Crossroads: an analysis of the EU’s current approach and future alternatives to social issues

Sofia Ekstrand, Henrik Karlsson, Johannes Lundborg, Nadja Piiroinen, Camilla Thor

student group at Uppsala Universitet
Supervisor: Assoc. Prof. Thomas Persson

Abstract: The starting point for this paper is the massive social challenge facing the European Union. In order to assess the EU’s current approach to social issues, we discuss its constitutional framework, policy tools and governance structure in brief, followed by a presentation of three future alternatives for a social EU. We conclude that the first alternative, a political union, is not a realistic option in the current environment. We instead advise the EU and its member states to choose between the second and third alternatives, i.e. an improved status quo or a multi-speed EU.

In the past few years the EU has been closely associated with the word crisis. Five years after its start, the eurozone crisis remains omnipresent in the EU and its member states. The economic and social impact of the eurozone crisis has been far-reaching, and institutional changes made by the EU have caused the debate regarding the union’s democratic legitimacy to gain momentum. Moreover, the threat of Grexit or Brexit is a headache for EU and national politicians, not to mention the question of how to solve the ongoing migration crisis. There is no doubt that the EU is under severe stress.

The starting point for this paper is the massive social challenge facing the EU in the aftermath of the eurozone crisis. We start from Jacques Delors’ assumption that “l’Europe sera sociale ou ne sera pas”: Europe will be social or it will not be. Thus, we argue that the EU needs to become more socially oriented whether it likes it or not,
otherwise the whole integration project might be at stake. When we speak of a social EU we refer to a union with a more balanced approach to economic and social objectives and practices, giving higher priority to social issues than at present. The aim of the paper is to point towards future ways to develop such a social EU. We conclude that the EU can choose between three different alternatives to social issues. The first alternative, a political union, is not a realistic option in today’s setting. We instead advise the EU and its member states to choose between the second and third alternatives, i.e. an improved status quo or a multi-speed EU. Before presenting the different alternatives more thoroughly, we will assess the status quo by examining key aspects of the EU’s current approach
to social issues.

The current approach: constitutional framework, policy tools and governance structure

The EU’s constitutional framework has traditionally been characterized by asymmetry between economic and social objectives. In some ways, however, the 2008 Lisbon Treaty represents a new era. Since its passage the EU has been guided by clearly social objectives, e.g. combating social exclusion, promoting social justice and solidarity and working towards a highly competitive social market economy (Treaty on European Union (TEU), art. 2, 3).

Even so, constitutional asymmetry remains between economic and social objectives, in that the member states have given no—or very limited—competence to the EU in social issues. As a result, the EU has limited tools to execute its social objectives. Moreover, economic redistribution, a central part of social policy, is left in the hands of the member states (Börzel & Hosli 2003; Cerioni 2015). Thus, the EU’s social dimension is driven by negative integration, i.e. prohibition of member states’ discriminatory or restrictive measures (Damjanovic 2013). This means that the EU with its inherent liberalizing open market rationale is able to affect its member states’ welfare systems through negative integration. This development is partly enhanced by the increasing marketization of welfare services, blurring the divide between traditional social welfare and economic services. As a consequence, the European Court of Justice (ECJ) is given manoeuvrability to steer development, while the member states have limited possibility to “take back” lost control through EU legislation. The member states’ loss of control over welfare sovereignty cannot be compensated on an EU level since there are no legally binding instruments (Damjanovic 2013). There is therefore a risk that law produced by the ECJ’s rulings will be used as a mask for politics (Scharpf 2009). This kind of “integration through law” has according to some scholars a liberalizing and deregulatory impact on the socioeconomic regimes of the EU’s member states, especially on continental and Scandinavian social market economies (Scharpf 2009).

The EU’s main social policy tool is the open method of coordination (OMC), a form of soft policy coordination that it is not legally binding. OMC implies that the member states agree upon common objectives and measure their progress towards these objectives. Such frequent policy evaluations not only help the member states to learn from each other’s practices, they also function as a form of peer pressure. When introduced, OMC was presented as a middle way, allowing the EU to adopt a stronger role in coordinating member states’ social policies while ensuring that member states formally retained their authority (Büchs 2008).

