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The European Way

European Commission - SPEECH/14/366   13/05/2014

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European Commission

Check Against Delivery

László Andor

Commissioner for Employment, Social Affairs and Inclusion

The European Way

University of National and World Economy

Sofia, 13 May 2014

Professor Stattev,

Learned professors,

Distinguished guests,

Ladies and gentlemen,

I am grateful for the honour this University does me in making me a Doctor Honoris Causa.

I also thank you for the chance to address you today.

This year will see many changes in the European Union institutions.

In less than a fortnight, European citizens will elect their representatives to the European Parliament.

The results should influence the choice of the next Commission President and President of the European Council.

The Commissioners nominated by the Member States will attend hearings before Parliament, and the new Commission will then take office.

It is no secret that there is a danger that the European Parliament elections may be swayed by an increase in the populist and europhobic vote.

There are some who want to turn back the clock and roll back the EU’s achievements, who are attracted by simplistic solutions to the complex problems of a Union of over half a billion people.

We must beware of a return to narrow nationalism and parish-pump politics. If we become inward-looking, we will surely fail to find the right answers to the challenges of the time.

The world around us is changing fast. Emerging economies in what we once called the Third World are catching up and making their influence felt. Demographic transformations, environmental threats and permanent technological revolutions define our destiny.

The European Union is facing global challenges, and the protracted financial and economic crisis that has dominated this Commission’s term of office has shown up many of its weaknesses, especially regarding the architecture of the Economic and Monetary Union.

It has often been said that the Union makes progress only when there is a crisis.

Probably that’s why one of the most popular quotes, recalled these days in Brussels, is the one coming from the great American President John F. Kennedy, who once said:

The Chinese use two brush strokes to write the word 'crisis.' One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger — but recognize the opportunity.

Where it has been able to, this Commission has seized the opportunities to strengthen the Union.

It has set out a new ten-year strategy (the EU 2020 strategy) to drive towards smart, sustainable and inclusive growth.

It has revamped EU governance to provide guidance to the Member States to meet their fiscal, economic, environmental and social commitments.

It has pursued financial sector regulation as well as industrial policy at EU level.

It has done its best in order to ensure that another crisis of this sort does not unhinge the Member States’ economies in the same way.

Ladies and gentlemen,

Today I want to talk about the achievements of this Commission within my portfolio — employment, social affairs and inclusion.

I shall concentrate on three issues — youth unemployment, poverty and labour mobility.

Tackling youth unemployment

Unemployment has been the most obvious and quantifiable effect of the crisis.

It affects Europe’s most valuable asset — its people, and especially its youth, together with their enthusiasm, passion and imagination, their desire to make personal progress, their skills and experience — the driving force for our collective future prosperity.

The unemployment rate for the EU recently peaked at 11 per cent (for the Eurozone at 12 per cent), while the youth unemployment rate is still close to 23%.

This means that young people are twice as likely to be unemployed as the overall population.

The problem is so acute that it is putting the future of an entire generation at risk.

Tackling the problem has been a priority for me personally, for the Commission as a whole, and for the EU heads of State or government.

That is why the Commission proposed in 2012 — and the European Council adopted shortly after — a Recommendation on establishing a Youth Guarantee. (This was presented as part of a Youth Employment Package.)

The Youth Guarantee means ensuring that every young person receives a high-quality offer of a job, an apprenticeship, traineeship or a new learning opportunity within four months of becoming unemployed or leaving formal education.

Of course, the Youth Guarantee comes at a cost, but doing nothing has been calculated to cost far more — including benefits granted and tax revenue forgone.

The ILO puts the total cost of establishing Youth Guarantee schemes in the euro area at 21 billion euros.

But the cost of doing nothing would be far greater.

Our Dublin agency, The European Foundation for the Improvement of Living and Working Conditions has estimated that if you add up the cost of benefits paid out to unemployed young people — and especially the loss of earnings and tax revenue — the economic cost of young people's disengagement from the labour market is equal to 1.21% of EU GDP.

