Changes from report parliamentary committee draft to plenary report

Change 5

AddedEXPLANATORY STATEMENT

AddedThis year’s report on the European Semester for economic policy coordination: the employment and social aspects was written in the context of the ongoing review of the EU’s economic governance mechanism. The EU economic governance tools are integrated in the European Semester. This results mainly in EU-level multilateral and bilateral surveillance of Member States' fiscal policies under the Stability and Growth Pact, economic and structural policies under the Macroeconomic Imbalances Procedure (MIP), and employment policies under the employment guidelines.

AddedThe report explains that in the context of slow economic growth and relatively stable labour markets with an uncertain economic outlook, the cost of living crisis is affecting all, but particularly the vulnerable groups. Hence inequalities and at risk of poverty are remaining major issues in the future. The ongoing geopolitical conflicts, such as Russia’s protracted war of aggression against Ukraine and the wider regional consequences of the Israeli Palestinian conflict are exacerbating these negative trends. In addition, the report recognises that the twin transition (green and digital) can have significant impact on the environment, the economy and the people by expanding some economic activities and contribute to sustainable growth and development but equally, by leading to more disparities between regions and its people. Finally, demographic trends, i.e. aging and brain drain, magnify these disparities as well as contribute to skills and labour shortages and in turn, lead to a decrease in the number of employees financing the social welfare model in the EU.

AddedIn this context, the report calls for the modernisation of several aspects of the labour market so as to address skills mismatches and labour market shortages as well as the great potential and risks of the twin transition. More specifically, it calls for:

Added- innovation in the up-to-date monitoring of the labour market and of supply and demand for skills, including through the recognition of an individual right for all to high quality and inclusive lifelong learning and at no cost for workers and through recognising the untapped potential of unemployed and underemployed people;

Added- the creation of good-quality jobs and the implementation of retention strategies as these are the best ways to attract a skilled workforce;

Added- improving access to quality employment in society, especially for those groups at higher risk of poverty and social exclusion and further EU action to protect workers in jobs under industrial transformation and ensure a decent level of income, including an EU directive on adequate minimum income;

Added- the need for technical support in particular for SMEs and start-ups for training and recruitment of new skilled and qualified employees in line with national policies and capacities.

AddedTo support this modernisation and transformation the report points to the need of increased EU funding dedicated to social objectives and the promotion of future-oriented investments focused on the just green and digital transition, while achieving synergies among different relevant EU funds, with a strong social dimension. In this context, it also highlights that financial instruments at all levels must become less fragmented and their management less bureaucratic and more blended and bundled.

AddedIn addition, the report explains how well designed EU fiscal rules can allow for the necessary reforms as well as public investment and financing of the digital and just transition towards a zero-carbon economy, as well as for the proper implementation of the principles of the European Pillar of Social Rights and of social investments. For that purpose, the report calls for:

Added- further mainstreaming of the principles of the European Pillar of Social Rights in economic budgetary policies, including via the introduction of social conditionality in the allocation rules of EU funds, as part of the Financial Regulation covering the EU general budget;

Added- the Commission to further promote a more systematic use of distributional impact assessment in the planning and budgeting of reforms;

Added- the possibility for designing more flexible individual adjustment paths for Members States, particularly the more indebted ones, that in turn allows them enough fiscal space to undertake the investments and reforms needed for socially fair green and digital transitions.

AddedFinally, the report emphasises how some new and revised processes in the European Semester can contribute to a more democratic, accountable and transparent mechanism. It welcomes in this context the Social Convergence Framework, an early warning system, used for the first time in the 2024 multilateral surveillance procedure, that could encourage the correction of risks to social convergence identified through the Social Scoreboard headline indicators and through social convergence reports published by the Commission. The report stresses the need to fully integrate the framework into the Semester process from the 2025 cycle onwards, including by using its results for the design of country specific recommendations. The report further highlights the importance for the European Parliament to be duly involved in a regular and structured way in the European Semester. It calls on an increased cooperation between the lead committees of the European Parliament and highlights the possibility to create a special working group in the European Parliament that should ensure dialogue with representatives of Member States, regional and local authorities as well as stakeholders who should be also essential actors in the European Semester process.