OMC has come to serve as a basis for the Lisbon Strategy and Europe 2020, the EU’s past and current growth plans which touch upon a wide range of social issues. However, OMC has been criticized for a lack of inclusiveness and efficiency. One main problem is the limited involvement of national parliaments. Scholars highlight that most national parliaments have remained uninterested and marginalized in national OMC processes and have consequently failed to make an impact (Büchs 2008; Duina & Raunio 2007; Michalski 2013). National governments have instead come to function as gatekeepers of OMC, not providing enough room for other national actors. Another problem is that OMC has not been sufficiently efficient. The ambitious objectives identified in the Lisbon Strategy were not achieved (which according to many was a function of too ambitious objectives). Even though OMC has contributed to changed perceptions, there is little evidence of any policy convergence (Büchs 2008).

It is possible, however, that the EU’s new governance structure (mainly the European Semester) has provided a sought-after framework for how to involve relevant stakeholders and increase the efficiency of OMC. Nevertheless, evaluations of Europe 2020 and the European Semester made by the EU itself indicate this has not been the case (European Commission 2014; 2015a; 2015b; 2015c). According to the Commission, both Europe 2020 and the European Semester have suffered from a lack of political ownership and compliance. Thus, there are still reasons to be concerned about the inclusiveness and efficiency of OMC. If OMC is to remain the EU’s main social policy tool, these inherent flaws need to be fixed.

Since 2011 the core of the EU’s economic and social governance structure is the European Semester. The Semester intends to improve coordination within the EU and has given the union increased possibilities to scrutinize and guide economic, fiscal and social policies (Costamagna 2012). Every year the Commission presents country-specific recommendations (CSRs) on economic and social matters to all member states, based on analyses of EU-wide and country-specific developments. The CSRs target the overarching goals in Europe 2020 and are supposed to form the basis for each member state’s draft budgetary plan (DPB).

Scholars disagree on whether the European Semester has affected the balance between economic and social objectives. Some argue that increased coordination of budgetary and financial issues has come at the expense of a social EU, as it has made expansionary public spending difficult. This might undermine the implementation of Europe 2020 and its social objectives (De la Porte & Heins 2015). Yet others view the European Semester as a way to change the current imbalance by offering new opportunities for the EU to mainstream its social objectives (Zeitlin & Vanhercke 2014).

Regardless, most scholars agree that the European Semester has become more socially oriented over time (Zeitlin & Vanhercke 2014). Today a broader social policy discussion is taking place, with many working groups and different configurations of the Council of EU involved. Besides macroeconomic issues, discussions on social security systems, pension systems, reduction of poverty and social exclusion are often featured.

The mix of hard and soft policy coordination in the European Semester is a common topic for debate. When it comes to economic matters, the Commission has access to hard policy tools. Member states can even be fined if they continuously fail to address deficits and imbalances. However, when scrutinizing and guiding social matters, the Commission has to rely on OMC. A large problem is the lack of implementation of the CSRs—which varies between 20% and 80% (Zeitlin & Vanhercke 2014). Thus, the Semester provides a framework for discussing social issues, but that might be all it does.

Tensions within the current approach

From this brief analysis two essential tensions can be identified between economic and social objectives and soft and hard policy coordination. Starting with the former, the imbalance has persisted despite the EU expressing social ambitions as exemplified in the Lisbon Treaty and the further socialization of the European Semester. The difficulty in translating these ambitions into a social model that the member states can agree upon begs the question of whether it is in fact feasible or in the end a mission impossible. A continuing lack of consensus is to be expected as further social integration would damage national sovereignty in an area closely related to the member states’ national identities with considerable redistributional effects.

As mentioned, with the new economic and social governance structure, the EU institutions have been given a more intrusive role in national policy-making. The growing discontent among citizens of many member states illustrates that strict fiscal discipline and balanced budget rules have come at a high price. Faced with cuts in welfare services, it is difficult for the European public to accept that austerity policies might be beneficial in the long run. The ongoing Greek drama serves as a telling example. Despite five years of austerity policies, economic growth is not within reach and it is obvious that the Greek people have had enough. This kind of public discontent provides a breeding ground for euroscepticism. What the EU needs least at this critical juncture are actors applying populism against the European integration. Thus, there are indeed many reasons for the EU to continue its work to further “socialise” and balance its new governance structure. Otherwise its social ambition is likely to be unattainable.

