CES - Economic and Social Council of Spain

The Spanish ESC approved its own-initiative report analysing economic governance in the European Union by a large majority This report is the Council’s third on the subject in recent years. The first was Report 2/2012 on new economic governance in the EU and growth, the second, Report 1/2014 on developments in economic governance in the European Union, and this third report is intended chiefly to review the actions taken over this period in order to assess the degree of progress in managing the crisis and in redesigning economic governance in the EMU, highlighting the challenges that remain.The report analyses the economic situation in the EU and discerns a general recovery, though with divergences across the various States. The employment rate has been falling but it is still two and a half percentage points higher than at the start of the crisis.The increase in activity has been supported by easing on the financial markets, an expansive monetary policy, relaxing of the fiscal consolidation process, a fall in oil prices and the depreciation of the euro. But other factors may undermine the economic upturn: a slowdown in the growth of emerging economies, less favourable prospects for raw-material exports, the raising of interest rates by the US Federal Reserve, the slowdown in world trade, international geopolitical tensions adding to uncertainty or difficulties in getting European inflation onto the desired track.The Council judges that there is very little room for manoeuvre in monetary policy for engineering a recovery in growth, which would require additional actions with fiscal policy measures. The contractionary fiscal policies adopted since 2010 are hampering recovery, with a generalised fall in public investment. The EU should move towards a less restrictive approach in its fiscal policy, albeit without questioning the need for fiscal consolidation, so as to substantially boost public investment. The Council also considers that greater flexibility should be allowed in complying with the consolidation roadmap for the States still in the corrective arm of the Stability and Growth Pact.The European Fund for Strategic Investments (EFSI), though a positive tool, has arrived late and is insufficient. Developing strategic investment will depend on mobilising private capital, with social and environmental considerations and territorial cohesion taking a back seat. The Council points to the risk that this initiative will chiefly benefit big companies with most funding capacity and that it will concentrate investments in the more developed EU countries with stronger public sectors, not helping with the necessary structural convergence. The EFSI, fleshing out the Juncker revival plan, appears unsuitable for giving fiscal impetus to the regions where the crisis is most severe and which have less budgetary margin for backing investment projects. Moreover the fund’s life of just three years gives rise to concern about the lack of tools with a longer timeframe for automatically addressing future crises of demand and investment.Regarding new developments towards banking union, the report highlights rules on capital requirements, restructuring and recapitalisation of banks and deposit guarantee schemes, though the process is still incomplete.The Single Supervisory Mechanism has limited scope, and though the Single Resolution Mechanism has become operational and the Single Resolution Fund has now started up, a bridge mechanism is still needed until the Fund reaches its full size in 2023. Also lacking is a public backing mechanism at European level, i.e. a fiscal backstop, to provide for any situation of acute need once the Fund has been fully financed, and the mechanisms available are insufficient.Regarding capital market union, the Council considers that, though at an early stage, it represents a significant change for the European financial system, traditionally dependent on bank financing but now seeking to increase the share of alternative sources of finance.As to combating cross-border tax avoidance, rapid and substantial progress has been made in administrative cooperation, extending the scope of automatic information exchanges.In tax harmonisation, no substantive steps have been taken towards establishing a consolidated common tax base in the EU for corporate tax, or for establishing a tax on European financial transactions.Regarding the integrated budgetary framework, the Council believes it would be reasonable to strengthen the EU budget and to establish mechanisms for mutualising public debt, promoting macroeconomic stabilisation and structural convergence in the euro area. But no progress has been made in this field, and moreover the project has been put off indefinitely.As to national competitiveness boards, which are to have a mandate to assess whether wages are evolving in line with productivity and to influence wage-setting processes, the Council expresses a strong concern that this power may clash with the model on which wages are determined in the Spanish institutional framework. The Council believes it would be advisable for the factors influencing competitiveness to be addressed in the context of European social dialogue.The Council sees a need for greater coordination and convergence in the field of economic and social policy in order to reduce the great disparities in competitiveness and social cohesion within the euro area. Economic and social policy requires greater coordination and should be geared to developing the single market and to preserving the European social model. Though the new macroeconomic imbalance procedure gives more attention to social aspects and employment, these remain subordinated to economic and financial developments, resulting in lopsided progress in the sphere of governance.In the context of the latest crisis, the European Union has lacked an integrated strategy in economic and social terms, as well as adequate governance mechanisms. The Commission has taken positive steps in the field of policy as well as in providing instruments for its implementation, although they remain insufficient.The new economic governance has had the effect of reducing the role of trade unions and employers’ organisations at European level in the decision-making process. This was acknowledged by the European Commission in its communication “On steps towards Completing Economic and Monetary Union”. It is also worth noting that the “Five Presidents’ Report” proposes that the various governments should consult the social partners more systematically before drawing up structural reform agendas.The weaknesses in institutional architecture have persisted. The deficiency of Community governance is the difficulty that Member States have in taking fast, joint and operative decisions to tackle the challenges that arise. The EU faces three crises: that of Community governance, especially as regards the euro; a crisis of asylum and refuge, as the issue has not been addressed jointly and effectively and moreover it has questioned Europe’s traditional values and culture of hospitality and even the principle of free movement; and a neighbourhood crisis, ranging from Ukraine to Syria and showing the weakness of European foreign policy. Europe continues to work on an intergovernmental logic that has generated a loss of legitimacy in EU institutions and a democratic deficit, resulting in a disaffection towards Europe among the general public. Also the EU as a region has lost influence on the international scene.Regarding the clarifying of decision processes and the enhancement of the European Parliament’s decision-making powers, no results have been achieved, as the changes required have not been made to the Treaties. Nor has there been any success in strengthening the role of national parliaments.The Council approves the Commission’s greater transparency with the publishing of information on meetings held by Commissioners and the EU transparency register. This latter point may help the European public to recover some pro-European feeling.We may conclude that we still have a long way to go in configuring a political and institutional EU architecture liable to ensure that the transfer of sovereignty by Member States to the Union in the main economic and financial spheres is accompanied by greater democratic legitimacy and accountability on the part of EU institutions.

