Social Rights in the New Economic Architecture of the European Union

by | Feb 13, 2017

What started in the United States as the subprime mortgage crisis in 2008 led the European Union to fundamentally rethink its socio-economic governance tools, calling into question the balance between the economic and the social dimensions of European integration. 

The sequence of events is well known. The financial crisis rapidly turned into a sovereign debt crisis as several peripheral Euro Area Member States, unable to service their debt, had to receive financial support, if the single currency was to survive.

The initial emergency support however, provided through various mechanisms, was a mere stopgap. The general view was that fiscal discipline was too weak, and tools to ensure macroeconomic convergence too few, in the Eurozone, leading to an imbalance between the monetary and the economic integration. By 2010, the consensus was that the mechanisms of fiscal and socio-economic surveillance and coordination had to be significantly strengthened in order to avoid the recurrence of crises in the future.

Two sets of instruments were adopted in turn, respectively called the Six-Pack and the Two-Pack. The European Semester was launched: an institutional process of macroeconomic, budgetary and structural policy coordination driven by the European Commission, the European Semester was designed to enhance macroeconomic and systemic convergence across the Union. In parallel, the internalization by the Member States of the new budgetary discipline of the Union was achieved by the ‘Fiscal Compact’. On top of the European Semester, a special, ‘enhanced surveillance’ procedure was also established for States facing serious economic and budgetary difficulties. Finally, a permanent firewall for the Eurozone, able to provide swift financial assistance to member States in need, was set up through an intergovernmental agreement: the European Stability Mechanism, sometimes described as “the European IMF”.

In a recent publication, we show that these new tools of socio-economic governance in the EU are almost entirely silent on the need to avoid that efforts aiming at economic convergence shall not lead to making it more difficult or impossible for the EU Member States to comply with their obligations to respect, protect and fulfil social rights, as listed both in the EU Charter of Fundamental Rights and in international human rights law. How can we ensure that the strengthening of budgetary discipline, the inclusion of severe conditionalities in the provision of financial assistance to Eurozone Member States experiencing financial difficulties, and more generally, the fostering of macroeconomic convergence across the EMU, shall not lead to a systemic downgrading of social rights?

Actors external to the EU, including the European Committee of Social Rights , the Independent Expert on foreign debt and human rights of the UN Human Rights Council, and the Committee on Economic, Social and Cultural Rights, have expressed their concerns in this regard. But the EU institutions themselves have also gradually become aware of the risks of an imbalance emerging between the economic and the social, and of the need to ensure that fundamental social rights be fully complied within the new governance framework. The Court of Justice of the European Union now insists that the institutions of the EU are bound to respect and ensure respect for the Charter of Fundamental Rights, even when they act under the mechanisms listed above. In a recent judgment, it concluded that the European Commission and the European Central Bank have a duty to guarantee that fundamental rights are fully complied with in the design and implementation of the Memoranda of Understanding concluded with States seeking support from the ESM. In March 2016, the European Commission also formally announced an initiative referred to as the “European Pillar of Social Rights,” to complement macroeconomic convergence with greater convergence in the areas of labour market participation, working conditions, social protection and access to high quality essential services.

Building on this case-law and these initiatives, our study puts forward certain proposals to ensure a better fit between the attempts to strengthen economic governance in the EU and the fulfilment of social rights.

The socio-economic architecture of the European Union must reinvent itself, both in order to rescue its legitimacy in the eyes of its citizens, and to answer the concerns expressed by various judicial and expert bodies that have intervened to ensure respect for social rights. Our study explains why the European Pillar of Social Rights provides an opportunity to achieve precisely this, in particular if it can lead to a process of greater social convergence within the Euro Area. In the short run, the priority should go to ensuring that the adoption of policy outputs under that new governance framework is guided by a robust social rights impact assessment. In the long run, what is required is a more fundamental re-weighting of the economic and the social in the governance of the EMU.

The best time to do this was when the tools were initially set up, when the Eurocrisis was full blown. The second best time is now.

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