As a Member State can be held liable for failure to comply with the general principles of EU law, ‘for them to be legally enforceable, the principles and rights first require dedicated measures or legislation to be adopted at the appropriate level’ (2).

3.   Essential services

3.1.

Principle 20 of the European Pillar of Social Rights (‘Access to essential services’) states: ‘Everyone has the right to access essential services of good quality, including water, sanitation, energy, transport, financial services and digital communications. Support for access to such services shall be available for those in need’.

3.2.

The concept of ‘essential services’ does not exist in the Treaties, which only deal with public services (transport) and services of general interest (economic and non-economic). Principle 20 does not provide any definition of ‘essential services’. It merely cites a few examples without providing an exhaustive list. The concept of ‘essential services’ is, however, well established in the framework of the United Nations’ Sustainable Development Goals, where it covers certain services that are also included in other key principles of the European Pillar of Social Rights.

3.3.

The right to essential services is therefore not limited to those set out in principle 20, but also concerns other principles such as childcare and children’s services, healthcare, inclusion of people with disabilities, long-term care, housing, and assistance for the homeless. Implementation of the right to access essential services of good quality will therefore need to be backed up by specific measures for both SGEIs and the areas mentioned above. In this connection, the EESC points out the responsibility and wide discretion Member States have in defining, arranging and financing services of general interest that meet citizens’ needs.

3.4.

In the absence of any definition, and given the examples of services listed under principle 20, it is clear that these are services of general economic interest, and subject to universal service or public service obligations covered by Article 36 of the European Charter of Fundamental Rights and Article 14 TFEU, as well as Protocol No 26 on SGIs.

3.5.

Principle 20 of the European Pillar of Social Rights therefore simply reaffirms existing rights set out in the Treaty. It has to be acknowledged that the interpretative provisions of Protocol 26 on services of general interest go further than a mere guarantee of ‘access to quality’ and provide for ‘a high level of quality, safety and affordability, equal treatment and the promotion of universal access and of user rights’. The EESC views SGEIs as vital components of a social justice system and is therefore pleased that principle 20 qualifies them as ‘essential services’.

3.6.

In order to give effect to the stated principle that ‘everyone has the right to access essential services of good quality’, it must be backed up by tangible measures in relation to sustainable development and social cohesion, while also ensuring that: a) the principle is guaranteed through legislative or regulatory provisions that define it and establish how it will be applied in each area; b) it is specified what compensation people can claim if the principle is not respected; c) legal redress, appeals or complaints are possible if the principle is breached.

3.7.

Services of general economic interest, such as electricity, passenger transport by rail and by road, and electronic and postal communications, known as ‘network industries’, have, since the end of the 1980s, been undergoing a specific, gradual process of Europeanisation and liberalisation with a view to establishing the single market.

3.8.

However, it quickly became clear that these services cannot function according to common competition and market rules alone, and that specific rules are vital in order to ensure that all members of the public have affordable access to these services, which are considered to be essential and are recognised as common EU values.

3.9.

The recognition of these services in primary law was brought up to date by the Treaty of Lisbon. Protocol No 26 TFEU specifies the EU’s common values and in particular the six values that must apply to all SGEIs throughout the European Union: ‘a high level of quality, safety and affordability, equal treatment and the promotion of universal access and of user rights’.

4.   Evaluating the application of Protocol No 26

4.1.

No overall assessment has been made of the positive effects (price reduction, diversification of supply) and negative effects (price increases, creation of oligopolies, market skimming, job insecurity, social dumping) of the policy of liberalising SGEIs. Some of the essential services included in the European Pillar of Social Rights make an effective contribution to economic and social progress and to social relations. For other services, the introduction of competition has led to higher tariffs and/or has weakened public service missions (3).

4.2.

Not only do the EU and the Member States have an increased obligation to ensure the proper functioning of SGEIs, which means developing a progressive approach to evaluating their performance, but it is also necessary for decision-making bodies to clearly define the concepts, objectives and missions. Until this is done, these performance evaluations will not be able to guarantee people the SGEIs they have a right to expect from both their national authorities and the European institutions.

4.3.

At the beginning of the 2000s, the Commission started to draw up an annual cross-cutting evaluation of network industries’ performance, based on the methodological note on the horizontal evaluation of SGEIs (4). These reports were regularly presented and debated at the EESC during public hearings in which all points of view were heard. In 2007, the Commission once again co-organised a workshop at the EESC on a new evaluation methodology based on a study by an external consultant, but the idea of establishing an evaluation of these SGIs was then shelved and forgotten.

4.4.

The EESC reiterates the demand set out in its own-initiative opinion on ‘An independent evaluation of services of general interest’ (5), in which it called for an evaluation of SGIs at national, regional or local level in the Member States; for this evaluation to be independent, pluralist and balanced; for it to cover economic, social and environmental aspects; and for it to be based on a set of criteria and conducted in consultation with all stakeholders, using a new harmonised evaluation methodology at EU level based on common indicators.

5.   Right to access essential services

5.1.

The Charter of Fundamental Rights (Article 36) states that ‘the Union recognises and respects access to services of general economic interest as provided for in national laws and practices, in accordance with the Treaty establishing the European Community’ and requires the EU to include them among the fundamental rights, ‘in order to promote the social and territorial cohesion of the Union’.

5.2.

Key principle 20 of the pillar therefore simply reaffirms the right of every individual to access quality SGIs as a component of the EU’s common values. Like Protocol No 26, the pillar does not stipulate the conditions of access, the level of guarantee or any appeal procedures.

5.3.

The EESC considers that the concept of guaranteed access for all is based on the principles of equal treatment, solidarity, universality, continuity, proximity to the user and affordability.

6.   Equal treatment

6.1.

With regard to SGIs, equal treatment is based on equal (universal) access, for users in comparable situations, to national and cross-border services, prohibiting discrimination or social exclusion of any kind whatsoever (nationality, gender, place of residence, disability, age, etc.).

6.2.

However, equal treatment or the obligation not to discriminate do not prohibit the adoption of measures providing specific advantages for certain categories of users (older people, disabled people or people with reduced mobility, etc.).

6.3.

For certain services, the right of universal access is intended to be guaranteed either by a universal service or by public service obligations imposed on service providers.

7.   Universal service

7.1.

Universal service is justified in the context of liberalising certain SGEIs, where the market alone cannot offer full geographical coverage, affordable prices or an appropriate quality of service. It consists of a ‘set of general interest requirements ensuring that certain services are made available at a specified quality to all consumers and users throughout the territory of a Member State, independently of geographical location, and, in the light of specific national conditions, at an affordable price’ (6). Until now, universal service has only been defined at EU level in the electronic and postal communications sectors, the electricity sector and the banking services sector.

7.2.

The definition of universal service therefore only concerns ‘certain services’, i.e. those set out in an exhaustive list. Universal service is therefore not synonymous with universality, since it does not guarantee access to all the services on the market.

7.3.

This applies specifically to electronic communications (7), where the services included under universal service have largely been overtaken by technological developments and no longer cater for the modern market communication tools available on the market.

7.4.

Many Member States, regions and cities are significantly behind on high-speed electronic communications and/or total geographical mobile phone coverage (grey or white areas), which today are a key factor in improving living conditions, for example by facilitating access to healthcare, education and other public services. It follows that the current shortcomings of the ‘universal service in electronic communications’ are only serving to exacerbate the digital divide.

7.5.

According to the relevant directive here, ‘the concept of universal service should evolve to reflect advances in technology, market developments and changes in user demand’ (8). In order to do so, the Commission must, in accordance with the above-mentioned directive, review the scope of universal service every three years, in particular with a view to proposing amendments or changes to its definition to the European Parliament and the Council.

7.6.

The EESC therefore recommends adapting the conditions for accessing electronic communications in line with technological developments, and in particular requiring full geographical coverage for mobile phones and broadband.

8.   Public service obligations

8.1.

For some SGEIs which do not benefit from universal service, the universal right of access is covered by public service obligations imposed on the providers of these services.

8.2.

Public transport of passengers by road and rail, for example, is not provided as a universal service, but is subject to public service obligations, i.e. a ‘requirement defined or determined by a competent authority in order to ensure public passenger transport services in the general interest that an operator, if it were considering its own commercial interests, would not assume or would not assume to the same extent or under the same conditions without reward’ (9). It follows that public transport services, as they cater to users’ needs, do not necessarily have to function according to market rules. However, in many Member States, rail and road passenger transport lines are either cut or under-maintained in rural or low density areas, for profitability reasons. The same goes for other services such as postal services (post office closures) and banking (branch closures).

8.3.

The EESC therefore calls for the concept of universal access to SGEIs to be clarified, and for legislative measures to be introduced obliging Member States to establish universal access indicators for each SGEI (density of service access points, maximum distance to an access point, service regularity, number of offices, etc.).

9.   Affordability

9.1.

In the best case scenario, the market can only offer a price determined on the basis of costs and thus may not guarantee access for all to an SGEI at an affordable price. One of the dangers of free competition is therefore the temptation for SGEI providers to supply only those customers perceived as being ‘solvent’.

9.2.

In order to counter this risk, Protocol No 26 requires Member States to ensure a high level of affordability for each SGEI.

9.3.

Affordability is defined in terms of the ‘price of services relative to the income of low/average income consumers (reported for consumers with different income levels)’ (10).

9.4.

The requirement of affordable service is therefore an important factor in tackling social exclusion, enabling everyone to access SGEIs, regardless of their income. However, principle 20 of the European Pillar of Social Rights appears to be more restrictive in that support for access to such services shall (only) be available for those in need.

9.5.

The fact is that, increasingly, affordable access is no longer guaranteed by means of a ‘reasonable’ social tariff, but through social assistance, which is exclusively reserved for the poorest people. However, the poorest are not the only ones who have serious financial difficulty accessing SGEIs.

9.6.

When the objective of affordable access for all is not met, regulatory authorities may apply price regulation measures. Thus, the Commission and the European legislator have intervened by introducing a regulation to reduce and then abolish charges for mobile communications (roaming charges) within the EU, if the user is travelling in the EU, but not if the user calls someone in the EU from his or her home country. In its proposal for a Regulation on cross-border parcel delivery services, the Commission announced binding measures if the situation of inflated prices charged by cross-border parcel delivery companies did not improve before the end of 2018 (11).

9.7.

With regard to the assessment of affordability, for many years now, the EESC has been calling for the concept of affordable SGEIs to be clarified and for legislative measures to be introduced requiring Member States to introduce indicators to determine the affordability of these services.

9.8.

The EESC reiterates its call for affordability to be determined by identifying a basket of essential services, with the financial contribution of a household for each of these services being set as an acceptable proportion of the social wage/minimum income, above which prices are deemed to be inflated and require regulatory measures, or should confer an entitlement for public aid.

10.   Quality essential services

10.1.

Protocol 26 calls on Member States to ensure a high level of quality of SGEIs, while the Pillar is limited to essential services ‘of good quality’.

10.2.

In any case, a quality service is one that leaves users satisfied. In order to achieve this, it will be necessary to identify users, their needs and expectations. However, expectations are often only expressed in hindsight, when a user complains about something that has gone wrong.

10.3.

Quality standards are set at EU level for many SGIs, including postal services, electronic communications, water supply, waste collection, passenger transport and social services of general interest. These standards vary and are sometimes very low. For example, although the majority of Europeans have access to high-quality drinking water, in some Member States many citizens prefer to drink bottled water as the tap water is regarded as having an unpleasant taste. It is necessary to update existing standards regularly to boost consumer confidence and improve the quality of tap water, thereby producing a positive impact on the environment by reducing plastic waste.

10.4.

Service quality is a key factor in any evaluation such as proposed by the EESC above. The Member States will therefore have to select indicators for SGEIs that focus on perceived satisfaction, covering for example speed, punctuality, reliability, comfort, availability, competence and helpfulness of service providers. Quality also covers aspects such as the environment, working conditions and consumer protection.

10.5.

Service quality is directly linked to consumer rights. For some SGEIs (rail transport, postal services), European legislation provides for compensation in the event of insufficient quality (delays or cancellations of trains or aircraft, items lost or damaged in the post). Given the huge shortcomings of rail passenger transport in some Member States, the EESC has the unavoidable impression that some service providers prefer to pay (modest) compensation, rather than invest in quality. In addition, in many Member States compensation rights for delays are limited to main lines, while urban, suburban and regional rail passenger services are excluded from any compensation, in line with the derogations permitted under EU law (12).

10.6.

The EESC calls for the compensation system to be applied in the event of a delay to any journey by rail, irrespective of the distance travelled, and for the right to compensation to be set per half-hour delay in the arrival time in relation to the official timetable or per 15 minutes of delay in the departure time.

10.7.

With respect to consumer rights, the EESC calls, as a general rule, for compensation for any SGI in the event of failure to comply with a public service obligation.

11.   European semester Social Scoreboard

11.1.

The Social Scoreboard of the European semester is intended to identify the social challenges the Member States face in applying the principles of the European Pillar of Social Rights.

11.2.

This preliminary analysis tool, combined with a more in-depth analysis at country level, is designed to assess the situation with respect to the social rights set out in the European Pillar based on the key indicators in the Social Scoreboard. However, the essential services under key principle 20 of the Pillar are missing from the Social Scoreboard’s headline and secondary indicators included in the statistical annex of the country reports.

11.3.

The EESC therefore calls for the essential services under principle 20 of the European Pillar of Social Rights to be made an integral part of the European semester’s Social Scoreboard.

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(1)  See recital 14 of the preamble to the European Pillar of Social Rights.

(2)  See recital 14 of the preamble to the European Pillar of Social Rights.

(3)  See the Eurobarometer surveys on services of general interest.

(4)  COM(2002) 331 final.

(5)  267/2008.

(6)  Green Paper on Services of General Interest of 21 May 2003.

(7)  Directive 2002/22/EC of 7 March 2002 on universal service and users’ rights relating to electronic communications networks and services.

(8)  Recital 1 of Directive 2002/22/EC of 7 March 2002.

(9)  Regulation (EC) No 1370/2007 of 23 October 2007.

(10)  COM(2002) 331 final.

(11)  Proposal for a Regulation COM(2016) 285 final.

(12)  Regulation (EC) No 1370/2007 of 23 October 2007.

Opinion of the European Economic and Social Committee ‘Towards a better economic convergence and competitiveness within macro-regions, such as the European Strategy for the Danube region — the role of transnational clusters’

(exploratory opinion)

(2019/C 282/03)

Rapporteur: Dimitris DIMITRIADIS

Referral	20.9.2018 Letter from Victor NEGRESCU, Romanian Minister Delegate for European affairs
Legal basis	Article 304 of the TFEU
Section responsible	Economic and Monetary Union and Economic and Social Cohesion
Adopted in section	4.6.2019
Adopted at plenary	19.6.2019
Plenary session No	544
Outcome of vote (for/against/abstentions)	202/1/2

1.   Conclusions and recommendations

1.1.

The European Economic and social Committee (EESC) recognizes that interregional, cross-national cooperation building upon pre-existing, historical socioeconomic and cultural links is the necessary response to the challenges resulting from a rapid evolving expansion of the European Union (EU), partly induced by intensified global competition and the resulting urge to enlarge controlled markets, in both geographical and economic terms. Establishing an interconnected cross-border and cross-sectoral system of collaboration, based on multi-level governance, and delivering a strategic framework for thematic poles for funding institutions to implement well-targeted projects in a macro-region is of great importance.

1.2.

In their first 10 years of operation, the four macro-regional strategies served as useful tools for cohesion policy, primarily by enhancing integration and cooperation and identifying important development processes involving citizens and regions. These strategies contribute to creating both a deeper and a broader Europe by involving candidate and neighbourhood countries on a level-playing field and by fostering exchange of experience.

1.3.

Nevertheless, performance, in terms of reducing social and spatial disparities and boosting environmental sustainability, remains modest. This is most likely due to the complexity of governance and intergovernmental arrangements, the level of bureaucracy, the lack of cross-regional homogeneity when implementing agreed joint strategies, and insufficient involvement of the social partners, socioeconomic agents and civil society organisations.

1.4.

The EESC supports that macro-regional strategies should be understood as laboratories for developing a bottom-up approach to solving the new challenges facing Europe’s society and economy. These challenges concern areas such as migration, sustainable energy supply, the labour market, education and digitalisation, and cannot be addressed by individual countries, regions or municipalities. Cross-regional, international cooperation is more effective and enables joint solutions.

1.5.

Macro-regional strategies can boost European integration, serving as the major strategic framework for cohesion and sustainability policy. Macro-regional strategies should be financed alongside special programmes such as the Urban Innovative Action programme. It appears advisable to integrate in the revised programming process for cohesion 2020+ the mandatory use of the thematic strategic framework resulting from the macro-regional strategies, in relation to other policies and with respect to EU enlargement and neighbourhood relations.

1.6.

Additionally, macro-regional strategies should also be geared towards the range of policies being promoted under the UN’s 2030 Agenda for Sustainable Development, adopted in 2015. This will strengthen the international visibility and recognition of and support for the regional cooperation in the frame of the four macro-regional strategies.

1.7.

Based on the detailed discussion of the above, the EESC provides in section 5 of the present opinion a list of specific policy proposals. These can be summarised as follows: (i) along with the necessity for strengthened policy interventions, we need to reduce the bureaucratic burden; (ii) introduce functioning networking, interconnection and management of existing databases and help the public make use of existing data and information; (iii) prioritise networking and clustering of the social partners, local socioeconomic agents and civil society organisations, both in the spatial sense (cross-regional clusters and cluster-partnering) and in the sectoral sense (according to the quadruple helix approach); (iv) in the future, macro-regional strategies will significantly benefit from efficient networks for educational activities with respect to the digitalisation of production, as well as from initiatives towards effective interregional research and innovation ecosystems, in basic and applied R & D activities.

1.8.

The development and implementation of macro-regional communication strategies for the stakeholders has a strong supportive role in enhancing visibility, fostering networking and participation. Consolidating communication and trust-building between the core governance of macro-regional strategies and the social partners, business sector, local actors, civil society, and academia should be further supported through hearings, national and macro-regional Participation Days.

2.   Background to the present opinion

2.1.

EU macro-regional strategies were launched as tools for facilitating the cross-national implementation of policies, fostering thereby cohesion across larger geographical areas. One of their goals was to increase competitiveness and socioeconomic development in areas extending over several states, including non-EU Member States.

2.2.

The present exploratory opinion was first intended as an own-initiative opinion to review existing EU policy documents in this area, including the EP Report on the implementation of macro-regional strategies (1), and drawing on existing EESC evaluations of EU policy for enhancing cross-border cooperation and convergence. Following the request from the Romanian presidency, the topic was further extended to include the importance of transnational clusters (2) in strengthening convergence and competitiveness within macro-regions. The opinion focuses on suggesting ways to better target and implement macro-regional strategies. This is done, firstly, by identifying specific needs in the whole region more closely, and thus ensuring the delivery of tangible results, and, secondly, by motivating stakeholders to become actively involved, while taking into account the ‘3 no’s’ principle.

