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Economic governance means coordinating the economic policies of Member States of the European Union (EU), designed to achieve the EU's objectives. The financial, budgetary, and economic crisis which began in 2008 demonstrated that the EU needed a more effective model of governance than the model of coordination or ad hoc responses that had been appropriate until then. The need for the structural reform of the Economic and Monetary Union (EMU) was highlighted by underlining the role of budgetary control and the social component.
The Directorate-general Coordination and European Affairs (DGE) coordinates the positions that Belgium defends in this area of socio-economic governance and the community budget in the European fora.
Objectives for Belgium
The Economic governance and the Economic and Monetary Union
The European Union is one of the largest economies in the world. Today, growth and prosperity are highly dependent on the stability and effectiveness of the Economic and Monetary Union (EMU) based on the single currency, the Euro. The economic and financial crisis of 2008 illustrated the interdependence of the European economies and the vital need to strengthen socio-economic and financial governance within the EU and especially the eurozone.
While the creation of the EMU was undoubtedly a step towards greater European integration, its economic and social integration has not received the same attention as the monetary integration. In effect, although the monetary policy of the eurozone is currently managed independently by the European Central Bank, budgetary policy and other economic and social policies remain the responsibility of national governments. In a context of interdependence, however, the policies of one Member State have an impact on the EU and its Member States. Better coordination of socio-economic policy was therefore essential.
The crisis that erupted in 2008 has led to an awareness of the strong interdependence of the economies within the EU, as well as the structural weaknesses of the EMU. Greater solidarity between Member States and increased responsibility for economic and budgetary policies are the main tools that have helped to address the crisis. A thorough review of the instruments of economic governance has also been carried out. This reform continues with the deepening of EMU. According to a roadmap adopted in 2012 by the European Council, a robust and stable monetary union should be built on 4 pillars:
- An integrated financial framework through the establishment of a banking union,
- An integrated fiscal framework,
- An integrated economic policy framework,
- The need to ensure democratic legitimacy and the ownership by Member States of the decisions taken within the context of the EMU.
Achieving a satisfactory level of budgetary and macro-economic coordination is a gradual process on which long-term work is needed. Belgium is fully committed to greater European integration resulting from a balanced approach between its different pillars and dimensions.
The European Semester
Until 2010, the procedures for coordinating economic and social policies were operated independently of each other. Based on the lessons learned from the economic and financial crisis, the European Semester was introduced in 2010. The European Semester is a cycle of coordination of economic, budgetary, employment and social policies within the EU. It is part of the economic governance of the European Union and allows Member States to align their economic and budgetary policies with the rules defined at European level. The European Semester aims to achieve several objectives:
- contributing to ensuring convergence and stability in the EU
- contributing to ensuring sound public finances
- promoting economic growth
- preventing excessive macroeconomic imbalances in the EU
- coordinating and monitoring social and employment policies
- monitoring the implementation of national recovery and resilience plans.
Belgium considers the recommendations made by the Commission in the preparation of its annual National Reform Plan and pays close attention to the articulation of the National Reform Plan with the implementation of the National Recovery Plan.
The social dimension of Economic and Monetary Union
It is widely accepted that EMU must have a social dimension. Given the risk posed by the persistence of serious imbalances in this area, social and employment indicators will now be considered in economic analyses. The deepening of the EMU is intended to be the driving force of a harmonious socio-economic governance.
The social dimension of the Economic and Monetary Union (EMU) is embodied in the European Pillar of Social Rights, adopted by the Heads of State and Government in November 2017. The European Pillar of Social Rights defines 20 key principles, divided into three areas: Equal opportunities and access to the labour market (1), fair working conditions (2) and social protection and inclusion (3). It is a reference framework which aims to ensure the deepening of the social dimension of EMU and to make labour markets and social protection systems fairer while promoting their proper functioning. To this end, the pillar lays the groundwork for the adoption of legislative initiatives designed to strengthen workers' rights and mobility, access to the labour market and improve social inclusion (Posting Directive, Social Security Coordination Regulation, Work-life Balance Directive, Accessibility Act, etc.) and is accompanied by a social scoreboard which will make it possible to evaluate trends in the Member States and provide indicators to guide social and employment policies in the context of the European Semester.
