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European Commissioner responsible for Employment, Social Affairs and Inclusion
Greece - on the way to recovery and job-creation
Parliamentary Committee /Athens
25 June 2013
Ladies and Gentlemen,
The EU has been in a crisis for too long. What started as a financial crisis in 2007/8, turned into the deepest post-war recession in 2009, and produced record high unemployment levels.
Today we have an 11 percent unemployment rate in the EU and 12 percent in the euro area. The number of those at risk of poverty or social exclusion has increased significantly in the last three years.
In some EU member states there is a social emergency.
Greece has been a country of extremes in this crisis. On the one hand, the highest debt/GDP ratio in the EU, and many weaknesses of public finances. On the other hand, by far the most dramatic fall in GDP and rise of unemployment (particularly youth unemployment) since the onset of the crisis.
In this difficult period, EU financial support, notably through the structural funds has helped in the crisis response. To make the conditions more beneficial for those in need, we changed the co-financing rates for the so-called programme countries. And last year we reprogrammed 16 billion euros of EU structural fund money in 8 member states, including Greece, where the youth unemployment rate was the highest, in order to support young unemployed people more efficiently and effectively.
Especially, the European Social Fund has been instrumental to alleviate the hardship of unemployment. It is therefore disappointing for me to see that many Member States don’t recognise the importance of the ESF in the next Multiannual Financial Framework, the EU's seven year budget, and reject our proposals to assign to it at least 25% of EU cohesion funding.
For the current period 2007 to 2013 Greece has received a total of 20 billion euros from the Structural Funds, and the European Social Fund accounted for over 4 billion euros of that amount.
Much European Social Fund support has been directed at the effects of the crisis — in particular to:
The European Social Fund supports three particularly important actions:
Responding to the excessively high youth unemployment, Greece undertook an extensive re-programming of European Social Fund operational programmes at the end of 2012 and endorsed in January 2013 a National Youth Action Plan.
This plan receives half a billion euro from EU funds. It targets 350,000 young people under 35 years old, and comprises on-going actions and new schemes launched in early 2013.
Building on this Youth Action Plan, the Greek Government should urgently develop an implementation plan for the so called Youth Guarantee. According to the Recommendation adopted by the EU Council in February this year, it would ensure that every person under 25 gets a quality offer of a job, continued education, training, apprenticeship or traineeship within 4 months of leaving school or becoming unemployed.
The Youth Guarantee is an important structural reform, targeting the most critical phase of a person's life and the difficult transition into the labour market.
Ensuring training or job placements has a fiscal cost, but it is a crucial economic investment to make, and support is available from the European Social Fund and the new Youth Employment Initiative.
This is a new endeavour for Greece which merits strong support. Especially in difficult periods as the current one, thesocial economy can become the much needed source of new jobs and activity and a breeding space for new solutions to social and societal problems.
The strength of this sector is in its diversity. Some cooperatives are profit-oriented but worker-owned; other social enterprises focus primarily on their social objectives and reinvest most profits to advance these social objectives. Some social businesses focus on work-integration or provision of social services, others have environmental objectives.
The Commission considers promoting the development of the social economy and social enterprise as one of its priorities. I have brought with me today a publication which we have recently produced on this. We have translated it into Greek, in a hope that it can help inspire the efforts of policy-makers as well as of individuals who would like to start or expand a social enterprise.
The Greek Government has started to lay the basis for a support framework to this new and promising sector of the economy. I welcome these efforts, but they must now intensify so that its full potential can be tapped.
Labour and product market reforms (MoU)
I wanted to use these examples to illustrate concrete areas of EU support to the huge effort Greece has been undertaking to implement an ambitious – and socially painful - economic reform programme.
There have been cuts in the public sector wage bill and pensions, indirect tax increases and far-reaching pension and labour market reforms.
The Government has promoted – and continues to do so – a re-designed wage-setting system by reducing non-wage labour costs, fighting undeclared work and informality, as well as by streamlining administrative burdens and increasing the transparency and enforceability of labour law.
At the same time, effective implementation of structural product market reforms is expected to improve the transmission of labour cost reductions into lower prices.
From my portfolio perspective, I am happy to note that reforms in labour legislation are being increasingly implemented in consultation with social partners and in respect of EU Directives and Core Labour Standards. I will participate this afternoon in a conference that should mark the start of a fruitful relationship with the International Labour Organisation. I very much support this.