2.3.

The opinion is in line with the EESC’s political priorities for 2018, particularly on ‘strengthening social and territorial cohesion and enforcing fundamental rights’. It is also in line with the Committee’s priority actions under the six-month presidency of the Council of the EU and with the interests of industry, academia, the social partners and civil society in the macro-regions.

2.4.

The opinion is expected to have a constructive influence on policy-makers across Europe, providing an objective analysis and practical suggestions on how to enhance the implementation of macro-regional strategies. It will also specify whether it is necessary to increase their scope and what innovative instruments could be suggested to incentivise cooperation between stakeholders, including opportunities derived from cross-national, intersectional clustering.

3.   General comments: the development of macro-regional strategies so far

3.1.

The performance of macro-regional strategies has suffered owning to the complexity of governance arrangements, the level of bureaucracy in various countries and the lack of homogeneity in the way agreed joint strategies were implemented in the regions involved. This has led to insufficient involvement of the social partners, socioeconomic agents and civil society organisations. As a result, it became necessary to better monitor the implementation of macro-regional strategies using appropriate indicators. This requires reliable and comparable data, which in turn must be detailed enough to reflect the situation in the entire area in question (3).

3.2.

Recent analysis shows that the four macro-regional strategies approved so far – in the Baltic Sea, the Adriatic and the Ionian, the Danube and the Alpine region – differ considerably in terms of the level of economic development of the participating countries. Economic performance was shown to strongly affect both the level of regional cooperation and the effectiveness of policy implementation. Moreover, problems such as commitment, ownership, resources and, in particular, ineffective governance, persist in specific areas.

3.3.

Despite the lack of homogeneity in macroeconomic performance, the Danube macro-region is characterised by strong relations between various areas in the region and by satisfactory integration in the areas of trade, investment and energy. The picture changes, however, when it comes to competitiveness, with significant differences, especially between urban and rural areas. Large variations also exist with respect to governance and institutional aspects.

3.4.

All four macro-regional strategies appear to have successfully brought together different actors, including various private stakeholders as well as public bodies across different levels of government. The EU strategy for the Danube region (EUSDR), in particular, generated a high level of policy dialogue and cooperation, including with third countries. In this context, it should be noted that progress was at its greatest in areas with pre-existing cooperation experience, drawing on deeper, historical socioeconomic links.

3.5.

High expectations regarding the outcome of multi-regional cooperation apparently resulted in the importance of institutional capacity building being misjudged during the early phases of developing the macro-regional strategies. When defining the cooperation agenda in a macro-region it is essential to emphasise issues requiring cross-sectoral and cross-territorial coordination, particularly with respect to institutional capacity building.

3.6.

The overall success of a macro-regional strategy is related to the development of policy solutions through joint efforts across regional borders. To ensure good performance it is essential to establish bottom-up cooperation involving the social partners, socioeconomic agents and civil society organisations, as well as any engaged actors from the entire geographical area, using the quadruple helix approach. These may include actors from industry, academia and R & D, governance (especially local and regional), civil society and the social economy.

3.7.

Related to the above is the fact that the Commission substantially supported cross-border clusters through a range of programming frameworks and financing instruments – Europe INNOVA, Interreg, ERDF and ESF especially with respect to human capital development and life-long-learning. As greater leveraging of other local and/or private resources is possible, this pre-existing framework has been enriched by the current support for European strategic cluster partnerships under COSME and INNOSUP-1 cluster projects for new industrial value chains under Horizon 2020 (4), as well as by utilizing instruments like ‘Invest EU’ programme and ‘Connecting Europe’ facility. There is a strong need for coordinated action aimed at reducing bureaucratic obstacles and directly promoting the creation and operation of entrepreneurial networks through tax-related incentives, financial support for clustered R & D activities and holistic strategies for cross-border marketing.

3.8.

The ex-post evaluation of cohesion policy refers to the link between smart specialisation and clusters. Relevant experience has shown that: (i) promoting networking and establishing clusters amongst companies has been among the most successful means of supporting innovation and development among SMEs. However, use of this tool has been marginal. An example is the DanuBioValNet project, which establishes new value chains for bio-based products in the Danube region; (ii) intermediation in the form of consulting and administrative services (e.g. through regional development agencies, chambers of commerce, cluster managers, etc.) boosts the effectiveness of networking and clustering (5).

3.9.

Differences in implementing rules between countries have been a major obstacle to realizing centrally developed policy plans. The effectiveness of cooperation can only be maximised if modern approaches such as project clusters, project chains and project platforms are adopted, moving from communication towards coordination and finally co-creation. Funding planning should be flexible and must respect regional competences and framework conditions. It is necessary to carefully examine the spectrum of existing financial resources and instruments, including IPA II, which is of major importance.

3.10.

To ensure better coordination and governance of macro-regional strategies, the role of individual stakeholders has to be clearly defined, especially in relation to funding. Future programmes should facilitate transnational collaboration beyond support for individual projects. In this regard, local agents could coordinate their contributions to the ongoing discussion on the prioritisation of goals and tools for the next programming period 2021-2027. This could be an excellent opportunity to reboot the four macro-regional strategies and to include the priorities resulting from the smart-specialization approaches.

4.   Specific comments: recent trends influencing the future of macro-regional strategies

4.1.

Almost 10 years since the launch of the first macro-regional strategy (EU strategy for the Baltic Sea region – EUSBSR), the current political and socioeconomic context at international and regional level is characterised by several trends and/or needs that are clearly connected with macro-regional strategies. We will start by examining those resulting from structural socioeconomic developments, before going on to look at trends linked to environmental preservation and resource scarcity.

4.2.

Contemporary global economic conditions demonstrate that interconnecting roads are more important than controlling spatially determined markets and the origins of resources. This in turn highlights the global significance of the specific region, starting from the Baltic Sea down to eastern Europe, the Black Sea, and the (eastern) Mediterranean. Given that the mobility of commodities and capital across Europe and Asia is key for the future economic (and political) architecture, interest and tensions in the specific wider area are increasing. This also therefore confirms the appropriateness of developing specific macro-regional strategies. It also attests to the global importance of their success and highlights supra-regional priorities.

4.3.

Closely connected to the above is the fact that the main migratory flows pass through the Danube and the Adriatic/Ionian regions. Alongside the mobility of commodities and capital already mentioned, mobility of people has emerged as a major socioeconomic, cultural and political issue. Humanitarian issues, economic opportunities and security concerns are factors in a critical and complex topic that needs to be included on the agenda of each macro-regional strategy, in accordance with the historical European socio-political acquis.

4.4.

The fact that two EU macro-regional strategies concern regions centred around a sea highlights the significance of maritime links, environmental aspects and the importance of the sea-related economic activities. The agents involved in the EUSBSR and the EU strategy for the Adriatic-Ionian region (EUSAIR) should therefore give particular consideration to the priorities of blue growth and to the risks and opportunities associated with the blue economy, which have been highlighted by the EU, the EESC, the UN and the WWF, among others.

4.5.

A major strategic goal of the macro-regional strategies was to promote economic convergence in the EU, which is tremendously important for economic sustainability and the political progressive balance at national and European level. Unfortunately, despite the political will and the EU budget being geared towards this, statistics instead show that regions have been diverging in socioeconomic terms, leading to political upheaval (6). The macro-regional strategies, especially those focusing on central and eastern Europe, have to take this into serious consideration and step up efforts to implement policies in this area, with genuine involvement of the social partners, local socioeconomic agents and civil society organisations. At the same time, macro-regional strategies prove very supportive in integrating new and prospective Member States into the EU. This is evident in the case of the western Balkan countries with links to EUSDR and EUSAIR, but also in the case of Moldova and Ukraine, which receive assistance with implementing their association agreement with the EU.

4.6.

Research in the humanities and social sciences has highlighted the need to move from an approach based on welfare to one based on maximising well-being, with the focus shifting from quantitative economies of scale to increased qualitative variety. In this sense, Europe’s multi-diversity, resulting from its history and natural characteristics, particularly in the regions of the existing macro-regional strategies, becomes a major comparative advantage in the newly emerging global era. It should therefore be ensured that the need to boost socioeconomic convergence will not lead to policies that may downgrade this ‘sociocultural and environmental variety’ as a resource. On the contrary, macro-regional strategies should promote the preservation of diversity in qualitative terms and boost the implementation of projects that will enhance cross-regional co-creation of new products and services.

4.7.

Generally speaking, the intensified international competition means that networking is becoming more important. Nevertheless, the exponential increase in labour productivity, which implies growing importance of qualitative differentiations, calls for clustering and collaborative structures that will utilise scale-related benefits in horizontal activities – e.g. promotion, logistics and transportation, R & D – yet sustain, and even increase, the ability to provide specialised products and services. In other words, current developments in internationalised markets make it necessary to develop spatial and inter-sectoral clusters of (semi-) autonomous producers. This should be one of the major priorities of the four macro-regional strategies (7).

4.8.

Added value can be achieved by linking individual macro-regional strategies, as in the case of EUSBSR and EUSDR (8). This appears to be feasible, especially in the case of issues relating to environmental protection and the rational use of finite resources and energy Relevant successful cases of cooperation between Chambers of Commerce in EUSDR and EUSAIR provide a good example for this (9).

4.9.

With their aim of boosting economic prosperity, macro-regional strategies should increasingly focus on clean technology initiatives and processes favouring the transition from a linear economy to a circular economy. Examples include EUSBSR projects that will be pursued under the Cleaner Growth initiative, and the CirculAlps and AlpLinkBioECO projects under the EU strategy for the Alpine region (EUSALP).

4.10.

Climate change is a challenge that has to be addressed in a well-coordinated manner over larger geographical areas: targeted environment-related investments should help to minimise the consequences of extreme weather incidents and other adverse effects of climate change, while maintaining the prevailing economic conditions and ecological characteristics of the areas in question. As another example, increased marine transportation primarily in Danube could result in decreased greenhouse gas emissions and better air quality in all areas affected by the road based freight transport. Macro-regional cooperation should lead to appropriate sustainable and holistic transport strategies.

4.11.

Another consequence of the need to drastically reduce greenhouse gas emissions (as outlined in the 2015 Paris Agreement) is the penetration of renewable energy sources. This ‘energy transition’ involves gradually phasing out fossil fuel power plants and rapidly increasing the number of wind energy converters and photovoltaic power stations. This transition entails significant changes in the power supply system, with new concepts that will also allow more flexibility in the trade of electrical energy between regions and countries. Macro-regional cooperation will definitely improve the likelihood of the correct decisions being made on issues relating to the energy transition.

4.12.

Overall, the aforementioned dimensions pertaining to the necessary orientation of the macro-regional strategy coincide with the range of policies that are being promoted under the 2030 Agenda for Sustainable Development, adopted by all UN Member States in 2015. In particular, macro-regional strategies should take note of ongoing actions to meet various Sustainable Development Goals (SDGs), possibly liaising with existing regional sustainable development strategy networks (10). Adjusting the agendas of the four macro-regional strategies in this framework will strengthen the necessary holistic approach. It will also boost the international visibility and recognition of and support for regional cooperation in the EU.

5.   Policy proposals

5.1.

Although there is a need to strengthen policy interventions and boost active commitment with respect to macro-regional strategies, there is also a need to reduce the already vast bureaucratic burden. An instrument for this could be to motivate the direct coordination of public stakeholders in the frame of European Groupings for Territorial Cooperation (EGTC), or the collaboration of private stakeholders as well in schemes of specific thematic content.

5.2.

There is a lack of reliable detailed data that enables comparisons between regions and between sectors. There is an overall need to introduce functioning networking and management of existing databases, potentially based on big data but also specific information.

5.3.

At the same time, as well as securing public access to these interconnected functional databases, it is also necessary to boost the public’s ability to use existing data and information. It is vital to have technical support for macro-regional strategies and provide access to tools for using the relevant data, in order to support both local and national governments and private agents and actors. This should be organised centrally but geared towards the region in question.

5.4.

Networking between the social partners, local socioeconomic agents and civil society organisations, in a spatial, but also a sectoral sense (using the quadruple helix approach) as well as their active involvement in decision-making, planning and evaluating policies, is extremely useful for implementing macro-regional strategies in the future, with a view to boosting cohesion and social and environmental sustainability.

5.5.

Moreover, specific political initiatives have to be adopted to strengthen the creation and development of cross-regional clusters and cluster-partnering (11): (i) restating the criteria for participating in clusters supported by EU and national funds, so that the participation of more successful corporations will be enhanced, without risking the self-determination of networks and the relative autonomy of the participating partners; (ii) financing and, in particular, other means of supporting clusters and networks – e.g. tax and process-related measures – should be extended in a timely manner, so that the duration of the clusters will not be limited by design and they are not prevented from reaching their maximum potential level of organisational maturity and financial self-sufficiency (12); (iii) national and (cross-) regional strategic planning has to consider evolving global circumstances and ways of supporting local clustering activities in this framework. Moreover, there should be more incentives to establish structures connecting existing clusters with each other in a regional and cross-sectoral sense, thereby utilising the complementarities of holistic interventions; (iv) the reasonable request to deal with local characteristics and specificities often results in clusters that lack an international focus beyond the cross-border dimension of the specific region. This has to be improved and applied supportive policies should mobilise socioeconomic operation of global course, given the significance of business internationalization. Moreover, this will help toward bridging the time gap between political initiatives and business decision making.

5.6.

Existing and future macro-regional strategies will significantly benefit from efficient networking initiatives in the area of education and administrative services, as well as in effective interregional research and innovation ecosystems and in basic and applied R & D activities. In the ongoing consultation concerning the revision of the EUSDR plan, it has been mentioned that the capacities of local and regional administrations will be enhanced through capacity-building initiatives, cooperation projects, networks for mutual learning, exchange of good practices, and policy recommendations. These could be supported through small-scale funding (as global grants or other tools) for local actors (small enterprises, civil society organisations, youth organisations, academia etc.), which will facilitate an inclusive environment for innovation at transnational level.

5.7.

Particularly when it comes to networking in education activities could be embedded in existing structures, such as the Erasmus+ programme. Policy recommendations should concentrate on key aspects of the specific geographical area, with the aim of opening up new avenues for improved products and services promoting entrepreneurship, and finally supporting the life-long-learning of local human capital in relation to the requirements resulting from the digitalization of production.

5.8.

In the regions of the four macro-regional strategies, we have a long tradition of historical, socioeconomic, cultural and political links, which can be of both a positive and a problematic nature. These links can be used in a constructive way by promoting alternative tools for cross-regional clustering and collaboration, such as the European Groupings for Territorial Cooperation (EGTC).

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(1)  (2017/2040 (INI).

(2)  It needs to be mentioned that by the term ‘clusters’ we mean the networking and thematic or holistic collaboration of agents and institutions from the private sector, the public administration, the academia and the civil society (which for instance goes beyond the networking of small and medium sized enterprises).

(3)  See http://ec.europa.eu/regional_policy/en/information/publications/studies/2017/macro-regional-strategies-and-their-links-with-cohesion-policy

(4)  It is important to mention the success of INNOSUP-1 in promoting clustering. The first six ongoing INNOSUP-2015 projects that started in 2016/2017 reached out to over 2 800 SMEs (e.g. through matchmaking events and calls for ideas/collaboration projects, etc.) and provide direct support for 449 SMEs (e.g. through innovation support vouchers). Overall, INNOSUP-1 cluster projects are on track to support 2 000 SMEs.

(5)  See the ex-post evaluation of cohesion policy programmes 2007-2013, financed by the ERDF and the CF, work package 2 –’Support to SMEs – Increasing research and innovation in SMEs and SME development’, Contract No 2014CE16BAT002, Final report, pp. 10-11 and 14-17,.

(6)  See Zarotiadis and Gkagka (2013), "European Union: A diverging Union?", Journal of Post-Keynesian Economics, Vol. 35, pp. 537-567.

(7)  See Council conclusions of 12 March 2018 calling for further development of the European cluster policy with the aim of linking up and scaling up regional clusters into cross-European world-class clusters, based on smart specialisation principles, in order to support the emergence of new value chains across Europe.

(8)  Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the implementation of EU macro-regional strategies, COM(2019) 21 final

(9)  Danube Chamber of Commerce Association has signed a cooperation agreement with the Forum of Adriatic and Ionian Chambers of Commerce with the aim of exchanging experience and cooperation in projects where the two strategies are complementary.

(10)  Consider, for instance, the newly established SDSN Black Sea ( http://sdsn-blacksea.auth.gr/and http://unsdsn.org/news/2018/10/31/presenting-a-new-regional-chapter-sdsn-black-sea/), the Mediterranean SDSN (http://www.sdsn-mediterranean.unisi.it/) and the SDSN northern Europe (https://www.unsdsn-ne.org/).

(11)  The specific proposals are in line with the first ‘Progress Report on the European Strategic Cluster Partnerships’, prepared by the European Observatory for Clusters and Industrial Change (#EOCIC), that provides an overview of the first results, experiences and good practices achieved by the second generation of European Strategic Cluster Partnerships for Going International (ESCP-4i).

(12)  This need to increase financing in a timely manner also ties in with the proposal for joint cluster initiatives in the COSME part of the Single Market Programme.

Opinion of the European Economic and Social Committee on ‘Communication from the Commission to the European Parliament, the Council, the European Central Bank, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank Investment Plan for Europe: stock-taking and next steps’

(COM(2018) 771 final)

(2019/C 282/04)

Rapporteur: Petr ZAHRADNÍK

Co-rapporteur: Javier DOZ ORRIT

Consultation	European Commission, 18.2.2019
Legal basis	Article 304 of the Treaty on the Functioning of the European Union
Section responsible	Economic and Monetary Union and Economic and Social Cohesion
Adopted in section	4.6.2019
Adopted at plenary	19.6.2019
Plenary session No	544
Outcome of vote (for/against/abstentions)	180/0/8

1.   Conclusions and recommendations

1.1.

Generally speaking, the EESC welcomes the Investment Plan for Europe for its contribution to the promotion of investment in the EU and more effective utilisation of limited financial resources for the purpose of strategic pan-European investments as a new type of EU financial redistribution. The EESC recommends setting an investment target in the EU as one of the criteria for a long-term and sustainable investment policy; the investment target could be a part of the European Semester’s regular cycle and would be evaluated annually.

1.2.

The aim of the Investment Plan for Europe and, more generally, publicly incentivised investment should be to support the EU’s strategic goals, including: (a) the promotion of sustainable economic and social upwards convergence among Member States; (b) sustainable investment, in line with the United Nations Sustainable Development Goals (UN SDGs); (c) facilitating fair, green and digital transitions; (d) strengthening the economic resilience of the European economies; (e) developing strategic infrastructure; (f) promoting productivity, research, development, innovation, education and professional training; (g) increasing social investment; and (h) supporting the competitiveness of the European economy in a global context. The EESC considers that further guidance would be necessary to achieve these goals in geographical and sectoral terms.

1.3.

