9 June 2003
ECOFIN statement
Report from the Council (ECOFIN) to the European Council on the Broad Guidelines of the Economic Policies of the Member States and the Community (for the 2003-2005 period). The report was adopted by the ECOFIN Council on 3 June 2003.
Strengthening the EU's Economy
In presenting these BEPGs to the Heads of State and Government, we, the Ministers of Economy and Finance, wish to draw specific attention to three main priorities for policy action in the coming year, namely 1) promoting growth, 2) increasing the flexibility of our labour markets, and 3) ensuring the sustainability of our public finances. This will also help to better communicate to the citizens of Europe the urgent need to modernise our economies.
It is essential to achieve higher and sustainable growth in our economies through appropriate macro-economic policies and structural reforms. We have made progress with the Lisbon economic reform agenda, but much remains to be done. We must step up the pace of reform and achieve more flexible economies that show a stronger resilience in the face of uncertainty and shocks.
Timely and effective implementation of the BEPGs is of crucial importance for confidence and growth. The ECOFIN Council and the Eurogroup have a vital role to play in enabling EU Member States and the Commission to jointly monitor and encourage implementation by all policy actors.
1) Giving priority to growth in Europe
Looking at the prospects for economic activity this year, we see the most promising approach to increase growth performance and its potential in mutually reinforcing growth- and stability-oriented macroeconomic policies and structural reforms. Price stability, including labour cost developments that are in line with productivity developments, and sound public finances are pre-conditions for the restoration of confidence. Therefore, we need to achieve an appropriate balance of monetary and fiscal policies to provide a platform for the strengthening of domestic demand, job creation and growth. We are committed to the implementation of the policy framework endorsed by the Spring European Council.
In addition to sound macroeconomic policies, making Europe the most competitive and dynamic knowledge-based economy in the world requires a stepping up in investment in human and physical capital. In this context, the EU and Member States should create framework conditions that facilitate investment in Research and Development as well as in infrastructure. Member States should lift barriers to the economy-wide application of technology and should also foster public-private links to exploit research findings. Furthermore, Member States need to prioritise the involvement of SMEs in R&D through their participation in integrated projects. The completion of the internal market is also key to increase the competitiveness of industry, thereby fostering productivity and business dynamism. In particular, a fully integrated financial market will help to channel savings efficiently into productive investment.
2) Reforms for more and better jobs
Increasing employment in Europe will require far-reaching structural reforms. Our labour markets must become more efficient, inclusive and adaptable, with more and better employment opportunities for all. Action is urgently needed to make work pay so that people seeking work are not discouraged by the prospect of losing benefits and paying higher taxes. For most Member States, this implies undertaking tax-benefit reforms to reduce non-wage labour costs, and to increase incentives to take up employment. In establishing security and minimum standards for workers, we must strike a balance favourable to employment creation allowing flexibility for firms to respond to changing economic conditions. A key objective is to increase labour market participation, particularly amongst women, the over-50s, the low-skilled and the long-term unemployed. Life-long learning and constant upgrading of skills are key for higher productivity and better jobs. We also need to encourage closer co-operation in skills standards across Europe, so that qualifications and experiences are widely recognised and mobility is facilitated.
3) Reforming pensions and health care systems
Europe will face major demographic changes in the years to come, which will put increasing pressure on public finances. To avoid leaving an unsustainable burden for future generations, most Member States need, on top of further consolidating their public finances and raising employment rates, to engage in far-reaching pension and health care reforms now. The demographic window of opportunity for the phasing-in of effective reform is closing rapidly. Reform action is of utmost importance. These reforms can be achieved more easily and successfully if implemented in a comprehensive and coordinated way.
Chancellor’s Statement on Economic and Monetary Union
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