ECO/660
Recommendations of organised civil society to address the cost-of-living crisis
OPINION
Section for Economic and Monetary Union and Economic and Social Cohesion
Recommendations of organised civil society to address the cost-of-living crisis
(own-initiative opinion)
Rapporteur: Krister ANDERSSON
Rapporteur: Krzysztof BALON
Rapporteur: Thomas KATTNIG
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Advisors
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Tellervo KYLÄ-HARAKKA-RUONALA (to the rapporteur Krister ANDERSSON)
Kamila PŁOWIEC (to the rapporteur Krzysztof BALON)
Peter HILPOLD (to the rapporteur Thomas KATTNIG)
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Plenary Assembly decision
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5/12/2024
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Legal basis
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Rule 52(2) of the Rules of Procedure
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Section responsible
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Economic and Monetary Union and Economic and Social Cohesion
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Adopted in section
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4/7/2025
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Outcome of vote
(for/against/abstentions)
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65/0/1
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Adopted at plenary
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D/M/YYYY
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Plenary session No
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…
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Outcome of vote
(for/against/abstentions)
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…/…/…
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Preamble
This opinion is part of a wider package of EESC opinions on the cost-of-living crisis. With this package, the EESC is examining the different facets of this policy challenge and presenting a comprehensive and wide-ranging set of recommendations to European and national policy-makers, civil society organisations and other stakeholders. The package includes seven ‘sectoral opinions’, each dedicated to issues in a specific relevant policy area. In addition, an ‘umbrella opinion’ presents the overarching policy recommendations to address the cost-of-living crisis as a whole and build resilience against future crises.
1.Conclusions and recommendations
1.1Increasing living costs, including energy, food prices and housing costs, combined with a general rise in prices – have affected people’s living conditions throughout Europe since 2021. Despite the recovery up to now, prices remain high and geopolitical uncertainty poses risks that may lead to new price increases.
1.2The EESC considers it crucial for the EU to be well prepared to prevent and tackle possible new adverse cost-of-living conditions in good time. While crisis prevention is the primary objective, it must be accompanied by improved resilience against risks and as a last resort, mitigation of actual impacts. Addressing crises calls for structural and long-term measures, as well as urgent and one-off actions.
1.3Affordable access to good quality services of general interest (SGIs) for all is vital in curbing the cost of living. The EESC calls for cooperation and meaningful distribution of tasks between the public, non-profit, and private sectors. The EESC also highlights the role of adequate investment and funding and the development of innovative approaches.
1.4Energy prices are crucial for both households and businesses. The EESC has advocated a fundamental reform of the design of the energy market to achieve lower and stable energy prices. The EESC also calls for well-designed reforms in energy taxation and a harm-based phase-out of fossil fuel subsidies, to be undertaken in such a way that costs for households and companies are reduced, contributing to supporting the most vulnerable and stimulating investments in decarbonised energy systems and R&I.
1.5Strong European production capacity is increasingly important to improve economic security and resilience to external price increases. The EESC calls for a modern, innovation-oriented and comprehensive industrial policy to facilitate the ‘reindustrialisation’ of Europe. Access at fair prices to energy and raw materials must be ensured in order to make production costs competitive. Better access to financing is also crucial, including for SMEs and social economy entities.
1.6The EESC stresses the need for regulatory simplification, the acceleration of permitting procedures and the reduction of non-productive administrative burdens to lower costs and to incentivise innovation, investment and trading – while not lowering social and environmental standards.
1.7The single market is invaluable for EU citizens in terms of the availability of a broader range of products at lower prices, and it also provides economic security against external price shocks. The EESC strongly calls for the elimination of market dysfunctionalities, through effective enforcement of existing single market and competition rules and by reducing the remaining barriers to all of the ‘four freedoms’ as well as the ‘fifth freedom’ of innovation and education.
1.8Favourable conditions for sustainable and just trade also need to be ensured to keep prices reasonable. The EESC calls for the active enhancement of trade agreements and economic partnerships – duly taking into account social and environmental standards – to reach new markets and diversified supply chains, thereby decreasing vulnerability to protectionist trade measures and their price impacts.
1.9The EESC deems it important to ensure that policies and measures affecting the cost of living are fair and efficient, whether they concern the green and digital transitions, value chains, social security, taxation, or any other relevant topics. This calls for the economic, social and environmental aspects to be considered in an integrated and mutually supportive way.