The urgent establishment of a unified classification system and indicators to identify the degree of sustainable performance, based on the UN SDGs and the European Council’s conclusions of 20 June 2017, would help investors to channel their investment flows towards sustainable activities (1).

1.4.

The EESC is convinced about the huge potential of innovative financial instruments to accommodate the areas covered by the proposed InvestEU Programme. The Committee believes in synergies between the InvestEU Programme and the future centrally managed programmes (Connecting Europe Facility, Horizon Europe, for example), with a preference for the use of a return-based instrument. To achieve this, regulatory simplification is needed when combining several programmes or projects.

1.5.

One of the most important added-values of the InvestEU Programme is the support of large- scale European projects (SESAR, ERTMS, EU smart grids) based on leveraging private funds, but whose realisation also requires Commission action to set up the appropriate regulatory and financial framework. The Commission should make an effort to get the Member States on board for these major projects.

1.6.

The EESC believes the EU should be prepared, at this time, to bear a greater risk in order to achieve a greater boost to jobs and living standards. The Committee therefore recommends a higher MFF commitment be allocated for the purpose of this instrument.

1.7.

The EESC very much supports the Commission’s effort to identify the primary obstacles to more intensive investment activities in the areas of the Single Market environment, integrating infrastructure, education and skills requirements, and the alignment of State-aid rules.

1.8.

Nonetheless, the Committee considers that overcoming the EU’s investment deficit, one of the most serious risks to the future of the European economy, would require a greater financial effort from the EU, the Member States and the private sector. This is why it calls on the EU authorities to strengthen InvestEU’s financial capacity within the Multiannual Financial Framework 2021-2027.

1.9.

On the other hand, the Committee believes that it is necessary to make more effort and to establish a greater linkage between the EFSI (or InvestEU Programme, respectively) and the other investment programmes of the EU and the Member States, promoting the necessary synergies, avoiding duplications and overlaps between them and directing investments in such a way as to meet more precise objectives.

1.10.

The EESC proposes to enhance the scope of the InvestEU programme in order to provide European companies with the necessary guarantees that enable them to invest outside the EU area and promote EU trade.

1.11.

The EESC strongly recommends that the Commission step up its efforts to raise awareness among European businesses and citizens about the benefits obtained from the Investment Plan for Europe, especially with regards to SMEs, thus making them aware of the EU contribution.

2.   General context of the proposal and key facts

2.1.

This opinion draws directly on and follows on from the conclusions adopted in the InvestEU (2) opinion as well as other opinions on the EU’s Multiannual Financial Framework 2021-2027 and on the EU’s economic and investment performance (3). Consequently, the conclusions explicitly expressed in these opinions will not be repeated in this document, which by implication agrees with them.

2.2.

The European Commission’s Communication on an Investment Plan for Europe: stock-taking and next steps fully agrees with the conclusions of the adopted InvestEU (4) opinion, particularly the following points: — investment activity is the only major macroeconomic indicator not to have reached its pre-crisis level of 2006-2007, and encouraging the use of all relevant instruments to support it is therefore fully justified and legitimate, — the creation of a financial instrument to support investment, based on the guarantee principle, constitutes a significant innovation in the financing of major investment projects in the public interest, — involving private capital is very beneficial and desirable for this purpose. However, ill-designed public-private partnerships (PPPs) may end up costing more than direct public provision of the same services. Public investment in high-quality, affordable and accessible public services in the EU must be a priority, — in addition to domestic investment, support should also be given to investment that has a significant cross-border dimension. The model can also be used to implement the EU’s development investments outside the EU, — the implementation of structural reforms at Member State level as well as across the EU as a whole may enhance the effects of investment activities, — investments made should respect the needs of the Single Market, where appropriate, in all its dimensions, the functioning of the financial markets, transport and energy infrastructure, and the preparedness of human resources to meet these challenges.

2.3.

The European Commission’s Communication ranges more broadly than usual by addressing the need to remove the obstacles that hinder the recovery of stronger investment and the more efficient use of financial instruments to support investment.

2.4.

While the draft regulation on the InvestEU programme deals mainly with the technical parameters of this instrument, the Commission’s Communication focuses in particular on the economic, political and social backdrop, as well as an analysis and description of the environment in which the instrument will be used. The EESC agrees with this general view.

2.5.

The first major priority for the Juncker Commission (late 2014 to early 2015) was to help remove or reduce the investment gap in the EU after the crisis. Without sufficient and profitable investment, Europe’s future economic prosperity and its ability to compete economically at global level cannot be ensured. This is why the Investment Plan for Europe project, which after 2020 will chiefly be symbolised by the InvestEU Programme, was adopted and put into practice. At the core is a financial instrument constructed on the basis of a budget guarantee. The EESC feels that this instrument is not only suitable for securing investment within the EU, but can also represent a highly effective EU platform for developing and supporting investment projects outside the EU (in relation to the new objectives of the EU multiannual financial framework for the period 2021-2027 in terms of external action, globalisation and greater number of external projects).

2.6.

The profitability and efficiency of investment depends on having a sound economic structure. Structural reforms are thus seen as a prerequisite for ensuring that investment brings about the expected impact. Significant structural failures result in a wide range of obstacles — regulatory, administrative, barriers to fair competition, etc. These obstacles are serious at both national and cross-border level.

2.7.

The EESC appreciates the fact that the EU supports the most open environment possible for both investment and trade, provided that labour and social rights and the protection of the environment are respected. At the same time, however, it is paying close attention to the ever-deeper global political and strategic risk with which some foreign investment may be linked. The EESC welcomes and supports the introduction of a protective function for certain foreign investments, the purpose of which is not primarily business-related or economic, but related to politics and power.

3.   General comments

3.1.

The EESC appreciates the benefits of the Investment Plan for Europe, in particular in the following respects: — at the time of the crisis, private financing came to a halt and financial needs were therefore not met. Investors began to consider risks much more carefully and thoroughly. The Investment Plan for Europe has proven to be an appropriate, safe, practical and carefully considered platform for boosting investment and enlisting private finance, — the Investment Plan for Europe has positively contributed to the targeted and systematic monitoring of instances of market failures or adverse investment situations and helped to tailor perceptions of risk to the need to address them in a market-compatible way, — the examples of supported projects mentioned in the European Commission’s Communication clearly show that, in the absence of the Investment Plan for Europe and the European Fund for Strategic Investments (EFSI), private capital would never have been put towards this type of project without sufficient guarantees and adequate risk coverage (unless it was philanthropically motivated) and public resources for such ventures would by their nature be limited, — the Investment Plan for Europe and the EFSI require projects to undergo a direct financial return test and thus meet the minimum quality standard imposed on them.

3.2.

The total public and private investment in the EU was, in 2018, 20,5 % of EU GDP, still more than two percentage points lower than 2007. The slow recovery of the investment rate, from 2013, has been due to both public and private investment.

3.3.

Public investment in the EU27 for the 2014-2018 period was, on average, 2,86 % of GDP (2,68 % in the euro area), compared to 3,4 % of GDP between 2009 and 2013 (3,2 % in the euro area) (5). In particular, net fixed capital formation was mostly negative from 2014 to 2017, indicating a falling public capital stock. As this contradicts on a macro-level the goals in the Investment Plan for Europe, the EESC encourages the European Commission to take measures to promote public investment at Member State level. These measures should be included in the country-specific recommendations along with the other relevant tools of the European Semester.

3.4.

The largest part of the investment gap is due to private investment. In light of this, the total size of the Investment Plan has been too low from the start. Over a five-year period, the European Union plans to have mobilised investments of EUR 500 billion, amounting to EUR 100 billion or roughly 0,6 % of EU GDP per year.

3.5.

The EESC is aware of the scope of repayable financial instruments for supporting investment activity in the EU and is also aware of their as yet untapped potential. For example, they lay the foundations for the much more efficient and convenient use of available funds. Unlike subsidies, they are repayable funds which can be subsequently and repeatedly used following turnover. In addition, the expected tightening of monetary policy and impaired credit availability may further increase their attractiveness. If they are handled appropriately from the point of view of economic policy and governance they facilitate the creation of a robust financial basis for very long-term (even several decades-long) support for public interest investments (it is essential to define what is meant by public interest; the prevailing view currently is that financial instruments are appropriate when it comes to remedying various kinds of market failure). The development of financial instruments also helps to encourage variation in the financial products available on national markets as well as on the pan-European financial intermediation market and to strengthen its diversity and the diversity of available financial products and solutions.

3.6.

At the same time, the EESC emphasises that by no means every project is suited to support from financial instruments (the general criterion for relevance is the existence of a market environment and the risk of market failure in its many forms). Where the project has proven itself worthy of support through financial instruments, the effect is achieved in three basic ways: — through support for a project that is capable of achieving additional and measurable benefits (for example, increasing profitability, productivity gains). In this case, the beneficiaries of the aid are almost exclusively individual businesses or their groupings, such as clusters, — through savings in the performance of existing processes (such as lowering energy demands and costs, and reducing running costs by optimising processes). In this case, public sector bodies may be supported by financial instruments in the same way as business entities, — through the establishment of financial participation for consumers of a given product or service. This participation may be further supported by a targeted subsidy or other national or regional support programme that enables a financial instrument to be repayable.

3.7.

The EESC takes note of a fundamental part of the European Commission’s Communication, which deals with identifying existing obstacles. These are primarily obstacles to the Single Market and the need to further deepen it and remove obstacles (both by overcoming existing administrative and regulatory obstacles and by undertaking the technological modernisation of the Single Market through the realisation of the Digital Single Market and the related implementation strategy). We are also thinking of the development potential of capital markets and their incorporation into the Capital Markets Union. There are also obstacles to and potential for integrating transport and energy infrastructure, either through the development of trans-European networks (TENs) or on the basis of an energy union. It is also important to bear in mind the human dimension and the education and skills requirements of the workforce (in line with the principles of the European Pillar of Social Rights) as well as the alignment of State-aid rules. From the point of view of optimising synergies under the MFF for the period 2021-2027, the EESC also notes that it is necessary to ensure maximum compliance with the ESI Funds.

3.8.

The EESC believes that it is necessary to make more effort and establish a higher level of consistency between the EFSI (or InvestEU Programme, respectively) and with the other investment programmes of the European Union and those of the Member States. This will help in promoting the necessary synergies and avoiding duplications among programmes.

3.9.

Publicly incentivised investment should be directed at precise objectives that are clearly and strategically set at the European level in order to fulfil the strategic goals of the Union. The areas that will be supported are set out in Section 1.2 of this document. In light of this, the EESC considers that it would be necessary to provide further guidance, specifically in terms of the sectoral allocation of credit to the EFSI and the future InvestEU programme.

3.10.

More specifically, regarding the European Commission’s Action Plan on Financing Sustainable Growth, the urgent establishment of a unified classification system and of indicators for identifying the degree of sustainability performance has to be underpinned by a holistic understanding of the impact of economic activities and investments on environmental sustainability and resource efficiency as well as on social and governance objectives, in accordance with the UN SDGs and the European Council’s conclusions of 20 June 2017. This approach should help investors to channel their investment flows towards sustainable activities that allow for the implementation of the 2030 Agenda in a full, comprehensive, integrated and effective manner (6).

3.11.

The original Juncker Plan used to guarantee or backstop EUR 21 bn to leverage up to EUR 315 bn. In InvestEU the Commission proposes a backstop of EUR 38 bn (+ EUR 9,5 bn from financial partners) in order to leverage up to EUR 650 bn. On the face of it, the InvestEU initiative doubles the firepower of the Juncker plan, plus it enables Member States to pledge up to 5 % of their cohesion policy allocations to the four guarantee compartments. The EESC welcomes this enhanced instrument but considers that the commitment of EUR 15,2 bn, which represents 1,2 % of the next MFF, is not adequate to achieve the goal of boosting investment back to pre-crisis levels. A 2 % commitment (EUR 25,5 bn), for example, could leverage additional public and private investment of over EUR 1 trillion.

3.12.

There is a need to promote and support the participation of European companies and consortia in international tenders and public procurement. The scope of the InvestEU Programme could be extended to cover all geographical areas and to provide guarantees to European companies investing outside the EU. This could be the first practical reaction to the Belt and Road Initiative.

4.   Specific comments

4.1.

The EESC recommends that appropriate attention be paid to ensuring the removal of obstacles at national and regional level, in line with the principle of subsidiarity.

4.2.

The EESC calls on the European Commission to clearly and unequivocally determine the possibilities for integrating the EFSI, the future InvestEU Programme and the ESI Funds. The proposal for a regulation refers in many places to synergies between the chapters and the programmes of the MFF, but the reality is far less accommodating to these synergies. Current practice shows limitations to the possibility of combining the EFSI with the ESI Funds. The EESC does not consider this to be desirable going forward and suggests setting clear rules that make it possible to use the ESI Funds (in the form of a subsidy) and the EFSI (in the form of a financial instrument) for the same project.

4.3.

The EESC calls on the European Commission to take a comprehensive view of investment when advocating an extension of EFSI. Member States must be enabled to have the necessary fiscal resources for public investment. As expenditure is invariably linked to tax revenues under the current fiscal rules of the European Union, the European Commission must be the leader in determined action with effective instruments against tax fraud, tax avoidance, money laundering and the illegal activity of tax havens. This includes eliminating the unfair tax competition that is practised today by some Member States that favour the aggressive tax planning of multinational companies.

4.4.

Certain types of investment, such as public infrastructure, can be provided more efficiently and with less cost to society using the public sector rather than Public-Private Partnerships. Where this is the case, the European Commission is encouraged to enable Member States to invest sufficiently without cutting social expenditure. Following long-standing rational public finance theory and practice, future generations that benefit from current investment should pay a fair share in its financing through the issuing of government bonds in the present. If public investment were to be financed solely by the current generation through higher taxes or lower government expenditure, it would be left with an unduly high present burden. In practice, this means making the Stability and Growth Pact (SGP) more flexible through the so-called Golden Rule: public investment expenses will not be accounted for purposes of calculating public deficit objectives. A flexible approach to the implementation of the newly adjusted SGP, introduced by the Commission in 2014, has had positive effects on growth. It should be maintained and targeted at investment that are of high public interest.

4.5.

EMU reform can provide the needed governance for an adequate investment policy. In particular, the completion of the Banking Union and the Capital Markets Union, putting into operation their instruments, can help the financing of companies, especially SMEs. The EESC considers this an emergency and regrets the delays coming from the European Council in this respect.

4.6.

The EESC considers that it would be necessary to provide further guidance regarding the sectoral allocation of EFSI aid and the future InvestEU programme. In the opinion of the Committee, investments should have priority in three sectors: (a) the construction of a European green and digital economic model; (b) research, development and innovation; and (c) education and training. To ensure a fair transition to a viable green and social model, investments of a social nature should be promoted along the lines indicated in the recommendations of the High Level Group on investment in social assistance and support (7).

4.7.

Audits by the European Court of Auditors (ECA) and the European Investment Bank (EIB) on samples of projects in the Infrastructure and Innovation Window (IIW) have suggested that about one third of projects could have been entirely financed from sources other than EFSI. Project promoters mainly choose EFSI due to a lower cost of funding and partially because of a longer maturity of the loans.

4.8.

Counting a project that would have been realised through non-EFSI sources of finance as additional with regard to EFSI squares with the common, non-technical understanding of additionality. It raises questions about the relevance for the real economy of the definition and practical application of additionality in the EFSI regulation and practice. This may undermine the credibility of the much needed EFSI. The EESC therefore considers that the EIF should primarily focus its activities on projects that are truly additional in the sense that they would not have been realised in the absence of EFSI financing to ensure the maximum effect on the real economy and to encourage trust in the EFSI by the general public.

4.9.

As the European Court of Auditors has noted, the methodology used to estimate the investment mobilised overstated, in some cases, the extent to which EFSI support actually induced additional investment in the real economy. Furthermore, the EESC considers that the European Commission should follow the recommendation by the European Court of Auditors to develop comparable performance and monitoring indicators for all EU financial instruments and budgetary guarantees in order to increase transparency and the ability to assess their results.

4.10.

As the ECA has noted, the EFSI has also partly replaced funding from other centrally managed EU financial instruments, in particular in the fields of transport and energy. We encourage the Commission and the EIB to consider potential future overlaps between operations under the EFSI Infrastructure and Innovation Window and the European Structural and Investment Funds financial instruments.

4.11.

In order to ensure a proper evaluation of EFSI mobilised investments, the EESC encourages the European Commission to systematically conceptualise the data collection that is necessary to carry out the statistical ex post analysis in order to evaluate the multiplier estimates of individual projects. This may help to improve future ex ante calculations.

4.12.

The EESC recommends that, in addition to the European Investment Advisory Hub (which is primarily intended to support large investment projects with a clear European added value), a network of national and regional advisory offices should operate, with a consistent methodology and interpretation across the EU, and providing advisory services in particular to SMEs and their more regionally focused projects.

4.13.

The EESC reiterates the need to carry out an eligibility test on projects for repayable financing through financial instruments, and recommends that the European Commission set up an expert platform. In this, the three basic requirements for financial instruments must be respected: effectiveness (which is ensured by the manager of these funds performing his or her duties, thus satisfying the public interest in a qualitatively different way from subsidies); usefulness (which is based on the legitimacy of each programme or part thereof that is earmarked for repayable instruments); and sustainability in its economic, social and environmental dimensions (which is based on the definition of the principle that revolving instruments should be repayable).

4.14.

The EFSI Regulation does not establish geographical distribution criteria for the guarantees it grants. It establishes that they are governed by demand. However, the Steering Committee of the EFSI established an indicative geographical diversification and a geographical concentration limit in the Framework for Infrastructure and Innovation. The Regulation does not set concentration limits for the Framework for SMEs. The Committee strongly believes that the Investment Plan for Europe and the future InvestEU programme must be instruments for economic and social convergence, and not divergence, between Member States. Although the information provided by the European Commission indicates that the trend towards geographical concentration has been partially corrected in 2018, the issue is sufficiently important for the adoption of political guidelines and regulatory changes necessary for this situation to end. As one avenue to improve the situation, the Committee welcomes the setting-up of National Promotional Banks and Institutions in countries that lack them to cooperate with EFSI and the EIB and encourages all Member States to do this.

4.15.

The EESC points out that, particularly in the next programming period of the fiscal framework, it will be more important for financial instruments to have a specific function for a specific purpose and that the proposed rules assume a wide range of combinations between them, thus opening up space for providing ‘tailor-made’ solutions to individual projects. Financial instruments are not homogeneous in type and a loan, guarantee, direct capital input or project bond can be earmarked for a specific type of project. When using these instruments, preference should in practice be given to ‘tailor-made’ solutions because it is precisely through these that the potential of financial instruments can be fully exploited.

4.16.