The Council considers that economic transformations are causing occupational changes for which measures are needed to prevent long-term unemployment from becoming structural and imbalances from forming between the supply of workers and the demands of companies, thereby hampering job creation.In western economies a polarisation is occurring in employment, with bigger shares being taken by more highly qualified jobs and at the same time by jobs with low or intermediate qualification levels. In all events this polarisation is a trend which may be acted upon by means of reducing the share of low-qualified jobs and increasing that of higher and intermediate ones. In the Spanish case this polarisation is also present, though Spain’s employment is on average less well qualified than in the main EU countries.To resolve the imbalances hampering job creation we need to promote employability, understood in a broad sense involving a range of stakeholders and policies (education, active employment, economic and sectoral policies) so as to promote the creation of jobs of quality.Companies’ job offers have moved on from the traditional concept of tasks and skills to that of roles and competences. Beyond candidates’ knowledge, as demonstrated by qualifications or professional experience, companies demand competences such as commercial aptitude, team spirit or proficiency with languages or new technologies. Hence the importance of enhancing professional competences – a concept going well beyond formal qualifications. The Council also notes that for 77% of companies, experience is the main factor when recruiting a candidate. Thus mechanisms such as in-work training are essential for facilitating the shift between education and work.The successive education law reforms show the need for greater stability in the broad outline of education policy based on a wide social and political consensus, guaranteeing coordination and cooperation across the various levels of government with responsibilities for education and employment. Governance in the education and training system should take more account of employability issues, with participation mechanisms catering for the various stakeholders. Given the highly diverse measures adopted in recent years, an integral assessment needs to be made of their effects on medium and long-term trends in employability as part of governance in the education and training system and active employment policies, with the participation of the social partners.The Council points to the need for measures to reduce the school dropout rate as well as dropouts from vocational training, such as an individual register of pupils and students to monitor their attendance, performance-linked monetary incentives for students to help them remain in the system, and also incentives to encourage companies to collaborate more closely with training centres.The Council stresses the importance of providing stable structures for workers’ lifelong learning, refocusing public resources on the sectors with the biggest gaps between training and jobs. The Council notes that despite the increase in training provision meeting the demands of or subsidised by companies in training for employment, involving nearly 30% of private-sector firms, this growth stalled in 2014. Accordingly the reasons for this situation should be investigated. In particular there has been less presence in training of small and mid-sized companies.In training demanded by companies, the supply and demand of vocational competences needs to be better matched, based on the detection of workforce training needs, planning of training and utilisation of the resources available in the system. The Council highlights the role of contracts in training and apprenticeship and notes that there are not many trainee contracts, which ought to be a formula for acquiring practical experience and entering the labour market.The jobs of university graduates are below their qualification level in 52.5% of cases, which represents an over-qualification rate well above the European average of 41.5%.In graduate qualifications we find an undue concentration in some fields and lower performance in others such as mathematics, in an imbalance that may originate in pre-university education.The Council advocates greater coordination in university policy, with strategic planning of study programmes so as to anticipate mismatches in qualifications and competences between employment supply and demand. Resolving these mismatches will involve not only education policy but also science, innovation, industrial, regional development and other policies, and in all events the links between universities and business need to be tightened.The Council judges it is necessary to substantially develop the procedures for assessment and accreditation of professional skills acquired through experience at work and the resulting offering of complementary instruction as required for obtaining a vocational training qualification.Job-matching is the chief instrument for suiting supply to demand in employment and for identifying the competences possessed by workers along with those which would be required to get a job. The Council stresses the role that the public employment services should play on the job market and considers that this role is currently very limited, and moreover points to the need for sufficient funding and efficient use of the resources available.