In March 2021, the Commission published an Action Plan to strengthen the implementation of the European Pillar of Social Rights and set new targets for 2030 in terms of labour market participation, training and skills development, and poverty reduction. The Heads of State and Government supported this new dynamic and endorsed these goals at the Porto Social Summit in May 2021.
Belgium supports this new impetus for the implementation of the European Pillar of Social Rights and defends an ambitious approach both in terms of social governance and social convergence between Member States.
Employment policy and workers' rights
Employment policy and workers' rights are an important component of socio-economic governance. The EU pays great attention to employment policies and the standardisation of rules in terms of the employment of workers, given their impact on competitiveness and growth. It is therefore worth mentioning the policies implemented at regular intervals to create jobs for European citizens facing the consequences of the economic and financial crisis.
Following the successive enlargements of the European Union, a growing number of workers are exercising their right to mobility, which is why it is important to ensure that they have fair working conditions. In this respect, the Union, while respecting the competences of the Member States, shall pay increased attention to the strengthening of workers' rights and standards which contribute to fair competition within the single market, particularly in the context of mobility and the posting of workers.
Belgium actively supports initiatives that help to strengthen workers' rights and contribute to establishing fair competition in the European market.
The budget of Member States has an impact on the EU's economic and monetary policy developed, as shown by the instruments adopted to stabilise the European economy after the 2008 crisis. Thus, the Stability and Growth Pact was therefore established so that Member States pursue a sound and responsible budgetary policy, the objective being to prevent any situation likely to have a negative influence on the common economic and monetary policy. The EU budget also plays an important role in this area as it reflects the priorities of the Union. The various headings define the funding corresponding to the different fields of action of the European Union. The budget is drawn up annually based on a financial proposal, the Multiannual Financial Framework (MFF) which establishes the principal policy priorities for a given period, generally seven years. These priorities concern matters that necessarily involve European funding, and therefore considerable budgetary resources that the Member States could not mobilise if they acted alone. The various crises that the European Union has had to face, the emergence of new investment priorities (green and digital transitions, migration, innovation, etc.) as well as the withdrawal of the United Kingdom from the European Union have an impact on the financing needs of the European budget and have demonstrated the limits of the flexibility of the financial framework. These issues are therefore at the heart of the investments of the new Multiannual Financial Framework (MFF) 2021-2027, adopted by the Council and the European Parliament in December 2020, after an intense negotiation between the Member States, which unanimously voted on the financial framework of the Union
NextGenerationEU: The European Recovery Plan
On 27 May 2020, the European Commission also presented a proposal for a major recovery plan to address the socio-economic crisis resulting from the COVID-19 pandemic. This recovery plan, NextGenerationEU, with €750 billion (amount expressed in 2018 prices), was adopted by the European Parliament and the Council in December 2020 and is integrated into the Multiannual Financial Framework for 2021-2027, which has been redesigned for the cause. This time-limited instrument aims to support Member States with investments and reforms and to provide a rapid economic boost by stimulating investments that will contribute to a greener, more digital, and more resilient Europe.
At the heart of the package is the Recovery and Resilience Facility (RRF), a financial instrument that will make €672.5 billion available to Member States in the form of loans and grants to support their reforms and investments. To benefit from part of this aid, each Member State has prepared a National Recovery Plan which must meet specific objectives and respond to the challenges identified in the European Semester through the Country Specific Recommendations (CSR). The implementation of these national recovery and resilience plans is monitored in the framework of the European Semester.
Belgium submitted its Recovery Plan to the European Commission on 30 April 2021. This was subsequently approved by both the European Commission and the Council of the EU, allowing Belgium to start implementing investments and reforms amounting to around €6 billion.