That amounts to a collective annual loss of 153 billion euro at 2011 figures to the Member States.

Here in Bulgaria, where one in four young people are neither in employment nor in education or training, the loss to the national economy resulting from not fruitfully employing them is more than 3% of Bulgarian GDP.

And that does not include the ultimate cost to society of wasting these young people’s skills and discouraging them from engaging in gainful employment.

The main financial support for the implementation of the Youth Guarantee in the EU comes from the European Social Fund.

The ESF is the strong arm of the EU budget for human capital investment, which has been endowed by about 80 billion euros for the period 2014-20.

On the top of the ESF, the European Council has introduced a Youth Employment Initiative to help finance the Youth Guarantee schemes.

It earmarks 6 billion euros of EU funding for the Initiative, partly comprising new money and partly resources from the European Social Fund.

It will help support Youth Guarantee schemes in regions where the youth unemployment rate was over 25% in 2012.

This covers five out of six regions in Bulgaria, where a total allocation of 55 million euros will supplement the European Social Fund and national funding already spent on youth employment.

26 Member States, including Bulgaria, have now submitted Youth Guarantee implementation plans.

They set out comprehensive national strategies for tackling the problem, reflecting very different situations and challenges, policies and institutional arrangements, and constraints on resources.

In most cases, more focus on a quality offer is needed.

While the Commission is still considering the Bulgarian plan, it recognises the effort made.

But there is a need for a more proactive approach and for more attention to be paid to minority groups in order to foster inclusiveness.

There is also a need for more substance in measures for those furthest from the labour market, so those who need it most benefit, rather than those who already stand a good chance of finding a job or offer.

The Youth Guarantee has been followed up by the European Alliance for Apprenticeships and the Council Recommendation on a Quality Framework for Traineeships.

The European Alliance for Apprenticeships aims to increase the quality, supply and attractiveness of apprenticeships and to change attitudes towards this sort of approach to training.

It provides a platform for coordinating and scaling up initiatives for successful apprenticeship-type schemes and promoting national partnerships for dual vocational training, which involves alternating between theoretical learning and on-the-job training.

The Quality Framework for Traineeships also seeks to improve the quality and attractiveness of traineeships offered, which are useful only where they provide quality learning content and decent working conditions.

The aim is to ensure that traineeships are genuinely useful as a stepping stone to the job market and employers do not treat trainees as a free or cheap source of labour to replace workers on proper contracts.

Addressing poverty

Ladies and gentlemen,

The corollary of a rise in unemployment and under-employment is an increase in poverty.

From 2008 to 2012, the number of people living in poverty or social exclusion across the EU went up by 6.7 million.

That makes a total of 123 million — one in four Europeans in the EU, not including Croatia.

Now that the recovery seems to be there, there is hope that employment will pick up and poverty will fall.

But it will take some time for the recovery to translate into new jobs in every country and even longer for this to help reducing the number of poor.

However, what I want to emphasise is that this is not only a matter of time. The chance to reduce poverty mainly depends on the choice of policies and institutions.

Chances of falling into and getting out of poverty vary with the Member State.

Some countries are better at avoiding poverty traps than others, and the percentage of GDP spent on social protection varies greatly too.

While social protection is vital for safeguarding human capital, well-being and social cohesion, it cannot reduce poverty and social exclusion on its own, but needs the backing of economic, employment, tax and education policy.

Reform is also needed to enable and support people to participate in the labour market and society and to promote investment in human capital development.

Establishing a minimum wage in order to ensure that jobs provide adequate income is an important reform, similarly to the design and implementation of minimum income schemes.

Forward-looking social investment brings tangible returns. Reducing early school-leaving is a way of improving young people’s prospects and it costs less than efforts to tackle poverty and labour market exclusion later.