If structural reforms are deemed important in general to achieve a higher level of investment, they need to be spelled out explicitly and in a detailed manner. Several structural adjustments and reforms during the period of austerity policies in programme countries have worsened the weakness in private and public demand, driven up unemployment, increased uncertainty and lowered the income of households and the sales expectations of firms. They have therefore contributed to an increase in the investment gap. The EESC therefore recommends that reforms should be promoted that: (a) improve the business environment; (b) facilitate the financing of companies — in particular SMEs; (c) increase productivity; (d) promote research, development innovation and training; (e) promote the creation of quality jobs; (f) strengthen collective bargaining and social dialogue at the European and national level; (g) strengthen domestic demand; (h) increase economic resilience; and (i) enable an adequate level of public investment, for instance through the creation of effective planning capabilities within the public sector.

4.17.

Along with the need to improve the synergies between the investment programmes of EU and Member States, there is also a need to promote the achievements of these programmes among citizens: around 945 000 SMEs are expected to benefit from EFSI and many more from the InvestEU programme. The benefiting SMEs must be made aware of the support received from the EU, for instance through a clarifying statement in the financing contract as well as via the use of the European Union’s logo on the contract.

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(1)  According to the European Commission’s Action Plan on Sustainable Growth Financing.

(2)  OJ C 62, 15.2.2019, p. 131.

(3)  OJ C 440, 6.12.2018, p. 106, OJ C 62, 15.2.2019, p. 83,OJ C 62, 15.2.2019, p. 90, OJ C 62, 15.2.2019, p. 126, OJ C 62, 15.2.2019, p. 312, and OJ C 159, 10.5.2019, p. 49.

(4)  OJ C 62, 15.2.2019, p. 131.

(5)  European Economic Forecast. Statistical Annex. European Commission, November 2018.

(6)  See European Parliament legislative resolution of 28 March 2019 on the Proposal for a Regulation of the European Parliament and of the Council on the establishment of a framework to facilitate sustainable investment (COM(2018)0353 — C8-0207/2018 — 2018/0178(COD)).

(7)  Investing in Social Care & Support. A European Imperative.

Opinion of the European Economic and Social Committee on ‘Communication from the Commission to the European Parliament, the European Council (Euro Summit), the Council, the European Central Bank, the European Economic and Social Committee and the Committee of the Regions Towards a stronger international role of the euro’

(COM(2018) 796 final)

(2019/C 282/05)

Rapporteur: Philip VON BROCKDORFF

Co-rapporteur: Dimitris DIMITRIADIS

Referral	European Commission, 24.1.2019
Legal basis	Article 304 of the Treaty on the Functioning of the European Union
Section responsible	Economic and Monetary Union and Economic and Social Cohesion
Adopted in section	4.6.2019
Adopted at plenary	19.6.2019
Plenary session No	544
Outcome of vote (for/against/abstentions)	200/3/3

1.   Conclusions and recommendations

1.1.

The EESC notes that the international role of the euro has not yet recovered to the pre-financial crisis level. Whereas the European Commission’s proposed measures, as contained in the Communication, are welcome and deemed necessary by the EESC, they may not go far enough given the extent of the euro area’s social and economic challenges. Social cohesion, economic upward convergence and the promotion of competitiveness and innovation, in particular for small and medium-sized enterprises (SMEs), should be the basis on which the euro area’s economy gathers pace and supports a stronger international role for the euro.

1.2.

The EESC urges the EU to redouble its efforts towards greater social cohesion and economic convergence across the EU. Major differences between Member States as well as within Member States still exist and these differences act as a hindrance to taking advantage of economic opportunities that could benefit the EU as a whole.

1.3.

The EESC cautions that ongoing technological breakthroughs such as fintech and digitalisation, and the emergence of other international currencies in the longer-term may potentially foster a multipolar system based on more than one key currency.

1.4.

The EESC believes that the euro has the capacity to increase its international status. At the same time, however, the EESC suggests that the overriding priority for the euro area will, first and foremost, be to put its house in order and achieve integrity and prosperity by improving its growth outlook and restoring the sustainability of public finances. This process, which requires, inter alia, the completion of the Economic and Monetary Union and of the banking union, ought to be the priority in achieving a stronger international role for the euro.

1.5.

The credibility of the EU’s single currency, which is a prerequisite to enhancing the international role of the euro, requires further action towards sound national fiscal and growth-enhancing policies as well as further efforts towards a healthier financial sector. In this connection, the EESC reiterates the relevance of supporting SMEs and further increasing productivity as a means to enhance the euro area’s competitiveness in international markets.

1.6.

The EESC is of the opinion that the benefits of market integration should not be eroded by financial instability, and calls for sustained action to reduce non-performing loans in a socially sustainable way, especially following the political agreement reached on capital requirements for banks’ bad loans in late 2018.

1.7.

The EESC believes that in order for the euro to increase its role as an international currency, the fragmentation of the euro area’s sovereign bond market, which makes the sovereign debt markets significantly less deep and liquid, should be addressed. The EESC urges the Commission to investigate options for creating more liquid and safer euro assets.

1.8.

The path towards a stronger international role of the euro may be somewhat facilitated by the ECB, first and foremost, through the fulfilling of its mandate of maintaining price stability in the euro area. Moreover, support from the ECB towards macroeconomic policies and deeper Economic Monetary Union and Capital Markets Union provides further impetus towards strengthening the international role of the euro.

1.9.

The EESC is also of the opinion that additional measures are required to deepen the European financial sector, including a stronger European financial market infrastructure and solid interest rate benchmarks. Moreover, the promotion of a wider use of the euro in strategic sectors is also considered crucial in contributing towards an increased international role of the euro.

1.10.

Finally, the EESC urges Member States to take a more unified approach in international diplomacy, something which could in turn result in enhanced trade opportunities. This unified approach could also be boosted by taking a more pro-active stance that seeks to promote the EU’s interests first and foremost, especially by anticipating strategic and diplomatic initiatives taken by China and the US.

2.   Background

2.1.

The Communication ‘Towards a stronger international role of the euro’ (1), published in December 2018, argues that there is scope for the euro to further develop its global role, so that it is more commensurate to the euro area’s political, economic and financial weight. The achievement of this objective requires the further strengthening of the structures of Economic and Monetary Union, including through the adoption of all pending proposals for completion of the banking union and decisive progress on the capital markets union.

2.2.

This working document is in line with calls made in previous EESC opinions (2) (3) which highlight the fact that the completion of the banking union, in particular a stronger and more uniform deposit insurance cover, and capital markets union is of paramount importance to ensuring a competitive European business environment for both large and smaller-sized enterprises, and to creating a genuine single European currency.

2.3.

In the 2017 Rome Declaration, the leaders of the 27 Member States and the European Council, the European Parliament and the European Commission, stated their commitment to making the European Union a stronger global actor by extending existing partnerships and developing new ones, promoting stability and prosperity at the regional and global level, shaping global events, and undertaking international responsibilities (4).

2.4.

For his part, the president of the European Commission, in his State of the Union address of September 2018, emphasised the importance of the euro in the international monetary system and called for more action to ensure that it plays its full role on the global stage (5).

2.5.

Within this context, the Commission has set out a roadmap for deepening the Economic and Monetary Union (6) which calls for an integrated and well-functioning financial system including the completion of the banking union and capital markets union (CMU).

2.6.

The Communication on Capital Markets Union (7) points out that the European Union needs well developed and integrated capital markets to strengthen the international role of the euro. A successful capital markets union will contribute towards a stable financial system, better access to finance for businesses, and thus more investment opportunities.

2.7.

In a similar vein, the 2016 JRC Science for Policy Report (8) shows that sound macroeconomic policies, the deepening of the EU’s Economic and Monetary Union, and the development of the capital markets union, will all contribute to further strengthening the role of the euro on the global trade and finance markets.

2.8.

The European Commission recommends (9) the wider use of the euro in energy-related projects and financial transactions as a means of achieving the EU’s energy policy objectives, reducing the risk of disruption to energy supplies and thereby promoting stronger autonomy on the part of European businesses.

3.   General comments

3.1.

The euro has come a long way in its 20-year history. It very soon evolved into the second most important international currency in the world (behind the US dollar) (10). Specifically, around 60 countries in the world are either using, will use or link their currency to the euro. At the same time, the euro represents around 20 % of international reserves of foreign central banks, thereby indicating its importance as a safe store of value, and constitutes one fifth of international debt issued by businesses and foreign governments. Last but not least, the euro is widely used for international payments: around one third of the value of international transactions were either invoiced or settled in euros in 2017 (compared to about two fifths for the US dollar).

3.2.

The international use of the euro is beneficial as it: (i) lowers exchange rate risk and associated costs for European businesses; (ii) increases price transparency, which allows firms to source cheaper raw material and consumers to buy cheaper goods; (iii) imposes greater inflationary discipline, which in principle leads to lower interest rates paid by households and businesses; (iv) enhances financial autonomy and provides access to finance on more favourable borrowing conditions for European businesses (including SMEs) and governments as European financial markets become more integrated, deeper and more liquid; and (v) fosters further intra-EU and international trade.

3.3.

At the same time, the strengthening of the euro’s international role would provide market participants around the world with an additional choice, thereby rendering the international economy more insulated from shocks related to the strong reliance of many sectors (e.g. energy, commodities and aircraft manufacturing) on the US dollar.

3.4.

The ranking between the dollar and the euro has not changed in the last two decades. Although the gap between the two currencies had gradually narrowed since the launch of the euro, it widened again after the start of the eurozone crisis. This situation is likely to persist in the foreseeable future despite the fact that the euro is issued by the world’s largest trading bloc. Thus, it seems that the strengthening of the euro’s international role is not just a matter of economic size and openness, but relates primarily to its limited ability to provide stability in times of global financial distress.

3.5.

There are still other factors holding back a stronger international use of the euro, including: i. the historically dominant role of the dollar as the global international reserve currency, ii. the lower costs associated with the use of the dollar and its higher liquidity particularly in money market operations, and iii. the currently incomplete integration of European financial markets which underpin the single currency. iv. Moreover, the fact that most of the international financial systems make use of platforms for trading, clearing and payment settlement located outside the euro area or operated by non-European companies does not bode well for a stronger international role of the euro.

3.6.

A stronger international role of the euro also requires an even more stable and resilient economic environment and a smoother functioning of the financial system. To this end, a number of initiatives have been proposed to promote the performance of the euro area economies (11) and to better absorb large asymmetric shocks in the euro area (12). The emphasis, however, should not only be put on absorbing asymmetric shocks, but also on improving the euro area’s divergent behaviour stemming from the very different economic, social, and political structures of its member countries. These divergences, especially in fiscal policy, wage evolution, productivity and governance, threaten the future prospects of the euro. Without some degree of fiscal union, the architecture of the common currency remains incomplete and leaves the euro area vulnerable to future financial and economic crises.

3.7.

The further internationalisation of the euro could entail greater risk potentially resulting in undesired temporary currency appreciation, especially during times of global turmoil. This, in turn, would reduce the competitiveness of domestic producers and hurt the euro area’s exports performance. Increased international use of the euro might also result in some costs but these would be outweighed by other benefits such as greater monetary policy autonomy and stronger international transmission of monetary policy.

3.8.

The international role of the euro has, to some extent, been driven by the euro area itself, with euro area investors being significant purchasers of euro-denominated bonds issued by non-euro area residents. However, the euro’s international role is characterised by a strong regional focus, being most prominent in countries located in the immediate vicinity of the euro area. In particular, there is ample evidence showing that the City of London plays a key role in the market for euro-denominated bonds issued by non-euro area residents, be it on the supply side, the demand side or as an intermediary. In this context, Brexit could have some effect on this market.

3.9.

From a broader perspective, the international role of the euro would be enhanced if the EU were to pursue a more unified foreign policy and insist on a continued multilateral approach to trade. The EU’s currency can only achieve a high level of international standing when the EU acts in a unified way, and when these actions are backed by its collective diplomatic and economic force. This should apply in sectors such as energy, transport, industry and other sectors where the interests of the EU and euro area as a whole ought to come first. It is also vital for the EU to speak with one voice on geopolitical developments such as the increasing influence in international trade of China via its One Belt, One Road initiative, an economic and diplomatic programme that could transform and dominate trade in Asia and beyond. The implications of this economic and diplomatic programme need to be assessed in depth by the EU since this would enhance China’s global economic presence. The EU and the euro area in particular cannot afford to stay idle as this programme unfolds.

4.   Specific comments

4.1.

Given the benefits associated with the euro as referred to in 3.2, it may appear surprising that not all Member States have actually joined the euro area. The reasons for not joining may vary and may include the state of preparedness of the Member States in question and their compliance with the economic criteria necessary to join the euro, as well as, in some cases, remaining legal obstacles to fulfilling such criteria. Overall, non-participation reflects the disparities persisting within the EU in terms of social cohesion and economic convergence. These disparities need to be addressed if enlargement of the euro area is to lead to further economic stability in the euro area, and make it more resilient to external economic shocks. This, in turn, would reinforce the EU’s status as a global power, and further strengthen the euro’s international role.

4.2.

The interaction between fiscal and monetary policy across the euro area is crucial for the future of the euro and its international role. Stable macroeconomic conditions, however, depend on both the fiscal and monetary stance shifting to offset sovereign debt sustainability concerns and enhance growth prospects. Again, the situation varies within the euro area due to the sub-optimal fiscal-structural-monetary policy mix in the aftermath of the global financial crisis, which led to the adjustment burden being unequally shared among the euro area Member States. This is a reflection of the existing institutional framework on which the euro was built, which acts as a constraint on individual Member States and lacks instruments to secure an effective coordinated economic and fiscal policy stance across the euro area.

4.3.

This explains in part why within the euro area imbalances and inequalities prevail and why it is deemed so necessary to speed up upward convergence. This would help improve economic performance and support social and political stability, all of which are essential for a stronger international role of the euro. As things stand, the challenges of monetary policy in an economic area where the economic and social conditions of Member States are so diverse are formidable.

4.4.

Steps must also be taken to address the problem of non-performing loans (NPLs). NPLs represent a considerable burden for the financing of the EU economy since they distort the allocation of credit, reduce market confidence and ultimately slow down economic growth. One must recognise that there are still significant risks in the national banking sectors of the euro area hampering the development of a common deposit insurance system. Clearly, reducing NPLs and recapitalising banks carries a cost for governments and the private sector alike. In accordance with its previous opinion (13), the EESC calls for responsible lending by credit institutions and highlights the need for national authorities and European institutions to join forces and make further progress in building a comprehensive and reliable EU framework for dealing with NPLs.

4.5.

The completion of the banking union as well as further integration of the capital markets union is also deemed crucial for macroeconomic stability. The banking union is key to reaping the benefits of cross-border banking activities in the monetary union. Though significant progress has been achieved, the banking union is not yet complete. The euro area also needs to continue making progress with other important initiatives to work towards a more complete financial union. The capital markets union will help foster cross-border financial integration, and banks and capital markets can complement each other in financing the euro area economy.

4.6.

Acting together, the banking union and the capital markets union can take the Single Market for financial services to the next level for two main reasons: (i) the presence of healthier, deeper and more integrated financial markets would allow businesses to gain access to credit on more favourable terms, enabling them to undertake profitable investment; and (ii) financial market integration would improve the financing environment especially for SMEs, which are often described as the backbone of Europe’s economy in terms of job creation, innovation and economic growth. In an integrated financial market, banks could exploit economies of scale more easily by offering similar or even the same products and services in several Member States. Furthermore, they would probably increase their cross-border holdings of assets and be able to build larger and more diversified collateral pools for securitised products and covered bonds.

4.7.

A well-functioning and integrated capital market is deemed very important for a functioning monetary area, so overcoming existing weaknesses in European capital markets should be a priority, especially in the case of a no-deal Brexit. However, we should bear in mind that the CMU project contains a very diverse set of approaches, some of which may not have brought about the desired outcome as originally conceived. Examples include pan-European personal pensions and the initiative concerning the securitisation market, though in regard to pensions, the EESC recognises the role state pensions play for people who cannot afford private pensions. Indeed, the success of the CMU has been rather mixed so far. Nevertheless, slowly but surely, these initiatives will eventually contribute towards a strengthened international role of the euro.

4.8.

Also, in the aftermath of the financial crisis, it is important to understand that the further strengthening of the international role of the euro depends on the financial stability of the euro area. The issuing of common euro area bills, notes and bonds as safe assets, similar to the ones issued by the US Treasury Department, accompanied by an appropriate governance structure (including a robust and reliable fiscal policy framework), would foster greater stability by supplying safe and liquid debt instruments suitable for financing unexpected increases in public expenditure.

4.9.

The issuing of common euro area bonds in particular should also go hand in hand with an improved supervisory framework. It is necessary to consider the risk element of such products, possibly through a pooling of the risks and guarantees, especially in the context of a highly integrated CMU.

4.10.

Increasing the international role of the euro, especially to compete with the US dollar as a reserve currency, should not be considered a one-way street for gaining competitive advantage. It can also bring global pressure to bear on the domestic economy of the euro area relative to economic developments in competitor nations. However, reacting effectively and with one voice could bring about greater social cohesion and economic convergence across the euro area. European initiatives to foster cooperation on defence and international affairs are also likely to enhance the EU’s geopolitical role and promote the euro’s global outreach.

4.11.

The challenging path towards a stronger international role of the euro may be somewhat facilitated by the ECB, first and foremost, through the fulfilling of its mandate of maintaining price stability in the euro area. Moreover, support from the ECB towards macroeconomic policies and a deeper EMU and CMU provides further impetus towards strengthening the international role of the euro.

---

(1)  COM(2018) 796 final.

(2)  OJ C 262, 25.7.2018, p. 28.

(3)  OJ C 197, 8.6.2018, p. 1.

(4)  https://www.consilium.europa.eu/en/press/press-releases/2017/03/25/rome-declaration/

(5)  https://ec.europa.eu/commission/sites/beta-political/files/soteu2018-speech_en_0.pdf

(6)  https://ec.europa.eu/commission/sites/beta-political/files/reflection-paper-emu_en.pdf

(7)  COM(2018) 767 final.

(8)  http://publications.jrc.ec.europa.eu/repository/bitstream/JRC96913/lbna27754enn.pdf

(9)  C(2018) 8111 final.

(10)  COM(2018) 767 final.

(11)  https://ec.europa.eu/commission/sites/beta-political/files/communication_-_long-term_budget_for_europes_priorities.pdf

(12)  COM(2018) 387 final.

(13)  OJ C 367, 10.10.2018, p. 43.

Opinion of the European Economic and Social Committee on ‘Proposal for a Council decision on guidelines for the employment policies of the Member States’

(COM(2019) 151 final)

(2019/C 282/06)

Rapporteur: Ana BONTEA

Referral	Council of the European Union, 12.3.2019
Legal basis	Article 148(2) of the Treaty on the Functioning of the European Union
Section responsible	Employment, Social Affairs and Citizenship
Adopted in section	5.6.2019
Adopted at plenary	20.6.2019
Plenary session No	544
Outcome of vote (for/against/abstentions)	211/3/10

1.   Conclusions and recommendations

1.1.

The EESC reiterates and builds on its previous findings and recommendations regarding the guidelines for Member States’ employment policies (1).

1.2.