After an initial difficult period which focussed on fiscal cuts, more and more attention is being paid to helping the unemployed so that they remain attached to the labour market and to improve affordability and adequacy of social safety nets.
In a period of crisis and hardship, such as the one Greece currently faces, focussing on solutions, especially for those who are not eligible for unemployment benefits and for those who are not active in the labour market is of utmost importance. Well targeted public works schemes can be part of the response. A well designed social safety net is another one.
Indeed, it is not acceptable that Greece should remain the last EU country without a universally recognised minimum income. The work that has started on introducing a minimum income scheme needs to advance quickly.
Ladies and Gentlemen,
With such a broad reform agenda, it is essential to never lose from sight the initial purpose of the endeavour. To support reforms, people must understand why they are necessary, even if they do not immediately see the fruits of the reform process.
To help this, Greece could envisage assessing the effectiveness of the reforms, for example those related to labour law adopted over the last three years. Such an assessment could show clearly the benefits of those reforms.
As important as it is, recovery in Greece does not depend only on the Greek reform effort.
It also depends on whether Europeans can overcome their present divisions and decisively reform the Economic and Monetary Union in a way that supports sustainable growth both in the so-called centre and in the so-called periphery.
Indeed, the crisis from which Europe is still struggling to emerge is also a crisis of an incomplete and imperfect Economic and Monetary Union.
It is a systemic crisis and as such it requires systemic solutions. The fact is that twenty years ago, Europe created a currency union without sufficient mechanisms to coordinate economic policies and without mechanisms through which the euro zone could adjust to asymmetric shocks in an economically effective and socially acceptable way.
We have been catching up over the past four years through the European Semester for enhanced coordination of economic policies. Europe has built backstops to refinance troubled sovereigns, such as the European Stability Mechanism. Finance Ministers are working on a single supervisory mechanism and a single resolution mechanism for banks as part of a new Banking Union, so that we end the deadly embrace between troubled sovereigns and troubled banks, which has been destabilising markets for years.
My prediction is that we will need to do even more.
We must genuinely reform and re-build the monetary union so that it can withstand future crises and provide to each Member State the possibility of sustainable economic growth.
We must ensure that the benefits of the monetary union are equally shared among the participating Member States and citizens. We must tackle growing social disparities within and across countries as a matter of genuine common concern.
If we neglect unemployment and social problems in some parts of the currency union, this will have negative economic spill-over effects and politically destabilising effects for the EMU as a whole.
Five years of economic and social crisis have profoundly transformed Europe, and we face big demographic, environmental and technological challenges. We need to make sure that European institutions and policies are fit for the decades to come, and can deliver on the objectives of the Treaty on European Union: balanced economic growth, full employment and social progress.
I have recently suggested, together with other European policy-makers, that Europe needs to convene a conference similar to that which took place in Bretton Woods in 1944.
That conference took 3 weeks, brought together over 40 governments, and created an international economic structure that lasted for more than 25 years and enabled post-war reconstruction.
Europe is in its deepest economic crisis since the Second World War, and it is clear that it will not emerge from this crisis through a succession of small, incremental steps.
A longer-term vision for Europe's economic order is needed to end the uncertainty, and such vision must be based on a grand bargain between the creditor and debtor countries.
Europe would do well to lock its political representatives and economic experts in a hotel for three weeks and task them with developing a long-term plan.
I am convinced that besides stronger mechanisms for governance of structural policies and the creation of a banking union, the new design of a genuine Economic and Monetary Union will also need to include an automatic stabiliser together with greater democratic accountability at the European level.
But of course all this is possible only if we maintain political unity in the short term.
All European countries need to continue the course of structural reforms. Southern European countries need to improve their public administration and tackle unemployment through measures like the Youth Guarantee. Germany, on the other hand, needs to strengthen domestic demand and improve labour market transitions of the weakest groups.
We have a framework to coordinate fiscal and structural policies, we have European instruments for investment, and we must continue in the direction of building unity and solidarity.
The Greek Government has acted throughout the crisis with great responsibility and awareness of the pan-European importance of its actions.
I trust that the Greek people and their political representatives will continue their effort to get the economy running and to keep the society together.
If the people and leaders of other European countries do the same, we can build a better future.