Active ageing and preventive health measures can also help older people stay in charge of their lives for as long as possible and reduce the need for long-term care.

On my initiative, the European Commission has made tackling poverty an explicit EU commitment, agreeing with Member States that at least 20 million people should be brought out of poverty by 2020, and advising Member States how to tackle poverty with more efficient budgets, and through adopting best practice.

Through two important policy documents, the Social Investment Package (2013) and the White Paper on Pensions (2012), the Commission has been providing guidance for reforms of welfare and social security systems within the Member States.

The EU’s main support for combating poverty and social exclusion is the European Social Fund. Over the next seven years Member States must use at least 20% of their money from the ESF for social inclusion, focussing on skills, helping disadvantaged people to get jobs, and offering help to social enterprises.

Nonetheless, the poorest people often find themselves far from the labour market, which prevents them from qualifying for job-activation and training measures supported by the Fund.

For over a quarter of a century, the EU has provided food aid to the most needy.

Starting in 1987, the programme for Food Distribution to the Most Deprived Persons of the Community, channelled food free of charge through various organisation, in direct contact with the recipients.

This has now been replaced by the Fund for European Aid to the Most Deprived.

It allows the Member States to continue to provide vital food aid and tackle extreme material deprivation. It will also co-finance social inclusion measures.

Extreme material deprivation may not only be life-threatening, but also makes it very tough for those affected to escape from poverty and exclusion and even to take advantage of training or counselling measures.

The Fund fills a gap in EU cohesion policy to help the most vulnerable, complementing the European Social Fund and other Cohesion instruments.

It offers the Member States wide latitude in identifying the target beneficiaries and in procuring and distributing food.

They can plan their programmes for 2014 to 2020 in line with their country’s situation and needs and their institutional arrangements.

The Commission approves the national programmes of the Member States, which then decide on the delivery of the assistance through partner organisations, be they public or non-governmental bodies, on the basis of objective, transparent criteria.

The Fund’s total budget for the next seven years is 3.8 billion euros.

Bulgaria’s allocation is slightly over 104 million euros.

Together with national co-financing, the money available is comparable with the amounts for the previous period.

Along with the European Social Fund, the Fund for European Aid to the Most Deprived is a tangible example of EU solidarity.

Labour mobility

Ladies and gentlemen,

The third area I wish to highlight today is our efforts to help EU workers in exercising the right of free movement.

Freedom of movement for workers is a fundamental principle of the European Union, along with free movement of goods, services and capital, and a cornerstone of the Single Market.

The EU rules and regulations on freedom of movement allow EU citizens to move to another Member State and work there on the same terms as nationals of the host State.

They safeguard mobile workers’ social security and pension entitlements and protect against discrimination and exploitation.

While transitional arrangements may apply in the years following a country’s accession to the EU, these will lapse after a certain time.

Since the first of January this year, Bulgarian workers can enjoy that right in full.

Despite the rules and regulations on freedom of movement, potential mobile EU workers face difficulties when they try to obtain information on their rights and they often lack assistance in having them enforced.

Following my initiative, a directive was adopted in April to ensure Union law on EU citizens’ right to work in another Member State.

The new rules aim to bridge the gap between those rights and the real situation on the ground.

They will make it easier for people working or looking for a job in another Member State to exercise their rights in practice.

In particular they will require one or more bodies to be responsible at national level for providing support and assistance to mobile EU workers.

The 2004 and 2007 enlargements brought an increase in the number of workers moving to other Member States for work purposes.

Their number rose from 4.7 million in 2005 to 8 million in 2013.

Three quarters of the increase is due to mobile EU workers from the Member States that joined in the last ten years.

The scale of the inflows of foreign workers and their potential impact on jobs, wages and working conditions has triggered unease in some countries.

The media often present a very partial view of the situation and politicians may exploit the situation.

Yet independent studies show that labour mobility generates social and economic benefits, increases workers’ employment opportunities and offers employers a larger pool of candidates for recruitment.