The EESC welcomes the measures taken at European and national level that have led to progress in the field of employment, and recommends that they be maintained and developed in order to foster economic and social sustainability, a workforce that is skilled, trained and therefore better prepared for new developments, particularly technological ones, and labour markets that can respond rapidly to economic change, while achieving the objectives of full employment and social progress, reducing disparities, promoting equal opportunities for all and social inclusion and combating poverty, so as to eliminate regional disparities in living and working conditions, and ensure a more efficient labour market and more effective social dialogue.

1.3.

The EESC reiterates that when designing policies for regulating the labour market and social rights, competitiveness, productivity and social sustainability/workers’ rights should form a seamless part of those policies, given that there is a clear connection between them. All policies implemented by European, national and local institutions should take into account an appropriate balance between economic sustainability, and social and environmental sustainability.

1.4.

Policies and structural reforms are needed that facilitate the creation of quality jobs, and foster responsible entrepreneurship and the growth of SMEs and social enterprises.

1.5.

The EESC underlines the importance of ensuring inclusive, equitable and high-quality technical, vocational and tertiary education, including higher education, of ensuring a high level of relevant skills and knowledge, for employment, decent jobs and entrepreneurship, and promoting lifelong learning opportunities for all.

1.6.

The proper functioning of social dialogue is essential to improving the design, implementation and follow-up of reforms (2).

1.7.

The EESC maintains its earlier recommendations to make further efforts to eliminate disparities, and would point out that upward convergence is a cross-cutting principle, which must be taken into account and integrated into all EU policies.

1.8.

The EESC reiterates its findings and recommendations on the European Pillar of Social Rights (3).

2.   General comments

2.1.

The proposal for a Council Decision provides for the four guidelines for the employment policies of the Member States set out in the Annex to Decision (EU) 2018/1215 to be maintained in 2019 (4).

2.2.

The EESC reiterates and builds on the findings and recommendations it made in previous opinions (5) regarding the guidelines for Member States’ employment policies.

2.3.

The EESC welcomes the measures taken at European and national level that have led to progress (6), and recommends that they be maintained and developed whilst ensuring continuous improvement in job quality and reducing inequality (because there are still differences between the Member States, between regions and between different groups of people on the labour market, with growth not benefiting all countries, regions and individuals equally, and some countries continuing to face high levels of unemployment, with real household incomes below pre-crisis levels and high poverty rates).

2.4.

For 2020, the Member States and the EU, in consultation with the social partners, are to work towards developing a new coordinated strategy for employment which, in particular, seeks to promote economic and social sustainability, a workforce that is skilled, trained and therefore better prepared for new developments, particularly technological ones, as well as labour markets that are responsive to economic change, with a view to achieving the objectives of full employment and social progress, reducing disparities, and strengthening the functioning of the labour market and the effectiveness of social dialogue.

3.   Specific comments

3.1.   Boosting the demand for labour and investment

3.1.1.

‘As reported in the 2019 country reports, all Member States experienced barriers to investment in different policy areas’. ‘Examples include high regulatory and administrative burden, the lack of predictability in regulatory frameworks, the effectiveness of justice systems and inefficient public administration’ (7) (reforms and investment require sufficient administrative and technical capacity for Member States to deliver on expected results), cumbersome and lengthy approval procedures, not to mention skills shortages due to weaknesses in education and training systems. Skills shortages are mentioned in several country reports as barriers hampering and delaying investment. Despite recent efforts and progress (8) as regards some shortcomings in the financial system, mention has also to be made of remaining difficulties that businesses — especially SMEs — face in accessing finance for investment (9). All these vulnerabilities, with relevant cross-border implications, require appropriate action at European and national level if the EU and its Member States are to return to their pre-crisis investment levels, and if the objectives established under the EU 2020 strategy on R & D and employee training for businesses are to be met.

3.1.2.

More targeted investment policies are needed, coupled with a well-designed set of structural reforms, which facilitate the creation of quality jobs, foster responsible entrepreneurship and genuine self-employment, and support the creation and growth of SMEs and social enterprises.

3.1.3.

An inclusive, consistent and effective cross-cutting European policy for SMEs is needed, and we need to move from the principle of ‘Think small first’ to the stage in which we apply the principle ‘Act small first’; thus the EESC reiterates its earlier recommendations (10), including creating an indicator measuring the conditions for entrepreneurship.

3.1.4.

Against the backdrop of demographic trends, productivity growth is key to ensuring future sustainable economic growth in all Member States. The key challenge for decision-makers and the social partners is to increase productivity growth in Europe (11) through more targeted investment in physical and human capital and in the exploitation of technological advances in industry and services, by stepping up productive investment in innovation, research and development, in projects that ensure growth and in physical and social infrastructure such as ICT networks and care facilities. Greater efforts are required to invest in quality job creation and to tackle precarious work as this also restrains productivity.

3.2.   Improving access to employment, skills and competences (12)

3.2.1.

A particular concern in 2019 is confirmation of a mismatch between structural skills and labour market requirements, with EU companies increasingly experiencing difficulties in hiring workers. This is due to the lack of relevant skills in the EU, which is increasingly acting as a constraint on production capacity. The lack of skills exists not only in countries with a high level of employment but also in those with a high level of unemployment, and is more acute in certain sectors: construction, ICT services, engineering and financial services (13). Stronger action is needed to address this by reforming education and training systems as a priority in most countries, and by promoting an approach based on results in higher education.

3.2.2.

The priorities are: ensuring equity and equal opportunities, equal access to quality education, to a high level of skills and knowledge, and to a fair distribution of learning outcomes.

3.2.3.

Educational institutions and teachers should be provided with the support, space and tools needed to instil the values of democracy, active citizenship, critical thinking, tolerance and peace, against the backdrop of the problems of migrant/refugee inclusion, right-wing extremism and populist nationalism.

3.2.4.

Effective vocational education and training based on dual training can foster the employment of young people.

3.2.5.

Bringing about full digital literacy for all teachers and pupils as well as for all Europeans, including those in marginalised areas, requires proper public funding, state-of-the-art equipment and competent technical staff.

3.2.6.

Addressing skills gaps is a multifaceted task requiring further effort. Creativity, entrepreneurship and mobility in education and training should be fostered at all levels, as well as lifelong learning and the strengthening of links between business and education providers. The social partners also have an important role to play in this regard.

3.2.7.

In addition to access to quality education and vocational training, persons with disabilities, and other groups facing disadvantages, need targeted measures and support to improve their access to the labour market.

3.3.   Enhancing the effectiveness of social dialogue at national and European level (14)

3.3.1.

Effective social dialogue is key to achieving the above-mentioned objectives of upward social convergence and access to quality employment, skills and competences and to improving the design and implementation of reforms stemming from these objectives, with a view to increasing ownership.

3.3.2.

The timely and meaningful involvement of the social partners throughout the European semester is essential to improving engagement in policies, thereby facilitating their successful implementation in a way that balances the interests of workers and employers. Cooperation between the social partners can be a driving force for successful, sustainable and inclusive economic, employment and social inclusion policies.

3.3.3.

The social partners can come up with innovative solutions for dealing with societal and labour market developments, demographic change, digitalisation and the impact of globalisation. The legislative framework at national and EU level should create the space for innovation at business, sectoral and national level, in order to spur on the development of the social partners. The European Social Fund (ESF) has an important role to play in providing capacity-building support for the social partners, as confirmed by the quadripartite statement on ‘A new start for social dialogue’ (2016); the EESC encourages the Commission and the Member States to ensure that the recommendations of the social partners are implemented (15).

3.3.4.

The social partners’ participation in the European semester also requires additional support for capacity building in order to be able to contribute to the different phases, including the implementation of reforms. Similarly, the social partners’ capacity must be strengthened in some countries in order to implement the results of the European social dialogue.

3.3.5.

As reported in the 2019 country reports, positive developments in some Member States contrast with steps back in others. In some Member States, involvement of the social partners at national level is actually quite limited. Consultation of the social partners should be mandatory.

3.3.6.

Social dialogue should play a greater role in the design, implementation and monitoring of reforms. Social partner agreements identifying urgent challenges and policy drivers to improve labour markets should be taken into account, as well as the country reports and the Social Scoreboard.

3.4.   Promoting equal opportunities for all, fostering social inclusion and combating poverty (16)

3.4.1.

The EESC reiterates that when designing policies for regulating the labour market and social rights, competitiveness, productivity and social sustainability/workers’ rights should form a seamless part of those policies, given that there is a clear connection between them. All stakeholders must commit to promoting inclusive growth as well as fostering conditions that are favourable to business, with the aim of creating more and better jobs. The only way of building fairer societies is to generate more inclusive and sustainable economic growth and jobs with the aim of ensuring that people have decent working conditions, adequate remuneration and pensions and are able to exercise their rights.

3.4.2.

Despite the improving situation throughout Europe, differences still remain between Member States, between regions and between different groups of people in the labour market. Growth is not benefiting all countries, regions and citizens in the same manner. Some Member States are still experiencing high unemployment, real household income below pre-crisis levels and high poverty rates. Regional differences remain large and are increasing within some Member States.

3.4.3.

The country-specific recommendations (17) can play a key role in increasing the effectiveness of the employment guidelines and the European Pillar of Social Rights, providing a significant opportunity to shape national policy in line with the guidelines and the principles of the Pillar, with a view to achieving common outcomes, and they should seek to reduce these differences and increase and channel resources into doing this.

3.4.4.

In some Member States unemployment rates have not fully recovered and are still above 10 %. The situation of young people remains a challenge in some countries: the high proportion of young people neither in employment, nor in education or training raise concerns for their present and future employability (18). In others, increasing labour shortages constitute a bottleneck to further growth.

3.4.5.

Overall, despite increasing employment rates among women, gender gaps in employment rates persist and lead to gaps in pay (19). Low-skilled people and people with a migrant background in particular, face difficulties in finding jobs (20). People with disabilities also remain at a disadvantage (21). Moreover, large regional disparities in labour market outcomes exist in many Member States. Demographic changes and technological developments are reshaping European job markets. These problems should be addressed through legislative/administrative measures and cooperation between the relevant institutions and the social partners.

3.5.   The European Pillar of Social Rights

3.5.1.

The European Pillar of Social Rights is fundamental to improving working and wage conditions and social protection systems in Europe, guaranteeing work-life balance, and improving social standards and convergence among EU Member States — including collective bargaining and access to social services. With regard to the European Pillar of Social Rights, the EESC reiterates its findings and recommendations from previous opinions (22).

3.5.2.

The 2019 country reports pay particular attention to how Member States deliver on the various dimensions of the European Pillar of Social Rights. The implementation of the Pillar is a benchmark for achieving inclusive, fair and sustainable growth.

3.5.3.

The future of the labour market should be a key priority in the debates on the Pillar, in order to address the major changes taking place in this area, and a consistent European employment strategy covering the following themes is needed: — investment and innovation; — employment and quality job creation; — fair working conditions for all; — fair and smooth transitions supported by active labour market policies; — the involvement of all stakeholders, especially the social partners.

3.5.4.

All stakeholders must work together to ensure that the future of work is fair and inclusive, offering employment opportunities for all and leading to social progress and a skilled and motivated workforce with a decent income and access to quality jobs.

3.5.5.

However, there will be no improvements without money: effective implementation of the Pillar in the Member States will only be possible if they have sufficient financial resources to invest in social policies, thus translating rights and principles into specific policy initiatives. Therefore, mechanisms such as the European Social Fund and the European Fund for Strategic Investments must play an important part.

3.6.   EU funds (23)

3.6.1.

The EESC welcomes the intention of the draft ESF+ Regulation to strengthen the link between the ESF and the European semester process, in particular the implementation of the country-specific recommendations.

3.6.2.

For some Member States, EU funds are a crucial part of their public investment. Better aligning EU funds with the European semester analysis and recommendations should improve the outcomes and strengthen the impact of cohesion policy funding.

3.6.3.

The European Fund for Strategic Investment and the European Structural and Investment Funds should be designed to play a crucial role in creating jobs and growth and in promoting territorial and social cohesion. The EESC is of the opinion that a more effective and efficient use of these funds is needed and that EU long-term investment in high-quality social infrastructure and services, including through the European Fund for Strategic Investments and the European Investment Bank, should be prioritised and coupled to the implementation of the Pillar.

3.7.   Digitalisation

3.7.1.

The EESC has, in numerous opinions, examined the issue of digitalisation and its impact on the organisation of work and employment (24).

3.7.2.

The fourth industrial revolution will bring major changes arising from developments in areas such as genetics, artificial intelligence, robotics, nanotechnology, 3D printing and biotechnology. These changes will affect consumption, production and employment patterns and bring major challenges requiring business, authorities and individuals to adapt proactively. In parallel with the technological revolution, there is a set of socioeconomic, geopolitical and demographic factors of change that are having a greater impact, interacting in multiple directions and intensifying one another. As the whole of industry adapts, most occupations are undergoing a fundamental transformation.

3.7.3.

While some jobs are at risk of redundancy and others are growing rapidly, existing jobs are experiencing a change in the required skills. Specific measures are needed for skills shortages, mass unemployment and rising inequality; retraining and up-skilling, proactive lifelong learning, appropriate incentives/facilities and multi-sectoral partnerships are needed.

3.7.4.

A better understanding of the changing nature of work and employment relationships in the digital era should lead to a more effective EU employment policy.

3.7.5.

Lifelong learning, retraining and upgrading of skills should be prioritised, so as to ensure that everyone can obtain jobs in the globalised high-tech workplace and can access sometimes essential information/services.

3.7.6.

In the digital era it is essential to guarantee access to the internet and provide digital literacy training to anyone at risk, and to ensure that such people are able to exercise their rights and access social services, particularly basic services.

3.7.7.

The new inequalities and social risks in the digital era may in part be attributed to the phenomenon of digital exclusion, whereby some segments of the population do not possess the necessary IT skills and basic digital literacy to access information and services, some of them crucial.

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(1)  OJ C 237, 6.7.2018, p. 57.

(2)  OJ C 159, 10.5.2019, p. 1; OJ C 434, 15.12.2017, p. 30.

(3)  OJ C 262, 25.7.2018, p. 1; OJ C 81, 2.3.2018, p. 145; OJ C 125, 21.4.2017, p. 10.

(4)  Council Decision (EU) 2018/1215 of 16 July 2018 on guidelines for the employment policies of the Member States (OJ L 224, 5.9.2018, p. 4):

—	boosting the demand for labour;

—	enhancing labour supply and improving access to employment, skills and competences;

—	enhancing the functioning of labour markets and the effectiveness of social dialogue; and

—	promoting equal opportunities for all, fostering social inclusion and combating poverty.

(5)  OJ C 332, 8.10.2015, p. 68; OJ C 237, 6.7.2018, p. 57.

(6)  Communication COM(2019) 150 final: the European Union enjoys its seventh consecutive year of economic growth; the economic recovery continues and has a positive impact on labour markets and social progress; the employment situation continues to improve – the number of people in employment reached a record 240 million in the fourth quarter of 2018, the 6,6 % unemployment rate is the lowest since 2000; in 2017 alone, more than five million people were lifted out of poverty and social exclusion.

(7)  Communication COM(2019) 150 final — (Appendix 4); See also Communication COM(2019) 500 final.

(8)  Access to finance for SMEs and midcaps in the period 2014-2020: opportunities and challenges (Information report); OJ C 345, 13.10.2017, p. 15; OJ C 197, 8.6.2018, p. 1 .

(9)  See footnote 8.

(10)  COM(2019) 150 final.

(11)  See footnote 10.

(12)  SOC/622 (ongoing), OJ C 62, 15.2.2019, p. 136, OJ C 228, 5.7.2019, p.16, OJ C 237, 6.7.2018, p. 8, OJ C 81, 2.3.2018, p. 167; OJ C 13, 15.1.2016, p. 57; OJ C 161, 6.6.2013, p. 67.

(13)  See study ordered by the EESC on ‘Skills mismatches’, 2018.

(14)  OJ C 159, 10.5.2019, p. 1; OJ C 434, 15.12.2017, p. 30.

(15)  Statement of the Presidency of the Council of the European Union, the European Commission and the European Social Partners on ‘A new start for social dialogue’, 2016.

(16)  OJ C 367, 10.10.2018, p. 15; OJ C 237, 6.7.2018, p. 1; OJ C 440, 6.12.2018, p. 135; SOC/620 (ongoing); OJ C 228, 5.7.2019, p. 7.

(17)  Country-specific recommendations.

(18)  OJ C 62, 15.2.2019, p. 142.

(19)  SOC/610 (OJ C 240, 16.7.2019, p. 3); OJ C 110, 22.3.2018, p. 26; OJ C 440, 6.12.2018, p. 37; OJ C 262, 25.7.2018, p. 101; OJ C 110, 22.3.2019, p. 20.

(20)  The costs of non-immigration and non-integration (Information report); OJ C 264, 20.7.2016, p. 19; OJ C 71, 24.2.2016, p. 46.

(21)  OJ C 34, 2.2.2017, p. 15; OJ C 367, 10.10.2018, p. 20; SOC/616 (ongoing).

(22)  OJ C 125, 21.4.2017, p. 10; OJ C 81, 2.3.2018, p. 145; SOC/614 (ongoing).

(23)  OJ C 62, 15.2.2019, p. 165.

(24)  OJ C 237, 6.7.2018, p. 8; OJ C 129, 11.4.2018, p. 7; OJ C 237, 6.7.2018, p. 1; OJ C 434, 15.12.2017, p. 36; OJ C 434, 15.12.2017, p. 30; OJ C 173, 31.5.2017, p. 45; OJ C 303, 19.8.2016, p. 54; OJ C 13, 15.1.2016, p. 161; OJ C 128, 18.5.2010, p. 74; SOC/622 (ongoing).

Opinion of the European Economic and Social Committee ‘Communication from the Commission to the European Parliament, the European Council and the Council — Further strengthening the Rule of Law within the Union State of play and possible next steps’

(COM(2019) 163 final)

(2019/C 282/07)

Rapporteurs:

Jukka AHTELA

Karolina DRESZER-SMALEC

José Antonio MORENO DÍAZ

Referral	European Commission, 10.5.2019
Legal basis	Article 62 of the Treaty on the Functioning of the European Union
Section responsible	Employment, Social Affairs and Citizenship
Adopted in section	5.6.2019
Adopted at plenary	19.6.2019
Plenary session No	544
Outcome of vote (for/against/abstentions)	190/11/12

1.   Conclusions and recommendations

1.1.

The EESC welcomes the Communication of the Commission, and the efforts made by the Commission to use other instruments to strengthen the rule of law. It is important to strengthen the rule of law aspect as much as possible in these instruments, as many of them have different purposes, and in as far as possible involve civil society in the implementation of these instruments.

1.2.

It believes that civil society, the media and political issues should have been dealt with more in depth in the Communication to understand the context, and to involve those directly affected more prominently.

1.3.

The EESC believes that the reflection period should have been longer to allow for a deeper consultation and participation of civil society in national Member States and that in the longer term, the Commission should propose a more systematic mechanism for the consultation of civil society organisations (CSOs) concerning the situation of fundamental rights and respect for the rule of law in the Member States.

