Brussels, 29/02/2012 (Agence Europe) - In a document unveiled on Wednesday 29 February, the president of the European Council, Herman Van Rompuy, advocates raising the age of retirement, revising wage-setting systems, reducing the tax burden on labour and fighting tax evasion. These suggestions were made in an attempt to orientate the European Council debates on Thursday and Friday 1-2 March towards possible measures to take for promoting growth and stimulating job creation in Europe.
As indicated in the Danish Presidency's report on the European semester, progress is lagging behind in a number of areas where reforms are essential for promoting growth and creating jobs. Moreover, the Commission's recent Alert Mechanism Report highlights the challenges and risks created by macro-economic developments in certain EU countries (see EUROPE 10536). The document prepared by Van Rompuy's staff underlines that “stagnating economic activity in 2012, as forecast by the Commission in its most recent economic forecasts, illustrates the need for serious action to relaunch growth in Europe”.
The European Council's objective is to identify the priorities EU countries should outline in the preparation of their national reform programmes and their stability and convergence programmes expected this April. Van Rompuy's document includes three lines of action:
Budgetary consolidation: the document explains that budgetary consolidation needs to be pursued seriously. The countries that benefit from financial assistance programmes (Greece, Portugal and Ireland) have introduced changes to the structural economic balance that go beyond 5% of GDP since 2009. The president of the European Council recommends: - prioritising spending to ensure growth (education, research and innovation); - pursuing reforms and modernising pension systems (the countries targeted are Greece, Spain, Cyprus, Luxembourg, Romania and Slovenia, where spending on pensions could increase by more than 6% of GDP over the next 50 years. The document notes, however, that recent reform in Greece, Spain and Romania is likely to reduce this spending); - implementing tax policies at a national level that are likely to promote growth - reducing high tax rates that create distortion (broadening the tax band, for example), reducing the tax burden on labour, particularly for workers on low incomes (only Ireland, the United Kingdom, Malta and Luxembourg have a tax burden lower than 30%); - increasing the efficiency and collection of taxes and measures to combat tax evasion.
Growth and competitiveness: opening up protected sectors by getting rid of non-justified restrictions on professional services and in the retail sector (efforts are being made in Italy, Portugal and Greece); ensuring that public administration is more effective (speeding up the absorption rates for EU funds and cutting down on red tape…); promoting innovation (European venture capital markets remain underdeveloped).
Employment: reforming the labour market to stimulate growth (revising wage-setting mechanisms. The document notes that between, 2000 and 2010 Belgium, Italy, Ireland, Spain and Portugal have experienced rises of more than 20% in nominal unit labour costs in the manufacturing sector); - enhancing labour mobility; - restricting access to early retirement schemes and early exit pathways, whilst supporting longer working lives. In most EU countries, the average age of retirement is below 62, whilst in many other developed parts of the world it is above 65. (LC/transl.fl)