Mr. Tony Donohoe:

I thank the committee for the invitation to present the views of the business community on the social dimension of EMU. The economic crisis has revealed many underlying issues with European economic competitiveness and social policies. Careful consideration needs to be given to ensure that solidarity mechanisms in the EMU context support a reform agenda that will restore Europe's global competitiveness and reduce our high levels of unemployment. Good economic performance and improved social protection are not intrinsically opposed. They can be made to support each other.

I propose to deal separately with each of the Commission's three major proposals on: reinforced surveillance of employment and social challenges; enhanced solidarity and action on employment and labour mobility; and strengthened social dialogue.

IBEC is convinced of the value of monitoring the progress made in implementing the EU 2020 growth strategy through a set of well-chosen indicators. An early warning system under EMU such as the macroeconomic imbalance procedure is also necessary to prevent undesirable economic and fiscal developments at an early stage, and correct macroeconomic imbalances before it is too late. Likewise, the so-called scoreboard of macroeconomic indicators is an important tool to shed light on central aspects of the global competitiveness of economies, for instance, the trade balance, unit labour costs and export market shares.

The business community also values existing EU labour market indicators, such as the 75% headline employment rate target or targets in the field of education and training. These targets are useful to encourage policies and reforms at national level that boost employment demand and participation, and improve educational attainments in line with labour market needs.

Committee members will be aware that the European Commission is proposing the addition of employment and social indicators to the macroeconomic imbalance procedure, and the creation of a separate key employment and social indicators scoreboard. We have some concerns that the multiplication of indicators and overlaps between the different instruments developed in the context of the European semester will cause confusion. This could undermine the objective of ensuring proper monitoring of the progress made in implementing policies which improve competitiveness, growth and employment.

Indicators to measure purely social developments, as opposed to labour market developments, belong in the employment and social scoreboard, not among the macroeconomic imbalance procedure indicators. Any new scoreboard should provide information and incentives for member states to reform their labour markets regulations and policies, social protection systems and-or education and training systems where the data gathered give evidence that they do not function effectively. The Commission and the European Council should also ensure that sub-indicators are consistent with the headline indicator. For example, the inequality ratio indicator links precariousness to flexible forms of work. This is completely at odds with the positive role that flexible forms of work such as fixed-term contracts and temporary agency work play as a steppingstone into the labour market, particularly for the vulnerable groups such as the young or the long-term unemployed.

If we want evidence of this, we need only look at this morning's quarterly national household survey employment figures which show a 3.8% increase in employment. The most important aspect of this is the 53,500 new full-time jobs created in the past year. We have heard much criticism of part-time employment, and 4,500 part-time jobs have been created in the same period. We are beginning to see employment growth in full-time work and one follows the other. We should also consider other indicators such as a skills indicator which might measure learning outcomes based on labour market need. We would ask the European Council for one on the share of students participating in work-based learning.

IBEC supports the introduction of contractual arrangements, such as the convergence and competitiveness instrument proposed by the Commission. However, it is important these proposals strike the right balance between solidarity and responsibility by increasing incentives for structural reforms, and do not lead to an overall increase in the tax burden in the EU or the euro area. In the case of automatic stabilisers, EMU solidarity should not be automatic. It is essential to preserve a link between financial support and commitments for reform. For example, the idea envisaged by the European Commission to establish EMU-level unemployment insurance is unacceptable. To be effective, unemployment insurance must be shaped at national level in light of the overall economic and social safety nets in which they are embedded. Otherwise, they could create unemployment traps and become unsustainable.

Employers value social dialogue at European level because it can lead to arrangements that better reflect companies' and employees' needs rather than legislative initiatives. It also enables employers and trade unions to build a shared understanding, which are essential prerequisites to modernise European labour markets. The European social dialogue has demonstrated it can provide solutions, most recently with the framework of actions on youth employment. The declaration on social partner involvement in economic governance should be taken into account in institutional discussions on the social dimension. Current practice in Europe shows diversity in terms of national approaches to social dialogue. What matters is that in all these diverse national traditions, employers, trade unions and, as Mr. O'Connor mentioned the community and voluntary pillar, are reliable and responsible partners to discuss realistic and forward-looking solutions, whatever the institutional arrangements.

I thank the committee for the opportunity to provide this input. In this short time I have only been able to highlight the issues in general terms and I look forward to the discussion. Declining competitiveness in the European Union is a trend deriving primarily from internal structural weaknesses. It has been reinforced over the past year as international competitors, in particular emerging economies, have become stronger. High public and private debt, slow productivity growth and ageing populations are the main challenges Europe needs to overcome if it wants to remain a prosperous continent in the future. The key factor in Europe’s collective success will be the ability of the EU, its member states, companies and social partners to put in place the framework conditions, policies and measures needed for European companies to be able to compete globally, make profits and grow again. This is the only way to create jobs in Europe. Whether the measures taken contribute positively to competitiveness, growth and jobs should be the central benchmark of economic and social co-ordination at European level, because social progress is tied to economic success.