1.10A high cost of living hits the most vulnerable the hardest, which increases inequalities. The EESC calls on the Member States to provide specific support measures targeted to protect the most disadvantaged, based on proper monitoring and impact assessments. Due attention must also be paid to the long-term impacts on future generations when shaping policies to address the cost of living.
1.11Specific efforts need to be focused on the provision of adequate and affordable housing for various needs, including for young people. Innovation and appropriate land use planning are needed to speed up construction and renovation. Social housing should be boosted to help make housing accessible and affordable to all.
1.12The EESC highlights the fact that boosting the creation of quality jobs and fostering full, decent and inclusive employment is a fundamental way of securing economic and social resilience to price increases. This requires a favourable environment conducive to entrepreneurship and business, including support for the development of the social economy. The latter is crucial for the creation of jobs for those who are not able to work in the primary labour market.
1.13The EESC emphasises the crucial role of education and skills development in enabling individuals to obtain quality jobs and better earnings. Well-functioning social dialogue and well-developed collective bargaining, in line with national practices and the autonomy of the social partners, are pivotal means of addressing the work-related issues of purchasing power, thereby contributing to social cohesion and a decent life for all. Civil dialogue in turn is needed for including citizens’ views in the development of policies affecting their living conditions.
1.14The EESC stresses the fact that addressing the cost of living requires both public and private investments in innovation and infrastructure, covering housing, energy, digital and transport systems, education, healthcare and social services, as well as security and defence capacity. To be able to finance the wide range of necessary investments in the common good, higher productivity and robust economic growth must be steadfastly promoted, while securing sustainable and transparent public finances.
2.Recent developments in the cost of living
2.1Since 2021, increasing energy and food prices, housing and transport costs, and fees for publicly provided services – combined with a general increase in the prices of goods and services – have impacted citizens throughout Europe and beyond. These developments have challenged compliance with the values of the European Union, including the protection of human dignity, and with the provisions of the European Pillar of Social Rights. This has affected people’s living conditions and led to negative effects on the societal and political atmosphere, and in some countries, populist movements have presented quick and easy, yet impractical, solutions to the very complex chain of causes.
2.2The rapid increase in energy prices in the wake of the Russian aggression and invasion of Ukraine contributed to an inflationary development, reducing real wages. The cost of basic food items and other necessities tended to increase the most, leaving low-income earners in particular with difficulties paying their bills and leading to increased energy poverty and related negative developments in economic conditions and access to affordable essential services. These developments triggered governments to act, not least to prevent inequalities and an unfair distribution of the burdens.
2.3Despite the problems, aggregate numbers in relation to economic developments remained surprisingly robust, as reported by the Commission. Headline inflation is forecast to return to the medium-term target during 2025 and decrease further in 2026, as strained supply chains and energy costs are alleviated. However, these forecasts may not be met under the current geopolitical conditions. Despite disinflation, prices remain high, posing a burden for households and companies.
2.4The successful disinflation has been accompanied by robust labour markets, which have defied fears of widespread job losses in the face of large macro-economic shocks. According to the Commission, resilience in labour markets has been crucial in supporting the economy. Employment growth has been the strongest in the services sector, most notably in information and communications technologies, the financial and insurance sectors, and property, and in the public sector. While employment has risen by three million in the euro area between the end of 2022 and mid-2024, and real wages have started to grow on the back of the rapid fall in inflation, not all Member States and regions have benefited. Renewed geopolitical concerns have resulted in a muted economic recovery and some sectors have experienced large layoffs and many bankruptcies.
2.5The Commission notes that the recovery in purchasing power is beneficial from an economic and social viewpoint, contributing to aggregate demand. The euro area’s ability to absorb shocks and rebound, as seen in its response to the pandemic and the energy shock, has contributed to this outcome. Overall, annual average real GDP growth is expected to increase gradually. However, regional disparities still persist and increased geopolitical uncertainty may pose risks in terms of both growth prospects and labour market developments.
2.6As reported by the Commission, the share of people at risk of poverty or social exclusion (AROPE) has declined slightly, but social issues persist. According to Eurostat Flash estimates, the share of people at risk of poverty in the euro area is also expected to remain stable for 2024. In some countries, a drop in the risk of poverty can be partly linked to strong increases in statutory minimum wages. However, a fifth of the EU population is living at risk of poverty or social exclusion.
2.7Financial distress still remains high after an increase during the energy crisis, for both the lowest-income and lower middle-income households. Against the background of higher prices and higher financing costs, the lowest-income households in the EU report elevated levels of financial distress, above other income groups.