1.4.

Ways of protecting CSOs performing watchdog functions, investigative journalists and independent media are necessary and proposals for their protection and active role in early warning must feature prominently in the proposals that the Commission will present at the end of the reflection period.

1.5.

While the EESC welcomes the strengthened access to funds for CSOs in the new Multiannual Financial Framework, it finds the amount set aside in the Commission proposal concerning the rule of law and fundamental rights and the amount earmarked for CSOs insufficient (1). Moreover, the EU should consider ways of enabling more core funding to CSOs performing watchdog, awareness-raising, advocacy and litigation activities as regards fundamental rights and the rule of law in all Member States

1.6.

The EESC maintains its supports for the creation of an EU-level mechanism to monitor respect for the rule of law and fundamental rights. The EESC considers it vital to create a legally binding European mechanism, a framework actively involving the Commission, the Parliament and the Council and in which the EESC plays an important role representing civil society. This mechanism should encompass a preventive component allowing experts and civil society representatives to trigger an early warning on specific developments and debate proposals for solutions including all relevant stakeholders. Such a mechanism would also help in the burden-sharing between the institutions and increase joint ownership of EU actions.

1.7.

Furthermore, the EESC proposes to recognise and reinforce existing civil society platforms and to establish an EU-level annual Forum on Fundamental Rights and the Rule of Law with the involvement of the EESC, firstly to allow EU decision-makers to receive early warning about emerging challenges to Article 2 TEU values directly from stakeholders, including grassroots organisations and, secondly, to facilitate mutual learning and national and transnational collaboration between all relevant stakeholders (businesses, trade unions, civil society organisations, national human rights institutions, and public authorities).

1.8.

The EESC believes that the multiplication of voices coming from existing platforms and grassroots organisations is necessary in the current circumstances. The EESC is a unique body which gives a possibility of real dialogue between all the CSO actors, including the social partners from all the Member States. This gives an added value in helping the diversity and vibrancy of civil society. Such a forum could allow CSOs to set off an early warning.

1.9.

The threats against the rule of law risk undermining the mutual trust upon which the EU is built, as recent jurisprudence has shown. The independent national courts are the bulwark ensuring that the EU, including its internal market, functions smoothly.

1.10.

Consideration should also be given to the economic aspects of the rule of law. Mutual trust is a value which is difficult to calculate in purely economic terms but it is clear that lack of trust linked with political influence in the judiciary or corruption has negative economic consequences. This is a subject that merits more emphasis and where more data and research is needed at EU level.

1.11.

Education, both formal and non-formal, has a key role to play in building the democratic and rule of law culture. Democracy and the rule of law should be in the hearts and minds of every European citizen; the EESC calls on the European Commission to propose an ambitious communication, education and citizen-awareness strategy on fundamental rights, the rule of law and democracy.

2.   Introduction and overview of the Communication

2.1.

The situation regarding respect for fundamental rights and the rule of law is very concerning throughout the EU, especially as it has had to trigger Article 7 TEU in some cases. Therefore, the present Commission Communication is launching a reflection on how the state of the rule of law in the EU could be improved.

2.2.

The Communication recalls the importance of the rule of law as a founding value of the European Union, which is the basis of the democratic system and a prerequisite for the protection of fundamental rights. The rule of law includes, among other things, principles such as legality, implying a transparent, accountable, democratic and pluralistic process for enacting laws; legal certainty; prohibiting the arbitrary exercise of executive power; effective judicial protection by independent and impartial courts, effective judicial review, including respect for fundamental rights; separation of powers; and equality before the law.

2.3.

The Commission sets out three pillars for an effective enforcement of the rule of law in the Union: Promotion: Building knowledge and a common Rule of Law culture; Prevention: Cooperation and support to strengthen the Rule of Law at national level; and Response: Enforcement at Union level when national mechanisms falter. More precisely, the Commission insists on the need to promote rule of law standards, to recognise warning signs, to deepen a Member State’s specific knowledge, to improve the common capacity to react in case of escalation, and to address shortcomings in the long term through structural reforms.

3.   General comments

3.1.

The EESC welcomes the consultation as it recognises the importance of the recent rule of law challenges in the EU. The number of such challenges has increased in recent years, indicating the risk of a possible full-blown crisis in the rule of law and democracy, especially in some Member States. This crisis should be fully acknowledged and an appropriate response put in place. This includes a bold restatement of the EU values and solid instruments to prevent and correct any further deterioration of the rule of law.

3.2.

The EESC had already expressed its deep concern with regard to the situation of fundamental rights and respect for the rule of law, and has been calling for stronger action since 2016 (2).

3.3.

It is important to recall that the European Union is not only a common market; it is a union based on common values, as stated in Article 2 of the Treaty. Furthermore, it recognises the rights, freedoms and principles set out in the Charter of Fundamental Rights of the EU. These values, on which the European Union is founded, form the basis of integration and are part of the European identity. As well as being criteria for accession, they must be respected in practice by the Member States, thereafter.

3.4.

The rule of law exists in an interdependent, inseparable, triangular relationship with fundamental rights and democracy. Only by guaranteeing these three values in conjunction with each other is it possible to prevent the abuse of State power. The protection of fundamental rights is a pillar that should be further developed, through the ratification of all relevant instruments (including UN conventions and the European Convention on Human Rights), more robust cooperation between EU institutions and the enhancement of support for grassroot and watchdog organisations across Europe.

3.5.

The EESC regrets that the EU treaties do not expressly stipulate that all Member States should satisfy the Copenhagen Criteria (3). The criteria should be equally and continuously respected by new and long-time members of the EU. The EESC notes that the EU institutions do not have sufficiently robust and well-tailored tools at their disposal capable of protecting against threats currently posed to the rule of law, fundamental rights and pluralist democracy in the Member States.

3.6.

The current challenges are not met in due time and with efficient responses at national and EU level: the existing instruments had limited impact on the drivers of these challenges.

3.7.

The most severe challenges are present in some Member States, where powerful political actors have turned against the independence of the judiciary, and against institutions and organisations which compose and uphold the pluralist democratic system. The Communication does not consider sufficiently this essential aspect, preferring a perspective in which institutions - Parliaments, governments and ministries, constitutional courts, professional bodies - are separated from political and electoral competition. This ‘hands off’ approach to party politics and elections prevents any explanation of why powerful actors work against the rule of law and democracy and why they seem at the same time popular and unstoppable. The political, cultural and sociological aspects of the rule of law challenges affecting democracies are an essential area which has been ignored in the EU’s analysis and response so far. This partly explains the limitations of the current approach and tools — including the Article 7(1) procedure. Through its connection with civil society in its entirety, including the social partners, the EESC is particularly well placed to offer a space for a better analysis, debate and response to these political, sociological and cultural aspects of challenges to democracy and the rule of law.

3.8.

The Commission has moved in the recent years towards building up complementary and cumulative mechanisms to fill the gap between no action and last-resort action. Yet, they seem insufficient for the current challenges - concerted actions for power-grabbing across institutions, including in the judiciary, which have, if not electoral constituencies, strong support within party organisations and party clienteles. Not even the consolidated democracies are safe from creeping authoritarianism and erosion of the rule of law. Security concerns are increasingly used to justify the questioning or suspension of democratic safeguards. Some governments make the work of several frontline CSOs more difficult instead of proposing an enabling space for their activities. It is therefore essential that the EU should take a more proactive and preventive approach.

3.9.

The EESC agrees with the Commission that recent populist and autocratic developments require action by all EU bodies and EU civil society in its entirety to ensure that the values upon which the EU is built are preserved. The EESC stands firm against any form of illiberal democracy.

3.10.

Therefore, the EESC also believes that the reflection period should have been longer, to allow for the deeper consultation and participation of CSOs in national Member States.

3.11.

The EESC has been informed by many CSOs, that short consultation periods are often a problem linked to lack of transparency and meaningful consultation, which undermines the quality of legislation and the rule of law in Member States. With this in mind, the EESC believes that the Commission should have allowed for a more thorough consultation of civil society, which is directly affected.

3.12.

Civil Society Organisations, human rights defenders, whistleblowers and journalists are in the front line when the rule of law deteriorates and in a very difficult situation when there is a breach of law in a given Member State. It is they who monitor the situation and report violations and it is at the grassroots level that they can send out early warning signals. Therefore, the EESC believes that their role is of primordial importance, as is that of the media and investigative journalism. Therefore, ways of protecting CSOs and the media are necessary for any tenable way forward. Proposals for their role must feature prominently in the proposals that the Commission will present after the reflection period.

3.13.

In particular, the future MFF should increase support to CSOs, in particular to the ones working in defence of Article 2 values. Core funding should be provided to CSOs at all levels — local, national, European — to support capacity-building and activities in the area of awareness-raising, monitoring and documentation, advocacy and litigation. To reinforce EU support to the role of CSOs in Europe, the future MFF should ensure that all relevant EU funds, in particular in the areas of social, economic and cohesion policies, integrate a strong role for civil society in the design, implementation and monitoring of these policies. The EU should also increase financial support to the independence and plurality of the media in Europe and mainstream these concerns in all relevant EU policies, including competition policies. To ensure political prioritisation of these issues, the future vice-president of the European Commission in charge of fundamental rights should also be in charge of the supervision of the enabling environment for civil society, human rights defenders and journalists. The EESC also recalls its call for the establishment of an EU Ombudsman on civic space freedoms to whom these actors could report incidents related to harassment or restriction of their work (4).

3.14.

In accordance with the mandate the EESC has been given in the TFEU, as a representative of organised civil society, it must be associated closely with the future development of institutional initiatives in this area.

3.15.

It has a special role to play and a duty to act, when activities of its own members and civil society at large are at risk within the EU. The EESC could and should play a crucial role in facilitating exchanges amongst all relevant stakeholders on the state of play on the rule of law in Member States seen from a civil society perspective and serve as a transmitter (early-warning network) before the appearance of the first symptoms of problems regarding FRRL.

3.16.

Back in 2016, the EESC adopted an own-initiative opinion calling for reinforced action by the Union with regard to fundamental rights and the rule of law in the Member States, following up with a the creation of a specific group to examine how organised civil society can best contribute in April 2018.

3.17.

Threats against the rule of law risk undermining the mutual trust upon which the EU is built. As a recent example this has been shown clearly when the EU Court of Justice ruled that a national judge does not necessarily have to respect a European Arrest Warrant (EAW) issued by a Member State of the EU, if there are systemic or generalised deficiencies with the rule of law in this Member State, and they are liable to affect the independence of the judiciary in the issuing Member State and the plaintiff’s fundamental right to a fair trial (5).

3.18.

The independent national courts are the bulwark ensuring that citizens can count on their EU rights being enforced, that European business can do cross-border trade without the concern that legal contracts are not enforced in an impartial and independent manner, and that workers working in a neighbouring country can have their rights enforced, and that CSOs can operate freely across borders, without foreign solidarity funding being taxed discriminatorily. CSOs, social partners and foreign investor councils have all expressed concern to the EESC about the deterioration of the rule of law, and its serious economic impact.

3.19.

Education, both formal and non-formal, has a key role in building the democratic and rule of law culture. The diversity of political cultures in Europe makes the task more difficult. However, there are successful historical examples in which democratic values are taught, spread and consolidated. In the long term, the best safeguard against democracy and rule of law backslides is an active, educated and involved citizenship. Liberal democracy as defined in a former EESC opinion (6) and the rule of law should be in the hearts and minds of every European citizen and the EU should lead the way forward towards this goal, for example by encouraging the mainstreaming of these topics in school and higher education curricula, and by promoting academic and professional exchanges between citizens and CSOs active in these areas. The EESC calls on the European Commission to propose an ambitious communication, education and citizen-awareness strategy on fundamental rights, the rule of law and democracy.

4.   Comments on existing tools

4.1.

The EESC notes the shortcomings of current tools available to the EU institutions to protect Article 2 values. Infringement procedures tend to be too narrow in their focus to prevent or correct concerted attacks on the rule of law. Second, it has proven extremely difficult to marshal sufficient political will to activate the procedure in Article 7 of the TEU.

4.2.

As regards the 2014 European Commission Communication ‘A new EU Framework to strengthen the Rule of Law’ (7), although it is easier to activate than Article 7, its effectiveness is questionable when faced with governments unwilling to cooperate. Furthermore, the thresholds required to activate it are too high and too late. The EESC recommends improving the rule of law framework including by defining clearer benchmarks, indicators and deadlines in order to better assess the concerned authorities’ response and the EU’s accompanying measures.

4.3.   Infringement proceedings and preliminary rulings

4.3.1.

In the past few years, the Commission has opened several value-related infringement proceedings concerning the rule of law (8), Such proceedings should be used whenever possible, but cannot stand alone, as not all violations pertain to EU law. However, some scholars are advocating that infringement proceedings might be brought pursuant to Article 258 TFEU directly for breach of Article 2 TEU (9), which might be an avenue to explore.

4.3.2.

The preliminary ruling can also be a useful tool. Nevertheless, various obstacles to get national courts to refer preliminary questions to the EUCJ exist, and it is often a long procedure.

4.4.   European Semester

4.4.1.

The main aim of the European Semester is to provide a framework for the coordination of economic policies across the EU, but it also covers the fight against corruption, effective justice systems, and reform of public administration, which can lead to country-specific recommendations (10). However, an effective follow-up is not necessarily ensured.

4.4.2.

The European Semester has been criticised for not being inclusive enough of the social partners, both at EU and national level (11) and only 20 % of country-specific recommendations are currently being implemented satisfactorily by Member States (12).

4.4.3.

The European Semester is mainly an economic and social policy tool, guiding and supporting reforms in Member States. However, its role in monitoring and promoting rule of law issues could be strengthened by incorporating rule of law indicators in a more visible way, including regarding issues like legal certainty and access to remedies for business and employees. The involvement of civil society should also be improved and a better follow-up should be ensured with a view to improving compliance.

4.5.   EU Justice Scoreboard

4.5.1.

The EU Justice Scoreboard gives information on the justice system in all Member States and can result in country-specific recommendations in the European semester. The EU Scoreboard leans on surveys of citizens and companies to evaluate the independence of the Justice system (13). However, the EESC recommends that CSO are included in this survey.

4.6.   Cooperation and Verification Mechanism

4.6.1.

The Cooperation and Verification Mechanism (CVM) (14) was created as a transitional measure to assist Romania and Bulgaria, after their accession, in addressing several shortcomings on judicial reform, corruption and (for Bulgaria) organised crime. It established a set of criteria which the Commission assesses and yearly reports on progress.

4.6.2.

This mechanism has proven to be an efficient tool. However, the last report on Romania indicated a setback in the progress, whereas it had been expected to be finalised very soon. This raises the concern as to whether the demand for progress is stringent enough and whether change must be more solidly rooted before the CVM is closed down.

4.6.3.

The relevance of the CVM in addressing rule of law challenges in other Member States needs a more thorough evaluation. Despite the variation in commitment on the part of various governing parties in the two countries, the existence of the instrument allows for a structured and continuous dialogue between the EC and the member country.

4.7.   Commission’s Structural Reform Support Service

4.7.1.

The Structural Reform Support Service (SRSS) delivers direct support to national authorities (reviewing methods, training, analysis, expert advice) and covers governance and public administration, including transparency and anti-corruption but is essentially a macro-economic tool. Few projects have been substantially related to the rule of law (15).

4.7.2.

The EESC recommends increased use of special assignments when country-specific recommendations on the rule of law have been issued to a Member State and involvement of CSOs in reform programmes should be ensured.

4.8.   European Structural and Investment Funds, and funds supporting Justice and Security policies

4.8.1.

One of the EU’s biggest levers to enforce respect for the rule of law is financing. On 17 January 2019, the European Parliament voted for a mechanism (the European Values Instrument) to increase funding of the EU’s Rights and Values Programme. The proposal by the Commission for a Justice, Rights and Values Fund does not fully meet this demand.

4.8.2.

While the EESC welcomes the funds attached to strengthening access for CSOs to funds from the new Multiannual Financial Framework, it finds the amount set aside for the rule of law and fundamental rights and the amount earmarked for CSOs insufficient (16).

4.9.   A new mechanism to protect the Union’s budget when generalised deficiencies regarding the rule of law in Member States affect or risk affecting the budget

4.9.1.

The EESC welcomed the proposal and recommended that the EESC be more closely involved (17). Moreover, the EESC recommended that the proposal be amended to include a broader notion of the rule of law that encompasses the protection of fundamental rights and guarantees protection of pluralist democracy.

4.9.2.

However, the EESC recommends extreme caution in this case to ensure that end-beneficiaries are not affected. It is important to remember and provide special means of support for independent organisations that are in an extremely delicate situation in their Member State.

4.10.   European Anti-Fraud Office (OLAF) with the EPPO

4.10.1.

Corruption is one of the challenges to the rule of law. Therefore, the EU must ensure that its funds are not misused or enabling corruption.

4.10.2.

Currently OLAF investigations can only be prosecuted by Member State prosecutors (18) and only 45 percent of the investigations result in prosecution (19) Therefore, the EESC supports the new European Public Prosecutor’s Office (EPPO) (20), and urges all EU countries to participate (21).

4.10.3.

CSOs, human rights defenders, whistleblowers and journalists play an important role in revealing fraud, and therefore, the EESC reiterates the importance of structured dialogue with civil society and increased financial and political support to these actors.

4.11.   EU accession process and neighbourhood policy

4.11.1.

In 2011, the EU introduced a new approach to the European Neighbourhood Instrument funds (ENP) in order to pressure partner countries to commit to the EU’s values and political reforms (22).

4.11.2.

Political conditionality is a positive side of the ENP, which functions well with those countries interested in reform.

4.11.3.

The EU must strongly uphold its commitment to political conditionality in the neighbourhood policy and in the EU accession process. To remain credible, it must apply the same criteria internally. For any country desiring to join the European Union, firm commitment to ‘European Values’ is essential. Accession candidates must fulfil the Copenhagen criteria (23). It is important that the EU enforces these demands very strictly. Strengthening the rule of law is not only an institutional issue, it requires societal transformation.

5.   Suggestion for the future

5.1.

The EESC has since 2016 supported the creation of an EU-level mechanism to monitor respect for the rule of law and fundamental rights (24).

5.2.

The EESC considers it vital to create a legally binding European mechanism, a framework actively involving the Commission, the Parliament and the Council and in which the EESC plays an important role representing civil society. This mechanism will complement existing tools (25) and should entail a preventive component to allow stakeholders (businesses, trade unions, civil society organisations, national human rights institutions and public authorities) and experts to identify shortcomings as they emerge at national level and debate their resolution at an early stage. Such a mechanism would also help in the burden-sharing between the institutions and increase joint ownership of EU actions in this field.

5.3.

The role of the EESC in this field should be seen against the backdrop of its unique composition and outreach between the EU and national level. As a focal representative of civil society, it covers organisations that are deeply committed to the rule of law and fundamental rights issues but also social partners and other key economic and social players with their national and EU affiliations. Hence, the EESC could give clear added value as a source of unique data and insights from the grassroots level without duplication with other relevant sources, with regard to promotion, prevention and response.

