The European Commission has recently approved Communication proposing “A Shared Commitment for Employment” aiming at strengthening cooperation between the EU, its Member States and EU social partners. The Communication suggests “actions” and “key priorities” to tackle unemployment. The Commission has stressed that “labour markets continue to deteriorate in reaction to the economic downturn” consequently “additional action is needed.”
According to Eurostat, the Statistical Office of the European Communities, the Euro area unemployment was 9.2% in April 2009, compared with 8.9% in March 2009 whilst the EU27 unemployment rate was 8.6% in April 2009, compared with 8.4% last March.
Member States are responsible for developing labour market and social policies however the President of the European Commission, José Manuel Barroso, said that “Although employment falls within national competence, we can still take some action at EU level.” In fact, the majority of the measures suggested fall within the competence of Member States, rather than the EU.
It should be recall that last April the Council adopted a Regulation aim to accelerate the spending of EU structural funds in order to counter the economic crisis. The regulation facilitates the mobilisation of the European Social Fund (ESF) and the European Regional Development Fund (ERDF) consequently Member States get access to additional advance payments for an amount totalling EUR 6.3 billion. Such advances intend to provide an immediate cash flow at the initial phase of the programming period. However, ESF programmes are co-funded by the EU and national sources therefore Member States must respect the national co-financing rates set by the regulations which vary from 15% to 50%, depending on the programme.
The Commission is now proposing a 19bn euro strategy to tackle unemployment. According to the Commission the impact of the crisis requires an anticipated mobilisation of ESF resources. The Commission will ensure the availability of around EUR 19 billion for the ESF in 2009-2010 by the full use of the budget available within the EU financial perspectives. The European Social Fund is based on the principles of co-financing hence EU financial support always goes along national public or private financing. The level of EU intervention depends on several socio-economic factors hence the co-financing may vary between 50% and 85% of the total cost of interventions. Consequently Member States have to cover part of projects costs which varies between 15% and 50%. The Commission will propose an amendment to the Structural Funds Regulation to give Member States the option to not provide national co-funding during 2009 and 2010.
The European Commission intends to change the rules for the use of the European Social Fund (ESF) for the years 2009-2010, thus, in order to reduce Member States financial constraints and to accelerate project implementation, co-financing by EU Member States will not be required during this period and Member States’ expenditure on projects will be 100% reimbursed.
Presently, due to the economic crisis several Member States have little room for manoeuvre to co-fund additional ESF projects. The Commission was therefore concerned that Member States would not be able to use hundreds of millions of euros allocated to them from the EU budget. Hence, it has decided to allow Member States to delay co-financing.
According to the Commission neither the distribution of funds between Member States nor the annual ceiling of the EU financial framework for the payment appropriations will change. The money will come from the financial envelope for structural funds in 2007-2013. Hence, Member States that make use of 100% financing for some projects in 2009-2010 would receive less money in 2011-2013. There will be therefore a higher rate of national co-financing.
According to Vladimir Spidla, the employment commissioner, the plans are about “pure solidarity.” The net contributors to the EU budget such as Germany, UK and Sweden may not fully support the Commission’s plans. There are fears that the money would be misspent. According to a Dutch spokesperson, suspending the co-financing rule might reduce incentives for Member States to come up with proposals for viable projects.
The Commission will also propose a new EU microfinance facility to provide microcredits for “those who have difficulty assessing the necessary funds to set up a business or micro-enterprise." Such facility will be established through the reallocation of €100 million from the existing EU budget, which the European Investment Bank will use as leverage to increase micro-credit fund to €500 million.
The EU has no competence in the area of employment policy therefore the Commission’s Communication is aiming at providing advice to policy makers in the Member States. The European Commission has put forward three priorities: maintaining employment, creating jobs and promoting mobility; upgrading skills and matching labour market needs; increasing access to employment. It has proposed a series of actions to be taken at national and EU level.
To boost job creation the Commission has recommended to Member States that they could “create a friendly environment for entrepreneurship, e.g. through a sustainable reduction of non wage labour costs including taxation, investing in research and infrastructure, reducing administrative burdens, promoting better regulation and encouraging the development of SMEs.” It is ironic that the Commission is asking Member States to reduce administrative burdens whilst they are most created by EU regulations.
The Commission has also urged Member States to extend to 6 months the entitlement to unemployment benefits of unemployed citizens looking for a job in another Member State which is presently three months.
The Commission has proposed different priority actions for upgrading skills, strengthening lifelong learning. The Commission is planning to step up the New Skills for New Jobs agenda as well as establishing EU-level sector skills councils. The Commission is asking the EU Member States to commit to provide at least 5 million apprenticeships across the EU for young people till the end of 2010. Moreover, the European Commission wants to persuade Member States to strengthen the 'New Start' EU target for the young unemployed.
In order to avoid the risk of long term unemployment, the Commission is suggesting that each unemployment person should receive an early opportunity for training or work, hence, for 15-19 year olds no later than one month after becoming unemployed and two months for 20- 24 year olds.
According to the Commission Member States should allocate a significant amount of their ESF resources to improve the efficiency of their national employment systems and active labour market policies. The Commission has recommended Member States “to actively implement and monitor the EU common principles for active inclusion.” Hence, the Commission has recommended Member States to strengthen the 'New Start' EU target for unemployed adults so that they not later than 3 months after registering with the public employment service they receive a new job or additional training.
The Commission is also asking Member States to promote the employment of vulnerable groups and older workers through, for instances, lower non-wage labour costs, and recruitment incentives.
The Commission presented its proposals to the European Council meeting on 18-19 June. The Commission has invited the European Council to endorse the three key priorities of the EU Shared Commitment for Employment as well as the proposals for better use of Community funds in response to the crisis.
The European Council has stressed that “Top priority must be given to tackling the effects of the crisis on employment by helping people stay in work or find new jobs.”
The EU leaders recognized that the competence of the Union over this area is limited nevertheless, according to the European Council conclusions, they said, “Whilst action in this field is first and foremost a matter for the Member States, the European Union has an important role to play in providing and improving the common framework required to ensure that measures taken are coordinated, mutually supporting and in line with single market rules.”
The European Council also stressed that the Member States and EU initiatives should focus in three priority areas “maintaining employment, creating new jobs and promoting mobility, upgrading skills and matching labour market needs, increasing access to employment.”
However, there is no reference in the European Council conclusions to the Commission Communication and to its proposal to relax co-financing requirements for the ESF for the years 2009 and 2010. The EU leaders could not reach an agreement on this issue. According to Germany, which is the biggest net contributor to the ESF, the rules should not be changed at all. Hence, the European Council has not given instructions on the proposed changes to the rules before the Commission put forward its proposal. Taking into account the negative reaction of several Member States the Commission has decided to temporarily shelve its legislative proposal which was scheduled to be presented on 2 July.
