Macroeconomic challenges. ETUC priorities and strategy for 2024
Adopted at the Executive Committee of 06-07 December 2023
(ETUC STRATEGY FOR SOCIAL AND ENVIRONMENTAL SUSTAINABILITY IN EU ECONOMICs)
The European economy is re-entering a moment of uncertainty and is undoubtedly at risk of recession, with a poor 0,6% growth for 2023. Fiscal policy is on its way to becoming more restrictive, while monetary policy negatively impacts economic activity and workers’ purchasing power, especially in the poorest households. This is deemed a gross mistake since while phasing out the extraordinary sanitary measures, the EU is adapting to the polycrisis. This requires an unprecedented effort for transformative public funding investment and social cohesion.
The EU lost momentum because of a lack of solid economic drivers: wages strengthen domestic demand, but nominal wage growth lags behind inflation, damaging domestic consumption, while exports declined. Moreover, while nominal and real profits increased in 2023, total investment growth in the EU is expected to slow to 1.2% in 2023 and increase to 1.5% in 2024 and 2.3% in 2025.
Indeed, private investment is not growing, standing at one percentage point below the pre-COVID period, while dividend payments will continue to skyrocket in 2023. We are, therefore, not witnessing the investment “offensive” that RRF induced to predict, mainly because of a disengagement of the private sector. As the private sector does not invest, higher taxes on corporate profits should be considered in Member States to ensure public authorities can compensate for the private sector's failure. Moreover, countries are meeting several obstacles in spending the RRF funds, including a lack of social dialogue and understaffed public administration. Open strategic autonomy risks overshadowing the EU strategy built around the green, digital, job-rich transformation. The ETUC disagrees with prioritising military spending (which is already increasing) over social and green priorities.
In addition, a restrictive monetary stance is hurting the economy and, from the ETUC perspective, is ineffective in fighting supply-side-induced inflation. Political commitments for price regulation, energy overhaul, fair and progressive taxation, and industrial policy, not a contractionary monetary stance, are needed to tackle this issue. We should also be aware that the increases in interest rates are challenging investment prospects for businesses, restricting the spending capacity of municipalities and slowing down the required adaptation of our economies to the urgent socio-ecological transformation of our industries, threatening millions of jobs for the future. While the EU and the International Energy Agency call for extra investment, increases in interest rates and undermining private investments in decarbonated energy will undoubtedly compromise the search for additional investments necessary for the green transition.
Finally, increases in interest rates will undoubtedly impact business and government activity, especially following COVID loans to SMEs. According to Eurostat, in Q2 2023, Business bankruptcies were at their highest level since 2015. In addition, governments are starting to restrict public spending for welfare and social policies, leading to industrial action of public services unions as offers for wage increases do not match with inflation and national average productivity increases.
Positive employment aggregate performances should not be overestimated as some Member States are beginning to experience increases in unemployment, and should not hide the huge difficulties, especially for vulnerable groups (for instance, people with a migrant background, women with family care charges, young workers, 55+ and people with disabilities) or become vulnerable because of ineffective or inexistent access to training or the sudden downturn of their economic sector without foresight or strategic vision of the company. Such vulnerabilities are shown in the long-term unemployment figures, slow job-to-job transitions and persistent poverty, or people at risk of social exclusion.
In this context, it is crucial to have a mix of policies that lever fiscal, social, industrial and employment policies. We need fiscal policies that drive investments toward the green transition and create solid public infrastructures, with an EU budget that consolidates the EU economy with material and immaterial infrastructures and networks, including at cross-border or transnational levels. Such investments should go together with creating quality jobs and granular analysis of active labour market policies, which should protect workers and enable them to adapt to fast-changing productive patterns.
Public policies should be pinpointed on social cohesion objectives, incentivising autonomous and genuine collective bargaining, especially to multiply its redistributive impact and unleash its potential to introduce innovative measures to protect workers. They should also finance social protection measures, giving priorities to just transition, including securing job-to-job transition, an adequate minimum income framework in all Member States, as pushed by the ETUC with its continuous demand for an EU directive, and financing of quality and accessible public services, with sufficient human, financial and material resources, at the service of European people.
Against this scenario, a reform of the economic governance that activates investments (10% of GDP until 2030 is the gap for a complete green and digital transition with just transition) and preserves social cohesion, having the European Pillar of Social Rights as a cornerstone, is pivotal but unfortunately far from what is currently envisaged.
The ETUC is critical about the positions on which both decision-makers (European Parliament and the Council) are converging and demands a prolongation of the escape clause to further reflect on the most appropriate reform considering the environmental and social ambitions of the EU.
Still, the medium-term fiscal-structural plans shall offer new momentum for designing a policy mix that keeps fiscal, industrial and employment policies in a single strategic framework. This is the terrain on which social dialogue can express its maximum potential, and social partners should be involved in designing, implementing, and monitoring medium-term national plans.
2024 will be the year of medium-term planning of the fiscal, industrial, and employment policies with strong coordination between the EU's common objectives and national actions. The European Semester will be widely revisited and offer opportunities and risks for European Trade unions. In this regard, the main objectives of the ETUC are:
- To change the approach to the coordination of monetary and fiscal policies, especially in the Macroeconomic dialogue;
- To reinforce social objectives in the definition of fiscal, economic, environmental, and social policies, especially in the ASGS and in the Social Convergence Framework;
- To bind the EU Semester to the just transition and social progress objectives, the ETUC will renew its capacity to coordinate and offer support to its members and, in particular, will enhance the trade union involvement in the economic governance of the EU and the Social Convergence Framework.
In articulation with the EU semester, TUSLO will spearhead the demand to make solidarity policy tools permanent through the EU lending capacity that activates EU facilities for investment and employment stabilisation during a crisis and finance an EU fund for investments. They will explore the possibilities of the recent attention to Beyond Growth and a Wellbeing economy and how this can be part of the Economic Governance and Semester framework. In the annexe, one can find the actions and timeframe to reinforce the TUSLO network.