5.4.

As a first step, the EESC has itself already started carrying out fact-finding missions to gather an overview on how civil society in individual Member States perceive the problems. The EESC has the intention to visit all 28 Member States (26), but will issue a report over its findings in the autumn of the first 5 country visits. Although these visits do not consist of a monitoring mechanism, it is important contribution to hear the view of the national CSOs. Therefore, the EESC as a further measure proposes to recognise and reinforce existing civil society platforms and grassroots organisations. The multiplication of voices coming from them is necessary in the current circumstances.

5.5.

Moreover, an annual stakeholder Forum on Fundamental Rights and the Rule of Law should be established at European level with the involvement of the EESC, firstly to allow EU decision-makers to receive early warning about emerging challenges to Article 2 TEU values directly from grassroots organisations and, secondly, to facilitate mutual learning, confidence-building and collaboration between national stakeholders such as businesses, trade unions, civil society organisations, national human rights institutions, and public authorities. The format and modalities of this stakeholder forum should be inspired by the existing models of the European Migration Forum and the European Circular Economy Stakeholder Platform. The EESC would provide the forum’s secretariat and host meetings, which would be jointly organised with the European Commission.

5.6.

The EESC believes that the multiplication of voices is necessary in the current circumstances and it could allow CSOs to set off an early warning. In contrast to the Annual Colloquium on Fundamental Rights, which involves a limited number of key stakeholders, the EESC Forum is intended as an open forum to encourage a public debate. The FRA mandate is regrettably limited by Article 51 of the Charter to intervene in the case of some violations of Article 2 TEU. Its forum is mainly attended by human rights organisations, whereas the EESC covers organisations beyond the field of human rights, including the social partners, and has experience in interacting with organisations on the European, national and grassroots level on a large variety of issues. This gives an added value in helping the diversity and vibrancy of civil society, and includes important economic actors.

5.7.

Consideration should be given to the economic aspects of the rule of law. Mutual trust is a value which is difficult to calculate in purely economic terms but it is clear that lack of trust linked with political influence in the judiciary or corruption has negative economic consequences. The EESC calls on the European Commission to place more emphasis and gather more data and analysis on the consequences of the demise of the rule of law on all the stakeholders, including the business sector. Legal uncertainty, non-transparent law-making, unfair competition, discriminatory access to public markets, and the unavailability of genuine access to remedies are examples of consequences of the demise of the rule of law on the business sector which should be better considered in the EU’s analysis and response, including in the European Semester.

5.8.

An specific issue is the need for stronger support for civil society organisations (core funding for watchdog organisations): It is important that the EU consider ways of supporting CSOs and investigative journalism and the media that are monitoring and reporting emerging challenges to Article 2. The EESC considers that a funding instrument to support CSOs promoting Article 2 values in the Member States is necessary to build grassroots support for these values among the public. In this regard, the EESC refers to its related opinion concerning the proposals for a new Justice, Rights and Values Fund (27) and calls on the Council and the European Parliament in the framework of the decision on the Multiannual Financial Framework post-2020 to substantially increase resources for this fund.

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(1)  OJ C 367, 10.10.2018, p. 88.

(2)  OJ C 34, 2.2.2017, p. 8.

(3)  Established by the Copenhagen European Council in 1993.

(4)  OJ C 81, 2.3.2018, p. 9.

(5)  European Court of Justice, Judgment of the Court (Grand Chamber) — Case C-216/18 PPU, 25 July 2018.

(6)  SOC/605 — Resilient democracy through a strong and diverse civil society (OJ C 228 5.7.2019, p. 24).

(7)  European Commission, Communication on A new EU Framework to strengthen the Rule of Law, 11 March 2014.

(8)  European Commission, http://europa.eu/rapid/press-release_IP-19-1957_EN.htm, 3 April 2019.

(9)  Michel Waelbroeck and Peter Oliver, Enforcing the Rule of Law in the EU: What can be done about Hungary and Poland?, 9 February 2018.

(10)  European Commission, Communication on Further strengthening the Rule of Law within the Union — State of play and possible next steps, 3 April 2019.

(11)  European Trade Union Confederation, Press release: ETUC on European Semester Winter Package, 27 February 2019.

(12)  Business Europe, Newsletter N°2019-13: A renewed role for the European Semester, 11 April 2019.

(13)  European Commission, the 2019 EU Justice scoreboard, 2019, p. 63: 3.3.3 Summary on judicial independence.

(14)  https://ec.europa.eu/info/policies/justice-and-fundamental-rights/effective-justice/rule-law/assistance-bulgaria-and-romania-under-cvm_en

(15)  Only 6 of the examples given by the SRSS are rule of law-focused: setting out an independent analysis of the Prosecutor’s Office in Bulgaria; reforming the assessment of disability in the Czech Republic, Greece and Poland; strengthening the effectiveness of the judicial system in Croatia; improving coordination of internal audits in Romania; improving the handling of whistleblowing cases in Italy; and helping to integrate young migrants and refugees in Austria.

(16)  OJ C 62, 15.2.2019, p. 178.

(17)  OJ C 62, 15.2.2019, p. 173.

(18)  European Court of Auditors, Special Report 1/2019: Fighting fraud in EU spending: action needed.

(19)  Organized Crime and Corruption Reporting Project, EC Adopts New Anti-Fraud Strategy, 1 May 2019.

(20)  European Commission, Communication on the Commission Anti-Fraud Strategy: enhanced action to protect the EU budget, 29 April 2019.

(21)  European Public Prosecutor’s Office, web page on policy.

(22)  Momin Badarna, The ENP and its Political Conditionality Instrument: is it ineffective?, Young European Federalists, 15 September 2018.

(23)  European Commission, 2018 Communication on EU Enlargement Policy, 17 April 2018.

(24)  OJ C 34, 2.2.2017, p. 8.

(25)  As proposed by the European Parliament in its Resolution of 27 January 2014 on the situation of fundamental rights in the EU (2012), P7_TA(2014)1773, Rapporteur: Louis Michel, 22 November, paragraph 9.

(26)  27 Member States, when the United Kingdom leaves the EU.

(27)  OJ C 62, 15.2.2019, p. 178 on COM(2018) 383 final and COM(2018) 384.

Opinion of the European Economic and Social Committee on ‘Proposal for a Decision of the European Parliament and of the Council amending Decision No 1313/2013/EU on a Union Civil Protection Mechanism’

(COM(2019) 125 final — 2019/0070 (COD))

(2019/C 282/08)

Rapporteur: Panagiotis GKOFAS

Referral	Parliament, 14.3.2019 Council, 27.3.2019
Legal basis	Article 304 of the Treaty on the Functioning of the European Union
Section responsible	Agriculture, Rural Development and the Environment
Adopted in section	23.5.2019
Adopted at plenary	19.6.2019
Plenary session No	544
Outcome of vote (for/against/abstentions)	171/01/04

1.   Context

1.1.

A new Union Civil Protection Mechanism (UCPM) was approved on 13 March 2019 by the Decision of the European Parliament and of the Council amending Decision 1313/2013/EU. The Union Civil Protection Mechanism provides a framework for cooperation and assistance in the event of major emergencies inside and outside the EU. Since 2001, the EU Civil Protection Mechanism has been activated more than 300 times. All EU Member States, two EEA countries (Iceland and Norway), as well as Montenegro, Serbia, FYROM and Turkey, are party to the Civil Protection Mechanism, as well as the United Nations (Sendai Framework for Disaster Risk Reduction 2015-2030) and relevant international organisations. The act provides for the setting up of an additional pool of resources, rescEU, to provide assistance in situations where overall existing capacities are insufficient. RescEU will include in particular aerial means to combat forest fires, as well as resources to respond to medical emergencies and chemical, biological, radiological and nuclear incidents. The Civil Protection Knowledge Network for training and knowledge-sharing will also be a strategic factor in preparedness and prevention.

1.2.

With this amendment, risk prevention should be improved by requiring Member States to further develop their assessment of their risk management capability and their risk management planning, in particular when Member States are simultaneously affected by the same type of disasters, whether natural or man-made, or linked to unexpected climate changes or unpredictable, strong earthquakes with high rate of recurrence, causing loss of human life and massive destruction of ecosystems, civil and public infrastructures, economic activities and small businesses (1).

2.   Conclusions

2.1.

The EESC welcomes this proposal to revise and reinforce the current framework of the UCPM.

2.2.

In order to ensure uniform conditions for the implementation of the UCPM and with a view to the establishment and organisation of the Civil Protection Knowledge Network, the EESC may contribute in specific advisory groups to the periodical revision of the guidelines on risk mapping and through appropriate inter-institutional initiatives (e.g. ‘Civil Society Annual Forum on Risk Assessment, Mitigation, Prevention and Preparedness’), in partnership with recognised, representative social and economic partners and regional crossborder resilient cities networks.

2.3.

The EESC asks the Council, the Parliament and the Commission to explore the feasibility and plan the implementation of a European Training Centre and Knowledge Hub connected with existing national and sub-national structures, including centres of excellence, specialised, independent research networks and other experts able to deliver immediate intervention analysis on unusual disasters. This centre and knowledge hub could be a permanently updated, tangible and accessible tool for basic competences in effective risk mitigation for young professionals and also experienced volunteers in the area of emergency management training for local resilient communities and, where possible, be extended to involve third countries, particularly neighbouring countries, vulnerable groups in isolated areas, mobility and tourism actors, media, etc.

2.4.

The EESC deems it necessary to integrate appropriately the new UCPM objectives and approach into the framework of existing structural and investment policies. It is essential to ensure an adequate territorial and community-led dimension (particularly in remote, insular, mountain and rural areas). Local community action is the fastest and most effective way of limiting the damage caused by a disaster.

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(1)  We refer to the workshop held in Naples on 10 February 2018 through a partnership between the EESC and the European Commission (DG ECHO) in collaboration with ETUC and SMEUnited representatives, CoR representatives, civil society organisations (WWF, CIME), national SME organisations (GSEVEE, CMA Corse, CNA) and trade unions, specialised EU and national academics, research and training networks (Sapienza University, Federico II University, INGV Volcanology Institute of Naples, SMEs Academy Avignon, Anodos Centre), EU resilient cities and region networks (Athens, Naples and Thessaloniki), media and specialised press.

Opinion of the European Economic and Social Committee on ‘Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Investment Bank

Clean Planet for all A European strategic long-term vision for a prosperous, modern, competitive and climate neutral economy’

(COM(2018) 773 final)

(2019/C 282/09)

Rapporteur: Pierre Jean COULON

Co-rapporteur: Stefan BACK

Referral	European Commission, 17.6.2019
Legal basis	Article 304 of the Treaty on the Functioning of the European Union
Sections responsible	Agriculture, Rural Development and the Environment Transport, Energy, Infrastructure and Information Society
Adopted at plenary	20.6.2019
Plenary session No	544
Outcome of vote (for/against/abstentions)	152/1/1

1.   Conclusions and recommendations

1.1.

The EESC agrees that the risk of global warming of 2o C soon after 2060 — beyond the maximum level set in the Paris Agreement — will have serious negative repercussions on living conditions and the economy in Europe. The EESC thus strongly supports the objective of making the EU a climate neutral economy by 2050 in a socially fair and efficient manner. Such a transition is possible and beneficial for Europe.

1.2.

It is therefore urgent that climate action is immediately taken. The EESC endorses the overriding priorities set out in the European Commission’s Communication. The EESC calls on the Member States to support the objective of making the European Union a climate neutral economy by 2050. The EESC calls on businesses, trade unions, NGOs, and national Economic and Social Committees to support this objective.

1.3.

The EESC welcomes the good results expected from the implementation of various measures already decided, with an estimated 45 % reduction in greenhouse gas emissions by 2030, which is greater than the 40 % undertaking made by the EU under the Paris Agreement, and a 60 % reduction by 2050.

1.4.

Whilst not sufficient to achieve the objective of a climate neutral society by 2050, the EESC considers that the estimated results on the 2030 horizon of measures already decided indicate that any new measures must factor in the need for predictability in order to allow good planning and avoid sunken assets. The EESC therefore points out the importance of sending clear and timely signals to businesses, especially SMEs.

1.5.

For the same reasons, the EESC considers that it is urgent to rapidly define a strategy for beyond 2030, in order to achieve a transition to a climate neutral society by 2050.

1.6.

The EESC stresses that the transition to a climate neutral society must be implemented through a competitive, socially fair and multilateral approach and that appropriate tools must be put in place to achieve full involvement and acceptance of civil society, including all citizens, businesses and organisations. This includes conception and implementation of carbon pricing taking into account its effects on businesses and citizens.

1.7.

The EESC underlines the importance of action taken at local and regional level and the importance of fully involving local and regional authorities.

1.8.

The EESC underlines the importance of the circular economy, bio economy, digitalisation and the sharing economy, as key contributors to improve resource efficiency and reduce emissions.

1.9.

The EESC recalls the key importance of mobility for the functioning of the EU internal market recognised by the Communication, and underlines the importance of finding solutions that reduce the CO2 footprint of mobility, including aviation, without impinging upon the vital role of mobility for the entire EU economy and society, individuals and businesses.

1.10.

The EESC agrees with the importance of generating electricity from all available and upcoming non-emission sources. Grid interconnections, energy storage and demand-side response are key to securing the supply of electricity which is increasingly generated from renewables.

1.11.

Early planning and early setting of objectives are important to ensure planning security for business, encourage research and development and create favourable conditions to enable Europe, including European industry and business in general, to reap the benefits of being a first mover and remain competitive. In this context the EESC underlines the importance of third country relations as a means of getting more countries on board in a proactive climate strategy and to ensure a level playing field for European industry and influence standard setting.

1.12.

Financing is key to the implementation of the planned strategy. The EESC therefore reiterates its recommendations that adequate budgetary resources be provided to support research, development and industrial deployment.

1.13.

The EESC points out that financing is a crucial issue. It is not only a matter of public funding, and that it is therefore important to promote mechanisms that seek to encourage green investments.

1.14.

The EESC points out that the transition to a climate neutral economy will not happen without far-reaching research and innovation. It requires all sorts of innovation, including in the area of new behaviours, business models, social norms, processes, techniques, marketing and technologies.

1.15.

The EESC points out the important role of bio energy with carbon capture and storage and natural carbon sinks, such as forests and many agricultural practises that bind carbon e.g. grassland, pasture land, peatland etc. The sustainable forest management and utilisation of carbon sequestration potential of agricultural land are part of the solution.

1.16.

The EESC notes that Europe represents around 7 % of the global population, 20 % of global GDP and 30 % of global high-quality scientific publications. As the transition to a climate-neutral economy needs to be a global endeavour to fight climate change, the EESC believes that the greatest impact the EU can have is to prove to the rest of the world that this transition to a climate-neutral economy is achievable and positive for society. As such, making 100 European cities climate neutral by 2030 would show that the transition to a climate neutral economy can become a reality and improve the quality of life.

1.17.

The EESC considers that Europe needs a social pact for the transition to a climate neutral economy, to be agreed by the EU, Member States, regions, cities, social partners and organised civil society, in order to ensure that the transition leaves no-one behind. For that purpose, the European Social Fund and the European Globalisation Fund should be properly designed and funded. The transition to a climate neutral economy is also an opportunity to eradicate energy poverty and improve quality of life, job creation and social inclusion, and ensure equal access to basic energy services for all Europeans.

1.18.

The EESC calls on the European Parliament to establish an independent EU Climate Change Committee tasked with making science-based assessments and policy recommendations. Where similar Committees do not already exist, the EESC calls on those Member States to establish such committees at national level and ensure that they report to national parliaments and national Economic and Social Committees, taking into account national specificities.

1.19.

Lastly, the EESC underscores once again the urgency of creating an efficient dialogue process to enable it to provide useful input into and eventually full acceptance of and support for the strategy to be formulated and submitted by 2020. The EESC therefore proposes that a permanent citizens’ dialogue should be set up as a compulsory preparatory element of all major political decisions and all pertinent law-making initiatives at EU, national and subnational levels. Input into the dialogue and the way it is taken into account should be publicly visible. The visibility of the dialogue should be ensured by making it a Commissioner-level responsibility.

2.   General comments

2.1.

The EESC considers climate change a serious societal threat. Global average temperatures may increase by 2o C soon after 2060 — well beyond the maximum level of the Paris Agreement — which will have serious negative repercussions on the global economy and on living conditions worldwide. As underlined by the 2018 IPCC report (1) and the European Commission communication on A Clean Planet for all (COM (2018) 773) (the Communication), a sense of urgency is needed to protect the planet and protect Europeans from climate change.

2.2.

The EESC points out that while there is a cost to the transition to a climate-neutral economy, there is also a cost of non-action. According to the Communication, weather-related disasters caused a record EUR 283 billion in economic damage in 2017, and river floods in Europe could cause damage of up to EUR 112 billion a year.

2.3.

The EESC strongly supports the objective of making the EU a climate neutral economy (i.e. achieving net–zero greenhouse gas emissions) by 2050 through a socially fair transition and in a cost-efficient manner. As the Communication shows, such a transition is possible and beneficial. It is furthermore in line with EU global commitments under the Paris Agreement and the UN Sustainable Development Goals.

2.4.

The EESC welcomes the fact that the Clean Energy for All Europeans Package increases the EU energy targets for 2030 for both renewables (from 27 % to 32 %) and energy efficiency (from 27 % to 32,5 %). According to the Communication, this means a 45 % greenhouse gas emissions reduction by 2030, better than the 40 % undertaking made by the EU under the Paris Agreement and an expected 60 % reduction by 2050. This will not achieve climate neutrality by 2050. The EESC therefore agrees that there is an imperative need for a vision of economic and societal transformation as set out in the Communication.

2.5.

The EESC underlines the importance of predictability to facilitate planning and avoid sunken assets. The EESC appreciates the statement in the Communication that no new policies and no revision of 2030 targets are currently planned, and points out the importance of clear and timely signals to business, especially SMEs.

2.6.

The EESC agrees that meeting the climate-neutrality objective requires structural changes in all areas of society. All citizens, businesses and entities will be impacted. Hence, it is essential that civil society is fully involved, mobilised and given the appropriate tools to influence the measures required to reach the climate neutrality. The EESC also recalls that integrating climate change adaptation into long- term planning is key to securing social and economic development.

2.7.

The EESC highlights the urgency of stepping up EU action and showing leadership in order to reap the benefits of being the first mover.

2.8.

The EESC takes note of the definition of seven ‘strategic building blocks’ indicating areas where action should be taken and the enabling framework drawn up.

2.9.

The EESC endorses the approach of providing an overall portfolio of 12 overriding priorities that should guide the implementation of the zero emission objective, and takes particular note of the statement that Member States, businesses and citizens will be able to choose and adapt pathways to national circumstances in order to achieve far-reaching societal and economic transformations in every sector of the economy.

2.10.