Moving over to the second tension, the main problem with soft policy coordination is the lack of compliance. It seems like OMC has contributed to ideational convergence, but there is little evidence of any policy convergence. Thus, it is questionable whether the OMC toolbox is effective enough at a time when strong measures are required. The problem is that there are no obvious alternatives to OMC. Hard policy coordination would indeed probably increase compliance and consequently policy effectiveness. Yet, it would be difficult to convince member states to surrender their sovereignty and agree upon a common social model. Further, the EU’s democratic deficit is another obstacle to hard policy coordination, mainly because of the lack of input legitimacy which is a requirement when dealing with social policy and redistributional effects.

From a democratic perspective, soft policy coordination is a safer option as the member states always can choose whether or not to follow the suggested recommendations depending on public opinion. With the current approach, however, there is an inherent risk that unelected entities such as the European Commission and the ECJ steer development without input from democratic institutions. The undemocratic character of these powerful EU institutions and the high salience of social policy are, from a democratic perspective, a problematic combination. Making sure that national stakeholders are sufficiently involved is consequently of utmost importance. Increased political ownership could also prove a shortcut towards increased compliance and policy effectiveness.

The way forward: political union, improved status quo, or multi-speed?

One way forward would be development towards a political union. Some argue that a successful social EU depends upon the member states surrendering more of their sovereignty, including the authority to levy taxes. Increased social competencies would enhance the EU’s ability to pressure member states to comply with EU law, while policymaking could remain an ordinary legislative procedure in which the European Parliament ensures some democratic legitimacy. Moreover, a move towards political union would hopefully increase the public’s interest in EU politics.

The current framework makes such major changes impossible. Hard legislation requires a change of the Treaties. So what is needed to make this happen? Generally EU citizens are not opposed to further integration. The latest figures show that 44% of the respondents support development of a federated EU, while 35% are opposed (European Commission 2014d). The Nordic countries were the most negative with 73% opposed, probably because of fear of welfare level reductions. However, a federal minimum level and a higher national minimum level are not mutually exclusive.

That said, realistically it seems difficult to imagine how any kind of agreement regarding redistribution of funds could be reached. Today most member states are foremost driven by their own national interest, and the way the EU is set up leaves few ways for ideas of a greater European good to achieve large popular support. Alas, national
identity still trumps European identity in most cases.

A second way forward is to further develop the EU’s current approach to social issues without any major changes to the constitutional framework. Social competencies would then remain with the member states, and the focus would instead be on fixing current problems and intensifying cooperation.

This second alternative implies a continuing socialization of the European Semester. The Juncker Commission stated that it is determined to “tie the social into the economic side of our social market economy to balance economic freedoms and social rights fairly” (European Commission 2015c:4). If this vision is to become reality, the EU has to make sure that the implementation of Europe 2020 is not undermined by its economic governance system through strict fiscal discipline and balanced budget rules. The EU has to allow for focus to be shifted from supply-side economics to demand-side economics in order to make room for some social investments. Moreover, the planned relaunch of Europe 2020 should be used as an opportunity to make the strategy more focused on social inclusion as initially intended. One way of doing this is to set common social standards beyond the narrow focus on employment rates and poverty reduction.

OMC also has to be improved, and for this to happen it needs to better take into account the different welfare state models prevailing in Europe. When it comes to improving inclusiveness and efficiency, one relatively easy way forward is to increase the involvement of national stakeholders, most notably national parliaments. It is not only important from the perspective that stakeholders be truly involved in the European Semester; inclusiveness is also related to output legitimacy. At the end of the day, national parliaments are the ones implementing the CSRs. If the MPs have not been able to discuss the political content of the CSRs, lack of compliance is understandable. Thus, it is naïve to expect national stakeholders to support and implement policies where they lack political ownership. To allow more time for scrutiny is one way of increasing inclusiveness. Another would be for the Commission to discuss the CSRs during sessions in national parliaments instead of at various council meetings. A third way is to make national parliaments obliged to discuss the DPBs before they are submitted to the Commission.