2.8As housing costs have continued to outpace income growth, concerns about affordability have grown, with implications for economic stability, social cohesion, and families’ well-being. Housing shortages can also harm longer-term growth and competitiveness as well as social cohesion, considering that housing availability and affordability issues can discourage labour and residential mobility, especially if not remedied by adequate housing policies.
2.9The geopolitical and geo-economic situation could very well lead to new price increases. Furthermore, short-sighted domestic policies at Member State or EU level – e.g., as a result of inadequate impact assessments – might also contribute to increasing prices. Due to the constantly changing environment, intensive monitoring and evaluation of the situation is necessary, and the EU must be well prepared to prevent and tackle possible new adverse cost-of-living conditions in good time.
3.General comments
3.1In general, addressing crises comprises several elements and stages, with crisis prevention as the primary objective, accompanied by improvement of resilience against risks and as a last resort, mitigation of the impacts to avoid damage. This also applies to the cost of living, and the following sections of this opinion are structured accordingly. The views and recommendations are based on universal and cross-cutting principles and complemented by specific aspects related to sectoral topics.
3.2The best way to prevent crises is to adopt forward-looking strategies and to pursue sound and sustainable policies at all times. From recent history, we can conclude that relying on Russian gas was a blunder and that it contributed to large increases in energy costs. The cost increases spread to other sectors of the economy and inflation resulted. Furthermore, the continuous increase in housing costs has lasting negative effects on prosperity as well as on purchasing power.
3.3The importance of maintaining price stability and the need to curb prices on essential goods and services, like energy, have become obvious. However, the energy policies that have been pursued have made many individuals worse off, due to poor targeting of measures. In many cases, the gravity of the situation was made worse by inflexible economies – with insufficient strategic autonomy – not being able to adjust and create new jobs quickly enough or to develop new sources of energy, as well as by the inability to properly use public investments and create a necessary stimulus for the economy. Relevant good practices were not transferred to all Member States.
3.4The energy crisis showed the need for policies to address issues comprehensively from different angles. For example, adjustments in both energy supply and demand have proven indispensable and the need for simultaneous enhancement of the security and diversification of supply, affordable prices and decarbonisation has become ever more evident. It is also important to ensure the coherence of policies at different policy-making levels, across policy areas and at different times.
3.5The necessary adjustments in the economies, however, often entail cost and price increases, which affect all citizens but harms the purchasing power of low-income earners in particular. This underlines the need for economic, social and environmental aspects to be considered in an integrated and mutually supportive way, thereby ensuring that policies and measures are fair and efficient, whether they concern the green and digital transitions, value chains, social security, taxation, or any other relevant topics.
3.6Important lessons can also be learnt from the COVID-19 crisis. During the pandemic, supply chains were adversely affected. Europe was excessively reliant on imports of many strategic goods. The Member States and the Commission have since started to develop strategies for limiting the vulnerability of supply chains. This can be seen as an important first step in limiting the risk of external shocks and of negative trends in the cost of living.
3.7Moreover, when analysing the sources of cost-of-living developments, demographic challenges, the impacts of climate change and environmental degradation, various geopolitical tensions, as well as migration and regional disparities need to be taken into account.
4.How to limit the risks of a high cost of living
4.1Bringing down inflation and achieving the ECB’s price stability objective is crucial for lowering the cost of living. This is an area where monetary policy plays a central role. On top of the general price level, the costs of living are dependent on several factors affecting the prices of individual goods and services and must therefore be addressed by measures in other policy fields such as energy, innovation, competition, trade, and tax and expenditure policies, among others.
4.2The costs of living are closely connected to food and essential services, including energy, water, sanitation, transport, financial services and digital communications, as well as other services of general interest (SGIs) such as housing, education, healthcare and long-term care. SGIs are also important because they contribute significantly to value creation and employment, strengthening the EU’s resilience and cohesion, and because they play an important role in delivering a fair green and digital transition. The EESC points to the Letta report which emphasises the central role of services of general interest (SGIs) in the internal market. It criticises the fragmented, sector-specific regulation in EU law and calls for an action plan for high-quality SGIs, which require stable tax revenues in order to be maintained and further developed.
4.3Ensuring affordable access to these services requires that the infrastructure, production and other supply-oriented operations are sufficient and efficient. Cooperation and meaningful distribution of tasks between the public, non-profit, and private sectors are important here. At the same time, it must be ensured that affordable essential services are provided for all. The provision of high quality SGIs also requires adequate funding and investment, as well as the development of innovative approaches, such as co-creation by citizens and their organisations.