The Council welcomes the recasting of these provisions previously scattered across various legal texts, facilitating their understanding and application.The opinion deems that the draft General Social Security Act is a major step forward in technical quality, though it points to a need for the Act to be worded in a way more intelligible to the public.The Council notes that the procedure for drawing up the recast text should have provided for consultation with the most representative employers’ organisations and trade unions with sufficient information and notice.The General Social Security Act dates from 1994 and has therefore been in force for over 20 years. The many subsequent provisions regulating major aspects of social security over the years have resulted in a complexity in the basic legislation in this especially sensitive sphere for the public. This complexity means that the current Social Security Act is hard to follow for those to whom it applies, as well as for jurists and lawyers. Accordingly the Council advised the government to draw up a new recast text back in 2011.The Council’s opinion deems that the new text generally provides a coherent framework in keeping with some of the principles according to which, according to the Toledo Pact and the various agreements signed with the social partners, the Social Security system should be developed so as to adapt it to social and economic change. In particular the Council welcomes the new structure of the special scheme for self-employed or freelance workers, bring together some previously widely dispersed provisions in a new chapter of the Act.The opinion says however that much remains to be done in the integration of special schemes, as shown by the non-inclusion in the recast text of the special scheme for mariners.Notwithstanding its generally favourable view of the recast Act, the Council believes there is still some way to go before it fully meets the criteria to be expected of a social security system and of such an Act in the 21st century. It calls for a further effort to be made to make the system clearer and simpler and to provide a text that is intelligible to those affected by it.

The Council approves the RLD’s aim of recasting, harmonising and clarifying the various employment legislation provisions enacted over recent years.The Council’s opinion notes that in view of the significance of the matters regulated in this draft RLD, more attention should have been given to the procedure for participation by the social partners. In the Council’s view the procedure should have provided for real consultation with sufficient information and notice with the most representative employers’ organisations and trade unions on this recasting work by the Employment and Social Security Ministry.The Employment Act has been in force since 2003 and needs recasting as it has been subject to several major amendments. In this regard the Council commends the effort made to prevent the dispersal of State-level employment legislation. The new system and ordering of provisions is also positive, as is the relocation of certain additional and final provisions in the main text of the Act.Beyond these general considerations the Council’s opinion notes that some particular aspects of the Act may give rise to legal confusion, and suggests that they be redrafted.

The Council considers that it is appropriate for the previous text, dating from 1995, to be updated, especially as over the past two decades there have been many legislative changes, including several major labour market reforms. But in the Council’s view, given the significance and centrality of the Workers’ Statute in individual and collective labour relations, the new text should have been drawn up with greater involvement of the social partners. In this regard the opinion highlights the insufficient consultation period of just seven days given at first to the social partners (the same as for a consultation on a regulation), with no reason being given for this shortened procedure. The period allowed to this Council for consultation following the ministry’s request for an urgent opinion was also short. The question of consolidating, clarifying and harmonising the Workers’ Statute requires a full and thorough analysis by the bodies consulted such as seems impossible in such a short time. As well as the periods given, the Council also criticises the procedure followed for participation by the social partners, which should have allowed for effective consultation sufficiently in advance of the most representative employers’ organisations and trade unions regarding the consolidated text. As to the content of the draft decree, the opinion points to a need to improve certain formal but none the less significant aspects. But, also due to the insufficient consultation period, it addresses only what appear to be the most important changes in the consolidated text.In these cases the Council recommends amending or maintaining the current form of the Workers’ Statute. Its opinion highlights among other provisions the new treatment for work by minors, arguing that the legislators should maintain the existing reference to the procedure for unhealthy, arduous, noxious or dangerous work being declared unsuitable for minors by government, and the arrangements for vocational and other education for minors. The same goes for the existing obligation to provide occupational health and safety training when workers change jobs or when new techniques which could involve hazards are introduced, or the halting of work by a majority decision of workers’ representatives in the event of serious and imminent hazards.