This alternative recognizes the importance of finding a middle way where the EU has measures to influence national social policy, but where member states keep their sovereignty. The question is if these changes are enough. This alternative is indeed a safe option since few if any radical changes are proposed. Such an alternative may appear boring and toothless. However, in this turbulent time, radical changes and “more EU” might not necessarily be what we need. The EU should arguably fix what is broken in its own institutions before more competencies, especially in such a sensitive area as social policy, can be transferred.

There is an inherent contradiction between unity and differentiation in the EU, as exemplified by how not all member states are part of the eurozone. The current migration crisis illustrates how difficult it can be for member states to agree on a common solution during a pressing time. If we accept this limitation and still want a social EU, one alternative is multi-speed integration. This alternative should not be Europe à la carte, where member states pick and choose from the integration menu (Hvidsten & Hovid 2015). Instead, the common social goals should remain the same for every member state, but the speed of achieving these goals would vary. The core foundations of the EU, such as the internal market, would then still connect the member states choosing to halt integration.

However, a multi-speed alternative is also problematic. The practical implications of a multi-speed EU are vast. The already complex institutional, procedural and legal reality of the EU would become even more complex and would hardly increase the citizens’ understanding of what is going on in the EU bubble. A major danger is also if some member states take a step forward in social integration whilst others consistently lag behind. This could create even bigger social differences within the EU member states and EU regions and undermine the core idea of solidarity. Most importantly, if choosing this alternative, one has to ask what is left of the idea of union.

Despite its problems, a multi-speed EU is realistic and possible within the current framework under the concept of enhanced cooperation (TEU, art. 20). With today’s political climate and diversity within the union, it is likely to become more difficult to reach common agreements on sensitive issues. Enhanced cooperation is perhaps the answer to issues where one size definitely does not fit all member states. Moreover, a step forward in integration through enhanced cooperation would be conditioned upon political approval within each member state, thereby increasing democratic legitimacy in times when euroscepticism flourishes.

In conclusion, three alternative ways to a social EU have been identified. However, the first alternative, political union, is not deemed realistic in today’s setting, leaving the EU and its member states with two future paths. Both alternatives have their pros and cons. The main strength of an improved status quo is that the proposed changes can be executed relatively easily in the near future. Moreover, the EU continues to be a union, unified in its diversity. The main weakness is that this alternative might not be effective enough, since it lacks hard policy tools. Efficiency and flexibility are the main strengths of a multi-speed EU, allowing for some member states to move ahead and create common solutions. Here, the main weakness is that a multi-speed EU might increase and
formalize inherent tensions and social differences between member states.

However, we deem that the pros outweigh the cons in both alternatives and therefore recommend the EU and its member states choose one of these two options. Of most importance is not which alternative is chosen, but rather that a way forward is chosen. The EU is standing at a crossroads. It has created a situation where its social ambitions are not being met by corresponding practices and where a quick fix seems distant. Thus, it cannot be highlighted enough that the EU and its member states need to take measures and those measures cannot wait. As has been argued throughout the paper, the EU will be social or it will not be. Otherwise, today’s discrepancy between the EU’s social ambitions and its actual practices might undermine the entire integration project.


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Social Justice is top priority for EU

commentary from Bridging Europe
Dimitris Rapidis (Founder & Director)

The spark of the global financial crisis in 2008 significantly shook the foundations of the European establishment. Spillover from the mortgage crisis took different shapes across the eurozone, affecting the abilities of member states with extant problematic state mechanisms and weak domestic markets to deal with persistent economic instability.

At the current stage, it is impossible to discuss a true political union that could supersede a monetary or banking union and form a federal union with adjusted and centralized powers. The major structural discrepancies preventing such a governance model include: the notion of nation states and the entrenchment of special national interests; the leadership race in the European Union and the relevant centrifugal powers; the debated linkages between monetary policy and national sovereignty; and the decreasing powers of the European Parliament, the only EU body elected by its citizens.

