The European Commission published a new proposal on 2 October on “strengthening the social dimension of the Economic and Monetary Union” (EMU). The communication has been trailed for almost a year already, raising expectations that it would signal a softening of the Commission’s austerity message. But what exactly is meant by a social dimension of EMU?

"The ‘social dimension of EMU’ relates to the ability of economic governance mechanisms and policy instruments to identify, take into account and address problematic developments and challenges related to employment and social policies in the EMU."

Despite the politics of the crisis and austerity in what are sometimes called the ‘peripheral’ economies of Ireland and southern Europe, the proposal is technocratic in tone. It outlines the addition of various social indicators (e.g. the rate of young people not in education, employment or training) to existing fiscal and economic monitoring mechanisms.

There is a disappointing absence of analysis of the strengths and weaknesses of the Troika bail-outs, particularly in terms of their social impact. The text acknowledges the Troika agreements with the so-called ‘programme’ countries, noting that “the [EU] response to the crisis focused strongly on necessary structural reforms, specifically for Member States receiving financial assistance.” It omits to state explicitly that the said structural reforms and spending cuts, whether explicitly backed by the Troika or not, have had a detrimental economic and social impact. In fact, the Commission’s view is that “a very high economic and social price has been paid” due to lack of earlier reform efforts in certain countries.

Whilst that may well be true, ESN’s visits to Greece, Ireland, Portugal and Spain reveal that a high price is being paid now by instituting cuts that are too deep and too fast to social protection systems that were already underdeveloped. In Ireland and Spain, important progress in the last ten years had been rolled back due to ‘austerity’ policies. The Commission’s country reports on structural reforms in ‘programme’ countries agreed by the Troika and the governments do not touch on specialist social work and care services. Rather: they focus on welfare benefits, employment services and health systems. Nonetheless, there is affirmation of the positive social and economic impact of social services:

"Good performance from welfare services, enabling and empowering people to participate in the economy and access social services, is also important to maintain healthy economic fundamentals throughout the EU."

The communication re-asserts that social protection is a responsibility of the Member States, noting that “the design, efficiency and functioning of [welfare policies are] a national responsibility and vary across Member States.”

Despite these statements, there is no follow-through in the section on social dialogue. It perpetuates a bad habit of seeing stakeholder engagement solely in terms of structured dialogue with trade unions and employers. Besides the ‘social partners’ and indeed social NGOs, local and regional government should be, in our view, a key partner of the Commission in its efforts to support reform of social protection systems – both within the eurozone and the wider Union through the European Semester process. Social spending accounts for around a fifth of subnational public expenditure so is a key policy area for local and regional authorities. How does the Commission envisage to support reform efforts in welfare systems? The possibility is opened up of specific EU financial support for structural reforms in the context of a ‘Convergence and Competitiveness Instrument’ in areas that are “important for the Member State in question and for the good functioning of the EMU.” The EU already offers financial support for reforms through the EU Structural and Investment Funds and is in fact underwriting social protection expenditure indirectly through the Troika bail-outs. There is the familiar support for soft mutual learning instruments, accompanied by a hint that the topics for exchange of best practice should be more closely related to areas of concern in Member States’ performance against the putative social scoreboard.

Handling the social dimension of the eurozone crisis constitutes a delicate political balancing act for a Commission caught between the champions of solidarity (European Parliament and others) and defenders of structural reform and fiscal discipline (in the creditor Member States). The European Voice reported that László Andor, the European Commissioner for Employment and Social Affairs, wanted the proposal to “include a mechanism to give automatic eurozone support to overburdened social security schemes in crisis-hit countries.” Commissioner Andor had wanted poor performance against certain social indicators to produce (unspecified) automatic action, according to the European Voice. In the end, the communication only contains the proposal for a social scoreboard without any automatic action.

Ultimately, the Commission’s communication errs on the side of technocratic timidity rather than practical concern for the dramatic impact of the crisis on European citizens. Social indicators are important, as are mutual learning and social dialogue, but this will do little to reassure those, including ourselves, deeply concerned by the depth and pace of spending cuts to public services. It should be stated that in other ways, the EU is supporting investment in genuine reforms that will help deliver social inclusion. Unfortunately, this communication on the social dimension of the EMU does nothing to advance this cause in those countries hit by the eurozone crisis.

John Halloran, Chief Executive
Stephen Barnett, Policy Director