The EESC particularly underlines the importance of debates at national, subnational, stakeholder and citizen levels as a means to democratically co-create the various measures that promote the transition to a climate neutral economy, including behavioural change. Such debates will also help identify the measures that can gain public support and engage civil society and citizens, in accordance with national specificities.

2.11.

The EESC regrets that it is not clear if and to what extent Member States will be free to adapt implementation measures to their specific situation. A clarification on this point during the planned consultations would be very useful. The implementation of the Energy Union Governance Regulation constitutes a test in that regard.

2.12.

The EESC draws attention to the fact that most issues set out in the overriding priorities have or are already being addressed by the Commission and that the EESC has been supportive of those initiatives and made suggestions, including the creation of contact forums and underscoring the importance of social aspects and governance.

2.13.

The EESC supports these priorities and underlines that they must be seen as a package. The EESC particularly underlines the importance of financing, of the role of citizens, prosumers and consumers and the social aspect, ensuring the no-one is left behind. Positive engagement of citizens can be created in particular by allowing citizens to share the economic benefits of the transition. This could, for instance, include actively promoting shared ownership in decentralised renewable energy generation, such as solar and wind power. It is vital to ensure acceptance of any burden arising, for instance, from carbon pricing.

2.14.

The EESC reiterates the importance of establishing and improving contact between administration and non–state actors and refers to its proposals to create a coalition of politics, administration and civil society (2).

3.   Need for a genuine, overarching EU industrial policy for the transition to a climate-neutral economy, supported by ambitious R & I, a social pact and democracy

3.1.   Comments on the 12 priorities

3.1.1.

The EESC recognises the vital importance of energy efficiency and renewables to fully decarbonise Europe. Those are already proven solutions.

3.1.2.

The potential of electricity as a decarbonisation driver is considerable in several fields, including heating and cooling (including heat pumps, district heating and district cooling), e-fuels and electromobility. The EESC notes that 55 % of the European Union’s electricity already comes from zero-carbon sources (i.e. 25 % from nuclear, 30 % from wind, hydropower, solar and other renewables) and agrees with the communication that the electricity produced must as far as possible come from clean, climate–neutral, non-emission sources.

3.1.3.

The EESC strongly supports the development of decentralised renewable energy generation, for example through energy cooperatives and prosumers (3). Development of smart and flexible digitalised systems for managing demand and supply in a decentralised power system based on renewables with a significant role for prosumers will be an important feature of the future. Energy storage is also key for the large-scale deployment of renewables because of variations in production levels, on both a daily and a yearly basis.

3.1.4.

The EESC supports the development of clean mobility through alternative transport modes, including public transport, through alternative propulsion systems for all modes of transport, including electrification and sustainable hydrogen, gas and biofuels, also for heavy duty road vehicles, shipping and aviation and through greater efficiency thanks to digitalisation, electrification and collaborative systems. This allows a better and more efficient transport system with a smaller environmental footprint. The EESC therefore calls for a new transport policy White Paper, to replace the current one. The EESC points to the limited GHG reduction aims for the non–ETS sectors, including transport, agreed by the European Council in October 2014 (4). Taxes and charges, including internalisation of external costs, should be used as incentives for better efficiency, be acceptable to those concerned and not increase the overall level of taxation.

3.1.5.

The EESC agrees on the importance of a competitive EU industry and the circular economy as important elements for GHG reduction, including a switch to alternative fuels, carbon capture and utilisation. The EESC would like to see a clear reference to Industry 4.0, digitalisation and the development of the collaborative economy as key to improving energy efficiency and reducing emissions (5). The EESC underlines that the circular economy is a key lever for climate change mitigation and for the transition to a climate-neutral economy. Circular economy strategies, such as measures to reduce the input of virgin materials, improve the use of existing assets and reduce the output of waste will prove to be a significant contribution to mitigate climate change and build a climate-neutral economy (6).

3.1.6.

Promoting sustainable food systems will mitigate greenhouse gas emissions, including by protecting and creating more carbon sinks. The EESC reiterates its view that the environmental impact of food systems may be reduced by encouraging simple nutrient diets (7), seasonal food production and consumption. Food distribution chains should be shortened and packing reduced.

3.1.7.

European industry has demonstrated its capacity to develop clean energy alternatives. EU industry still leads in key sectors, such as wind turbines, but has lost its edge in others, such as solar panel production, which has slipped away from Europe, partially as a result of poor public policy choices made by previous national governments. Only about 1 % of world production of lithium batteries is currently located in Europe. To avoid repeating such mistakes for emerging sectors, the EESC welcomes initiatives such as the Action Plan to promote the battery industry in the EU and concretisation of plans to implement the European Battery Alliance, including the development of new technology (8).

3.1.8.

The EESC draws attention to the importance of setting standards in international forums, where the EU can take the lead, with the competitive edge this entails.

3.1.9.

The EESC agrees on the importance of bringing other major and emerging economies on board and of creating a positive momentum. In this context, the EESC underlines the importance of ensuring fair competition and a level playing field in relation to third countries. Preserving competitiveness must be an important element in all relevant policy choices.

3.1.10.

The EESC underlines the huge need for investment and cross-border and cross-sector planning cooperation that is necessary to implement the smart networks, including smart meters and energy storage facilities, which are a fundamental prerequisite for efficient implementation of existing and future network plans and for dealing with variations in production of alternative energies.

3.1.11.

The EESC notes that carbon capture and storage (CCS) appears as the seventh strategic building block and that it at least currently remains key to the possibility of achieving a climate neutral society in 2050, especially through bio energy with CCS. The EESC points out that the European Court of Auditors analysed that already existing EU funding designed to support CCS, such as NER 300, has ‘delivered no successful carbon capture and storage project’. There is thus much uncertainty about the technological feasibility of CCS, and little certainty about public support for CCS.

3.1.12.

The EESC highlights the importance of natural carbon sinks, such as forests and many agricultural practises that bind carbon e.g. grassland, pasture land, peatland, etc. The sustainable forest management, combined with use of wood based products that store carbon and substitute fossil-based materials and energy give long-term mitigation as well as enhance the adaptation capacity of forests towards climate change. It is essential that the carbon-binding capacity of agricultural land is exploited. The sustainable forest management and utilisation of carbon sequestration potential of agricultural land are part of the solution.

3.2.   The Framework conditions — an overview

3.2.1.

The EESC agrees that access to adequate financing is imperative for the envisaged transformation to succeed. It is essential to attract sufficient public and private investment. The EESC therefore reiterates its call to ensure that 40 % of the European Fund for Strategic Investments and 40 % of the EU budget are invested in the fight against climate change and to climate-proof all EU and national budgets (9) (10). The EESC highlights the close link between financing of research and innovation and market launching of innovative solutions, as set out below in points 3.3.5 and 3.3.6.

3.2.2.

The EESC therefore welcomes the Commission Action Plan for Financing Sustainable Growth and the ensuing legislative proposals. The EESC reiterates that it is important to give green financing a positive image, but also that any kind of labelling or benchmarking takes account of sectoral and local specificities as well as the size of businesses concerned (11).

3.2.3.

The EESC recalls its tangible proposals to redirect funding towards sustainable investments through ‘green earmarking (12)’, using quantitative easing by the European Central Bank as a source of financing.

3.2.4.

The EESC draws attention to the need to provide a toolkit to facilitate access to financing for small-scale actors in order to enable actors at all levels to access climate finance (13).

3.2.5.

Finally, the EESC stresses that technologies pertinent to the climate and energy transformation are in constant and dynamic evolution. Regular re-evaluation of ways and means is thus crucial.

3.3.   Research and innovation

3.3.1.

The EESC points out that there will be no transition to a climate neutral economy without far-reaching research and innovation, including social innovation. Indeed, this requires all sorts of innovation, including new behaviours, business models, social norms, processes, techniques, marketing and technologies.

3.3.2.

The EESC notes that Europe represents around 7 % of the global population, 10 % of global GHG, 20 % of global GDP and 30 % of global high-quality scientific publications. As the transition to a climate-neutral economy needs to be a global endeavour to fight climate change, the EESC believes that the EU can achieve the greatest impact by proving to the rest of the world that this transition is feasible and positive for society.

3.3.3.

The EESC considers that Europe produces excellent science but struggles to turn it into valuable innovation. The EU and Member States should better support research and innovation across all value chains, from basic research to commercial deployment, and include social sciences and humanities (SSH) to improve understanding of what drives the energy choices of end-users, including SMEs and citizens.

3.3.4.

The EESC considers that the EU has a historic opportunity to enable European business, innovators, workers and investors to affirm global leadership on the booming clean energy markets. The EU should step up its ambition in all clean energy areas, from energy efficiency to e-mobility, to provide European business with a sound domestic market where innovation can be safely deployed, as well as an integrated industrial strategy aimed at exporting clean energy solutions to the rest of the world.

3.3.5.

The EESC thus asks the European Commission, European Parliament and European Council to ensure that the forthcoming Multiannual Financial Framework properly supports energy-climate research, innovation and, where possible, market deployment. It therefore supports the European Parliament’s call to increase Horizon Europe’s budget to EUR 120 billion for the programming period 2021-2027. It also calls for synergies to be able to be built between EU funding instruments, including Horizon Europe, Connecting European Facility, the Innovation Fund, the Structural Funds, ITER, Euratom research and training programme and Erasmus and the tools managed by the European Investment Bank and the European Investment Fund.

3.3.6.

The EESC welcomes the proposal to create ‘Research and Innovations Missions’ to better steer research and innovation towards projects on societal challenges, including the transition to a climate neutral economy. In that regard, the EESC asks the European Commission and the Council to establish a specific mission to make 100 EU cities climate neutral by 2030. This will show Europeans that the transition to a climate neutral economy can become a reality and improve their quality of life. This will also be the opportunity to work concretely with cities all over the world, starting with cities from Eastern Partnership and Union for the Mediterranean countries, so they can take inspiration from European experiences.

3.3.7.

The EESC welcomes the proposal to create a ‘European Innovation Council’. Building on the experience of tools which already exist, including the European Institute of Innovation and Technology, the EESC would like the European Innovation Council to become the key EU tool for providing patient and risk-tolerant capital to those innovations that are key to the transition towards a climate neutral economy. It can help national start-ups to become European champions, rather than be bought by US and Asian competitors.

3.3.8.

The EESC notes in this context the critical role of regional and local communities in addressing climate challenge and in increasing adaptability and resilience, in ways that directly affect local-level prospects for broad transformation. Many communities are already taking the initiative themselves, and play an effective part in the solutions needed. The EESC highlights the role of EU islands, including outermost regions, as potential innovators for climate neutral policies for the European Union and the rest of the world.

3.4.   Jointly drawing up a social pact for the transition to a climate neutral economy

3.4.1.

The EESC believes that all European, national and subnational institutions should build up support for the transition to a climate neutral economy. Legitimate concerns raised by coal workers in many EU countries, and the recent social movements in France have further emphasised this need to show that the transition toward a more environmentally sustainable society, should also be a transition towards a more democratic and socially fair society.

3.4.2.

The EESC considers that Europe needs a social pact for the transition to a climate neutral economy, to be agreed by the EU, Member States, regions, cities, social partners and organised civil society, in order to ensure that the transition leaves no-one behind.

3.4.3.

The EESC believes that the European Union needs to provide proper funding to support workers at risk of losing their jobs as a result of the transition to a climate neutral economy. For that purpose, the EESC calls on the European Commission, Parliament and Council to ensure that the European Social Fund and the European Globalisation Fund are properly designed and funded to address the challenges of the transition to a climate neutral economy. This would signal Europe’s will to ensure that no-one is left behind.

3.4.4.

The EESC considers that the skills of the workers of a climate neutral economy can significantly differ from the skills that many workers have today. It is important to adapt education and training programmes to make sure that future and current workers and training services can include the transition to a climate neutral economy in their training choices. This will enable a swifter adaptation of Europe’s workforce and help Europeans to develop new talents.

3.4.5.

The EESC considers the transition to a climate neutral economy to be the opportunity to provide jobs for young Europeans, including young unemployed people. The EESC therefore asks the European Commission to develop a ‘Green Erasmus Pro programme’, building on its Erasmus Pro pilot project, as well as other projects that can attract more young people into the growing sectors of the climate neutral economy (e.g. sustainable agriculture, circular economy, waste management, energy efficiency, renewable energy generation) by improving the image and working conditions of such jobs.

3.4.6.

The EESC views the transition to a climate neutral economy as an opportunity to eradicate energy poverty in Europe and improve quality of life, job creation and social inclusion. The EU should ensure equal access to basic energy services for all Europeans. Building on the findings of the European Energy Poverty Observatory, a European action plan to eradicate energy poverty should be drawn up in cooperation with stakeholders, including consumer organisations, to ensure that public action increasingly targets the root causes of energy poverty. The EESC stresses the need to move from palliative measures to preventive measures, such as renovation to transform old buildings into net-zero energy buildings. Social tariffs and energy cheques can only constitute temporary relief and should be gradually replaced by mechanisms such as subsidies for making existing buildings net-zero energy buildings, and electric car purchases.

3.4.7.

The EESC calls on Member States to better recognise and support a sense of ownership amongst citizens and communities for all local initiatives needed to bring about a climate neutral economy, including initiatives aimed at changing behaviour and producing renewable energy locally. Support mechanisms and energy market reforms should enable local communities to actively participate in energy production and have fair access to the energy market. Member States which lack the institutional capacity should be more actively assisted.

3.4.8.

The EESC welcomes the European Commission’s ambition to decrease by half the number of premature deaths caused by air pollution by 2030 (400 000 premature deaths in Europe in 2015). The EESC considers that the EU and all its Member States should make the fight against air pollution a high-level policy priority. Regulatory measures reducing air pollutants emitted by vehicles and power plants should be strengthened. The European Commission should further engage civil society organisations, especially associations protecting children and the elderly, as those groups of the European population are the most at risk of suffering and dying from air pollution.

3.4.9.

The EESC firmly believes that drafting a social pact for a transition to a climate neutral economy is an essential feature to ensure positive citizen engagement in favour of tangible actions in favour of this transition.

3.5.   Democracy and governance

3.5.1.

The EESC agrees with the importance of the role of citizens, regional and local authorities and participation of citizens envisaged in the course of the citizens’ dialogues. In light of the huge-scale youth mobilisation, the EESC calls on the European Commission and Member States to engage in dialogue also with young citizens.

3.5.2.

The EESC welcomes the Commission’s view that, for clean mobility, ‘behavioural changes by individuals and companies must underpin this evolution’. The EESC believes that this holds true for all sectors concerned by the transition to a climate neutral economy, including energy, housing, agriculture and food. The EESC underlines that the far-reaching changes envisaged, including behavioural and life style changes, will require acceptance by those concerned.

3.5.3.

The EESC considers that existing procedures are not yet sufficiently fit for purpose to ensure the necessary acceptance by citizens. The EESC underlines that the European Commission should aim not only to make the energy transition ‘socially acceptable’ but also to ensure that it is democratically and socially supported.

3.5.4.

Building on the Energy Union Governance Regulation, the EESC proposes that a permanent citizens’ dialogue should be set up and that it should be a compulsory preparatory element of all major political decisions and all EU law-making pertinent to climate change. Transparency and accountability should be significant elements of such dialogue, which should be close to citizens. Therefore, while an internet dialogue may be necessary, it must be complemented by meetings and direct contact with the general public. It should be properly financed, staffed and given a face in the form of a dedicated European Commission vice-president.

3.5.5.

The EESC considers that the EU and Member States need to further democratise energy policymaking, using tools such as deliberative polling, and ensuring systemic engagement and necessary resources for organised civil society to participate when drafting and implementing national energy and climate plans.

3.5.6.

The EESC notes the crucial role that regions and local authorities play in delivering climate and energy policy and in nurturing the behaviours needed for its effective implementation. It points to initiatives undertaken by the Covenant of Mayors and calls on the Commission to endorse similar initiatives and to set up a permanent consultation mechanism based on the Talanoa Dialogue (14). This includes the European Dialogue on Non-state Climate Action called for by EESC.

3.5.7.

The EESC reiterates its call for the creation of a European Energy Information Service within the European Environment Agency that would be able to ensure open access to quality data, develop a single entry point for all the datasets needed to assess the progress of the Energy Union, develop with stakeholders the assumptions for different scenarios, provide open source models to allow for testing different assumptions and check consistency between different projections. Its work should be freely accessible to all decision-makers, businesses and the general public.

3.5.8.

The EESC calls on the European Parliament to establish an independent EU Climate Change Committee tasked with making science-based assessments and policy recommendations. Where similar Committees do not already exist, the EESC calls on those Member States to establish such committees at national level and ensure that they report to national parliaments and national Economic and Social Committees, taking into account national specificities.

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(1)  The special IPCC report adopted in October 2018.

(2)  EESC Opinions on Building a coalition of civil society and subnational authorities to deliver commitments of the Paris Agreement (OJ C 389, 21.10.2016, p. 20) and on Boosting climate action by non-state actors (OJ C 227, 28.6.2018, p. 35).

(3)  EESC Opinion on Revision of the Renewable Energy Directive (OJ C 246, 28.7.2017, p. 55).

(4)  Conclusions of the European Council, 23-24.10.2014, EUCO 169/14, points I 2.1, 2.2, 2.10-2.13.

(5)  EESC Opinions on Investing in a smart, innovative and sustainable Industry -A renewed EU Industrial Policy Strategy (OJ C 227, 28.6.2018, p. 70), Strategic developments in industrial policy by 2030 (OJ C 62, 15.2.2019, p. 16), A European agenda for the collaborative economy (OJ C 75, 10.3.2017, p. 33).

(6)  Circle Economy and Ecofys report Circular Economy: A key lever in bridging the emissions gap to a 1,5°C pathway.

(7)  EESC Opinion Civil society’s contribution to the development of a comprehensive food policy in the EU (OJ C 129, 11.4.2018, p. 18).

(8)  Press Statement by Vice President Maris Sefcovic, April 2019, Joint Press Conference with Peter Altmaier and Bruno Le Maire, 2 May 2019.

(9)  EESC Opinion on European Finance-Climate Pact (OJ C 62, 15.2.2019, p. 8).

(10)  EESC Opinion on Facilitating access to climate finance for non -state actors (OJ C 110, 22.3.2019, p. 14).

(11)  EESC Opinions on an Action plan on sustainable finance (OJ C 62, 15.2.2019, p. 73) and Sustainable finance: taxonomy and benchmarks (OJ C 62, 15.2.2019, p. 103).

(12)  EESC Opinion on the European Finance-Climate Pact (OJ C 62, 15.2.2019, p. 8).

(13)  See footnote 10 above.

(14)  https://unfccc.int/topics/2018-talanoa-dialogue-platform?>.

Corrigendum to the Opinion of the European Economic and Social Committee on ‘Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2015/757 in order to take appropriate account of the global data collection system for ship fuel oil consumption data’

( Official Journal of the European Union C 240 of 16 July 2019 )

(2019/C 282/10)

On page 43, paragraph 3.1:

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on page 43, paragraph 3.2:

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