4.4Energy prices are crucial not only for households but also for many businesses and particularly for energy-intensive industries. The EESC has advocated a fundamental reform of the design of the energy market to achieve lower and stable energy prices for households and to achieve more competitive production costs for businesses. In the long term, the EU should aim for a decarbonised energy system with lower energy prices. The phase-out of fossil fuel subsidies (FFSs) should be undertaken in such a way that the new energy sources contribute to cost reductions for households and companies and reduced pressure on consumer prices.
4.5Competitive access to domestic raw materials is also important in lowering production costs and in reducing vulnerabilities to external price increases. Better access to finance, including risk capital, is also essential – especially for enabling SMEs to operate and employ. Achieving the Commission objective of reducing the administrative burden for SMEs by 35% would also improve the business climate for smaller firms, while upholding social and environmental standards.
4.6Well-designed fair reforms in taxation could help reduce costs for both households and businesses, stimulate investments and increase employment while at the same time avoiding unnecessary tax competition. For example, the Commission has encouraged the Member States to lower the excise duty and VAT rates on electricity, which would not only reduce energy bills but also contribute to decarbonisation.
4.7Innovation is key in improving the productivity of any activity. Increasing both public and private investment in innovation is therefore badly needed. The development and uptake of advanced digital technologies is fundamental to improving the efficiency of both production and consumption. A skilled workforce is yet another prerequisite for higher productivity. In addition, initiatives such as one-stop shops for funding, planning security and better cooperation between administrative and funding entities, and closer contacts between businesses and universities, are examples of promoting innovation.
4.8The single market is invaluable for EU citizens in terms of the availability of a broader range of products at lower prices. Many dysfunctionalities, however, prevent full advantage being taken of the common market. Improving its functioning requires, inter alia, effective enforcing of existing single market and competition rules, improved public procurement practices with clear regulations and monitoring (in particular by opening up access to tenders and preventing single bid tenders) and efforts to reduce the remaining barriers to all of the ‘four freedoms’ as well as the ‘fifth freedom’ outlined in the Letta report.
4.9A well-functioning single market also requires well-functioning physical infrastructure, including decarbonised transport, energy and digital networks. Investment in infrastructure must also cover measures against security risks, both physical and cyber threats. While preventing disruptions in the networks, security and reliability measures also prevent the consequent impacts on prices.
4.10Favourable conditions for sustainable and just trade also need to be ensured to keep prices down. This calls for active enhancement of trade agreements, while ensuring reciprocity and adherence to multilateral trade rules, duly taking into account international and European social and environmental standards and legislation. Diversification of partnerships and markets is increasingly important to avoid excessive vulnerability to price increases in the new and changing geo-economic situation characterised by protectionism and fragmentation into blocks.
4.11Additionally, regulatory simplification, the acceleration of permitting procedures and a reduction of non-productive administrative burdens are needed to lower costs and to incentivise innovation, investment and trading – while not lowering social and environmental standards – thereby benefiting both citizens and businesses.
5.How to improve resilience against increases in the cost of living
5.1A solid and stable economy, social partners and civil society organisations are the cornerstones of resilience against any shocks and crises. On the one hand, this calls for robust and sustainable economic growth, relying on increasing productivity, employment, investment, and market integration. On the other hand, it requires the promotion of strong social security systems, social cohesion and respect for fundamental rights and the planetary boundaries, as well as the relevant EU targets.
5.2Enhancing the creation of quality jobs, and full inclusive and decent employment, which enables people to live in dignity, including people with special needs, and prevents the phenomenon of the ‘working poor’, is a fundamental way of securing economic and social sustainability and cohesion. This requires a favourable environment conducive to entrepreneurship and business as well as active labour market policies. It also requires active support and investment for the development of a social economy at national level and EU level.
5.3Education is crucial in enabling individuals to obtain quality jobs and better earnings and to manage their finances. As economies are facing rapid technological change, investing in upskilling and reskilling has become crucial for enabling individuals to stay employed and find new jobs. Well functioning social dialogue and well developed collective bargaining, in line with national practices and respecting the autonomy of the social partners, are pivotal means of addressing the work-related issues of purchasing power, thereby contributing to social cohesion and a decent life for all. Civil dialogue in turn is needed for including citizens’ views in the development of policies affecting their living conditions.