Free movement of labour can bring more flexibility to the labour markets of both the host country and the country of origin.

Employers as well as workers benefit from the dissemination of knowledge and innovation it entails. Society as a whole stands to gain as a result.

A 2011 Commission report highlights the overall positive role that mobile workers from Bulgaria and Romania have played in the host countries’ economies.

They have contributed to the skill mix and have filled vacancies in sectors with a labour shortage, such as the construction industry and the domestic and food services sectors.

The impact of free movement by Romanian and Bulgarian workers on the EU’s long-term GDP is estimated at 0.3% for the EU of 27.

Money sent home by mobile workers abroad can partly offset the negative impact on growth in the short and medium term in the country of origin.

It helps drive economic growth by supporting aggregate demand and financing investment in education and start-ups of capital-intensive businesses.

It amounted to 4.1% of GDP in Bulgaria, the highest figure for the Central and Eastern Member States.

That is not to minimise the challenges, such as pressure on local services in the host countries and the loss of young people for the countries of origin.

However, only 43% of recent mobile workers from Bulgaria were less than 34 years old, compared with over 60% from Slovakia and Latvia.

And it must be also mentioned that labour mobility is not necessarily a one-way street, since workers often come home with more experience, new skills, including language skills, and savings to invest.

Various EU instruments can help boosting the capacity of labour mobility to serve workers, communities and companies in Europe.

The European Social Fund provides support for transnational mobility by financing language and orientation training, travel costs and integration into the host country.

In the Employment Package (2012), the Commission outlined a vision for a genuine European labour market, together with actions that help achieving it.

Strengthening and reforming EURES, the European job-search network, is one of the key actions.

There are already around 1.4 million vacancies on the EURES web portal, 1.1 million jobseekers have registered their CVs and 30 000 employers are registered for the purpose of finding skilled staff.

We are increasing financial support for targeted mobility schemes for young people to offer better possibilities and tackle youth unemployment.

Your first EURES job, which is aimed mainly at graduates, helps young jobseekers take up employment opportunities in other Member States.

Since modern labour markets rely on skill-based matching of CVs and vacancies, we invented a new instrument to assist this function in the EU.

ESCO, the European classification of Skills, Competences, Qualifications and Occupations, will provide a common language to facilitate online automated matching for the European labour market and support better performance of EURES.

Conclusion

Ladies and gentlemen,

The Europe 2020 strategy provides a valid framework for economic and social progress in the European Union.

But it is also true that the Eurozone crisis made it extremely difficult for a number of Member States to reach all their targets by 2020.

However, I do believe the EU can return to the avenue of smart, sustainable and inclusive growth, if we show perseverance with the reconstruction of the EMU.

The Commission’s Blueprint for a deep and genuine Economic and Monetary Union sets out its vision for future euro-area integration.

It puts forward proposals and a clear timetable for reforming governance of the banking and financial sector and of the fiscal, economic and political architecture to restore confidence in the single currency and help prevent future crises.

The Blueprint of the Commission was followed-up by adopting a Communication to strengthen the social dimension of Economic and Monetary Union. This introduced a scoreboard of employment and social indicators, and highlighted the relevance of cross-country automatic stabilisers.

These instruments can help detecting but also tackling the growing divergence between the centre and periphery of Europe, and particularly the EMU. Without this, we risk losing not only financial and economic stability again, but also the true meaning of the European social model.

When we look at these documents, and work on their implementation, we should not forget the words of Robert Schuman from 1950:

"Europe will not be made all at once, or according to a single plan. It will be built through concrete achievements which first create a de facto solidarity."

This long term commitment to economic cooperation, solidarity and increasing living standards holds the key to the future of Europe.

Our task is to pursue resilient economies and inclusive societies simultaneously.

This is what I call the European way, and this is what I have been working for as European Commissioner for Employment, Social Affairs and Inclusion.

Thank you very much.


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