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 for a more effective model of governance than the system of coordination or ad hoc responses used until then. Therefore, the necessity of a structural reform of the Economic and Monetary Union (EMU), with emphasis on the importance of budgetary control and of the social component, received ample attention.

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

Economic governance and the Economic and Monetary Union

The European Union (EU) 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), supported by the euro as single currency. The recent economic and financial crisis highlighted the interdependence of the European 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, the Union’s economic and social integration has not received the same attention as its monetary integration. Although the monetary policy in the eurozone is currently managed independently by the European Central Bank, the 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. A better coordination of  the economic and social policies is 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 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 main tools that have been used to resolve the crisis. Moreover the instruments of economic governance have been thoroughly reviewed. This reform is continuing with the project to deepen the EMU. According to the roadmap adopted in 2012, 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 of the Member States in the decision-making process 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 by the end of 2025 according to a tight schedule.

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 with special attention for the social dimension: the Union is responsible for providing greater stimulus, particularly through a genuine industrial policy and an inclusive and diversified employment policy,  taking into account the important role played by the social partners in this respect.

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 considerable 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 confronted with the consequences of the economic and financial crisis. Moreover, given the successive enlargements of the European Union, an increasing numbers of workers make use of their right to mobility. Hence it is important to ensure fair working conditions for all 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 the 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. One of these instruments was the Stability and Growth Pact allowing Member States to 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 EU, for which it defines funding through different items corresponding to the various fields of action of the European Union. The budget is drawn up annually, based on a financial project called the Multiannual Financial Framework (MFF) which establishes the budget priorities for a given period, generally seven years. These priorities are focused on matters where European funding is essential, i.e. matters requiring ample budgetary means the Member States would hardly be able or  be unable to provide. The different crises the European Union had to face - as well as the Brexit - have influenced the financial requirements of the European budget and have revealed the limitations in the flexibility of the financial framework. These issues will hence be central to the negotiation of the financial framework 2021-2027.

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