5.4Education and skills development, together with technological, social and process innovations, are also vital for productivity. Considering that European productivity development is persistently lagging behind the US and other main trading partners, significantly more investment in research and innovation, as well as in education and training is indispensable. An important role is played here by the general higher education system.
5.5In general, investment policies are important to increase the flexibility and durability of economies. The Draghi and Letta reports highlight the need for increased investments, in both the private and public sectors. Public and private investments are necessary for the development of infrastructure, including physical and social infrastructure, ranging from energy, housing, digital and transport systems to education, healthcare and social services. Sufficient funding must be ensured for these important long-term investments at all times.
5.6Simplifying rules, appropriate land use planning, as well as research and innovation can accelerate construction and refurbishment and reduce their costs. It is increasingly important to ensure adequate investment in housing. Special attention should be paid to affordable housing for young people as they are heavily affected by high housing costs, as well as to social housing as an essential and promising tool of active housing policies. The current approach limits housing policy to households with the lowest incomes. This approach should be revised and, instead, State aid law should be adapted accordingly, in line with the services of general economic interest (SGEI) regulation system. The disability dimension should be mainstreamed in all housing programmes to ensure that housing is not only affordable and sustainable, but also accessible to all. In addition, housing indicators should be included in the national reform programmes and stability/convergence programmes.
5.7Private investments are primarily needed both for creating new businesses and for developing existing businesses, thereby creating jobs and improving productivity. The changed geopolitical conditions also call for more investment to strengthen production capacity within the EU. A modern, innovation-oriented and comprehensive industrial policy will play a key role in facilitating the ‘reindustrialisation’ of Europe.
5.8The importance of market integration should not be under-estimated in protecting Europeans from price shocks. More than thirty years after the creation of the single market, the EU still needs to take full advantage of its size (440 million consumers, 23 million companies). Deepening the single market would not only lead to substantial efficiency and welfare gains but also improve the EU’s resilience and economic security in the changed geopolitical circumstances, together with the diversification and de-risking of international partnerships, trade and supply chains. The focus of further market integration should therefore be to further improve competitiveness, as well as social cohesion and living conditions.
5.9As for sustainable public finances, after several years of fiscal expansion due to two unprecedented crises, policy-makers are being called on to turn to fiscal consolidation strategies to strengthen fiscal sustainability while increasing investments. The recent reform in economic governance is supportive of medium-term fiscal adjustment strategies that are tailored to the specific needs of each economy. Moreover, it is expected to promote structural reforms and investments that help modernise economies, increase their resilience and potential growth, and ensure fiscal sustainability.
6.How to mitigate the impacts of increases in the cost of living
6.1Carefully developed economic and social policies should continue to be pursued in all situations. However, rapid increases in the cost of living also raise the need for specific measures to mitigate their impacts, especially for vulnerable people. High costs of living hit the most vulnerable the hardest, given that basic living costs take up a larger share of their income, which increases inequalities and may lead to health problems and social exclusion. Specific policies (e.g. social climate plans), careful targeting and proper impact assessments are therefore needed to ensure that the measures to be taken are efficient and fit for purpose. This calls for proper data gathering and monitoring of the situation.
6.2In general, affordable access to SGIs alleviates the burden on disadvantaged people. Minimum wages and means-tested income support measures also contribute to their protection. At the same time, it is important to avoid high marginal effects. It is also important to develop manifold civil society and public activities, like advocacy, specific advice centres, self-help structures and customised services.
6.3The consequences of monetary policy measures to curb inflation, such as increases in interest rates, affect the entire society. Counter-measures may be needed to support some segments of the population through public means. Housing allowances, rent subsidies, and support measures in relation to energy and transport, as well as increased child benefit, are examples of support measures often used in the Member States.
6.4A reduction in specific taxes may counter the general increase in prices, making the situation less burdensome. Several Member States reduced fuel and energy taxes when the world-market prices of energy increased. Many of the remedies, such as tax reductions and increased public support, will be the concern of national budgets. Re-allocating counter-productive subsidies and fighting the informal economy could help in this respect.
6.5Whenever making changes in taxation or subsidies, it is important to establish the objectives clearly and analyse the impacts thoroughly, to avoid unintended economic, social or environmental consequences, including for future generations. Unfair tax competition must be avoided, while ensuring a competitive tax environment, also vis-à-vis other economic blocs.
Brussels, 4 July 2025.
The President of the Section for Economic and Monetary Union and Economic and Social Cohesion
Ioannis VARDAKASTANIS
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