Socio-economic and financial governance

In brief

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 the need of a more effective model of governance than the system of coordination or ad hoc responses used until then. Therefore, a structural reform of the Economic and Monetary Union (EMU) was necessary, namely by  enhancing budgetary control and developing the social component within the EMU

The Directorate General for Coordination and European Affairs (DGE) coordinates the positions that Belgium defends regarding the socio-economic governance in the European fora.

Objectives for Belgium

The economic governance of the Economic and Monetary Union

The European Union is one of the largest economies on the planet. 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 recent economic and financial crisis highlighted the interdependence of the EU’s Member States economies and the vital need to strengthen socio-economic and financial governance within the EU, and especially within the eurozone.

While building the EMU was an undeniable step towards greater European integration, its economic and social integration has not received the same attention as the monetary integration. As a result, although monetary policy is currently managed independently by the European Central Bank in the eurozone, budgetary policy and other economic and social policies are still the responsibility of national governments. However, in a context of interdependence, the policies implemented in one Member State have an effect on the EU and its other Member States. Thus, improving the economic and social coordination between the Member States is 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 of the structural imperfections of the EMU. Greater solidarity between Member States, and an increased responsibility in terms of economic and budgetary policies, are the tools that have been used to resolve the crisis. Deep-seated reform of the instruments of economic governance has also taken place, reform which is continuing with the project to deepen the EMU. Thus, according to a roadmap adopted in 2012 by the European Council, a robust and stable monetary union would have to 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 regarding the EMU.

The Five Presidents' Report entitled "Completing Europe's Economic and Monetary Union", published on 22 June 2015, reflected these objectives by highlighting a financial union, a fiscal union, an economic union and finally, a political union. The reforms needed for their implementation are underway and should be completed according to a specific schedule that is set to end in 2025.

Providing 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 which encompasses a balanced approach between its different pillars and dimensions.

The social dimension of the EMU

In general, it is recognised that the EMU must take on a social dimension. Given the risk posed by the persistence of serious social imbalances in this area, social and employment indicators will now be taken into account in economic analyses.

The process of deepening the EMU that is developed by the publication of the Five Presidents' Report in June 2015 requires a harmonious socio-economic governance. The social dimension of such governance is also highlighted; the Union is responsible for providing greater stimulus, particularly through a genuine industrial policy and an inclusive and diversified employment policy, while taking into account of the important role played by social partners.

Belgium welcomes the importance given to the social component in the planned reforms in terms of economic and monetary governance.

Employment policies and workers' rights

Employment policies and workers' rights are an important component of socio-economic governance. The EU is paying increased attention to employment policies and to the standardisation of rules with regard to the employment of workers, given their impact on competitiveness and growth. As such, it is useful to mention the policies regularly implemented in order to create employment for European citizens, heavily affected by the consequences of the economic and financial crisis. Moreover, given the successive enlargements of the European Union, increasing numbers of workers benefit from labour mobility. Hence, it is important to ensure fair working conditions for all of these workers. In this context and while respecting the competences of the Member States, the Union is paying increased attention to the reinforcement of the workers rights (notably within the framework of the posting of workers) as well as to a better coordination between the social security systems of the Member States.

The budget

The budget of Member States has an impact on the economic and monetary policies developed within the EU, as shown by the instruments that were adopted in order to stabilise the European economy after the 2008 crisis. The Stability and Growth Pact was therefore adopted so that Member States pursue a sound and responsible fiscal policy, the objective being to prevent any situation likely to have a negative influence on the common economic and monetary policy.

The EU budget is also important in this area, because it reflects the priorities of the Union, for which it defines funding through different items corresponding to the various fields of action of the European Union.  It is drawn up annually, based on a financial proposal called the Multiannual Financial Framework (MFF) which establishes the budget principles and priorities for a given period, generally seven years.  These priorities are focused on matters where European funding is essential, that is to say when it would be more expensive and even impossible for Member States to provide budgetary resources. The different crises the European Union had to face have influenced the financial requirements  of the European budget and have revealed the limitations in the flexibility of the financial framework. In the context of the mid-term review of the multiannual financial framework, the European institutions reflect on the way to make this framework more flexible so as to make the budget more responsive to the needs of the Union. These issues will also be central to the negotiation of the next financial framework after 2020.

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