In this respect, and according to Uppsala’s paper entitled “Crossroads”, a multispeed EU is what will prevail for the foreseeable future. But even this model is constantly challenged. Grexit and Brexit, while both ostensibly having the same aim, are imbued with different meanings. For Greece, Grexit is associated with two major assumptions: first, it is a disastrous option for the country, Greek society and the domestic economy; second, it is a great opportunity for the state and industry to reorganize, expand and get rid of failed austerity politics. For Great Britain, Brexit is mainly driven by balanced analysis which sees the country’s liberal commercial appeal squeezed by a bureaucratic and slow EU model of governance where prospects for growth and prosperity are dwindling. Then comes Portugal, where the four-year rule of conservative powers nourished the name “success story”, referring to the country’s so-called improvement in financial performance. But even in the latter case, a country where discussions on exiting the eurozone never saw the light of day, leftist movements are now ready to pose the very same question to the public should pressure from creditors further increase and distort the minimum safety nets for major social issues like unemployment and poverty.

Brexit is mainly driven by balanced analysis which sees the country’s liberal commercial appeal squeezed by a bureaucratic and slow EU model of governance.

Therefore, while a multi-speed EU could prove a viable short and medium term model, major problems in the European establishment nevertheless remain untouched. The quest for basic balance in the EU’s social model gets even more complicated as jargon multiplies meanings. The EU’s bureaucratic system is equipped with seemingly unlimited terminology conflicting with itself in practice. As noted in “Crossroads”, most EU social policy tools contribute to the understanding and perception of policy convergence, but there is little evidence of it in reality. In our opinion, the major problem lies in the multiple and overlapping communication channels that EU and domestic actors use to promote certain policy tools or present the benefits of given legislation. The more bodies and actors involved, the less clear the message arrives to interested parties. A useful first step toward tackling this problem is legislation simplification aimed at general principles, combined with more extensive monitoring of actions from Brussels or local EU offices, restricting the role of national authorities.

While a multi-speed EU could prove a viable short and medium term model, major problems in the European establishment nevertheless remain untouched.

Considering a coherent social policy model, Horizon 2020 and Erasmus+ offer great opportunities for many organizations to get involved and contribute regionally, address problems in social inclusion and motivate young people. There are many incentives for partners to participate in such programmes; their enhancement of cooperation and convergence has proven one of the most effective tools the EU currently wields. Nonetheless, more programmes must focus on crucial macroeconomic problems, targeting vulnerable groups that suffer from social exclusion, unemployment, poverty and discrimination of any kind. The EU’s most important features are its diversity and the fact that it is one of the most stable, innovative, productive, democratic and safe places in the world. But this is not to be taken for granted, especially under global geostrategic shifts and power politics races in the wider region or even internally.

The refugee crisis poses a huge threat to the social and political model of the EU and the eurozone. Along with short-sighted austerity politics in the European South and severe youth unemployment, the refugee crisis reveals the vast cooperation gaps and policy inconsistencies of the EU and its member states separately. Numerous EU
summits have failed to address this topic in an efficient way. Germany has taken the lead and assumed the largest burden among Central and Northern member states, but other big engines of the union such as France, the UK and Poland have proven reluctant to assist efficiently. Greece is doing its best despite restricted state capacities and the lack of sustainable funding and technical assistance, its citizens showing massive solidarity and growing a grassroots movement to assist refugees in every possible respect. But Germany and Greece cannot and should not address the problem alone in a union of 28 member states.

More programmes must focus on crucial macroeconomic problems, targeting vulnerable groups that suffer from social exclusion, unemployment, poverty and discrimination of any kind.

In addition, youth unemployment still remains a painful story for many member states, especially for those most affected by the financial crisis and continuous fiscal consolidation programmes. Greece, Spain and Portugal have the worst figures in the EU28 since 2010. In the case of both the refugee crisis and youth unemployment, the EU’s social policy model is severely challenged, or perhaps it has even failed entirely.

As correctly pointed out by the Uppsala team, today’s discrepancy between the EU’s social ambitions and its actual practices might undermine the entire integration project. This issue gets even more complicated as the EU enters into a risky and complex geopolitical era. Internal problems and policy failures can be further aggravated as
our neighbourhood—from the Balkans to Turkey and the Middle East—enters a vicious circle of religious antagonism and warfare. Under such conditions, the EU is called to further its integration project or else decide once and for all that a common vision is no longer a priority.

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