Social cohesion in Europe after the crisis

In the last few years, Europe has been forced to re-think its socio-economic model. Social indicators speak for themselves. Real household income declined significantly between 2008 and 2012, employment rates are lower and the number of people in poverty saw a steady rise with a growing divergence between EU countries. In the eurozone, cuts in public spending and internal devaluation have been the main tools to aim at a correction of unsustainable fiscal positions and a strengthening of competitiveness. It has carried a heavy social price tag. Outside of the eurozone, austerity has also been the prevailing policy, seen as inevitable to avoid economic instability. The crisis has not hit everyone equally. The general losses have been high, but there have also been some quite important redistributive effects. With all the difficulties of defining and measuring 'fairness', it is clear that the adjustment has not been equitable. Apart from issues of market failure, there have been direct increases of inequality within each of the member states. Higher poverty rates have been observed, rises in inequalities between higher and lower income earners as well as intergenerational inequalities between age groups. Long-term consequences are only beginning to surface in the public debate as the most immediate pressures of the crisis are slowly overcome. In this report, the authors first of all look at the results of the survey we have carried out in seven European countries and review perceptions of the socio-economic model. Subsequently, they assess the importance of the social dimension in the broader context of the European growth model. The authors discuss the impact of the structural challenges of globalisation, demography and technological change. They then review the EU’s performance in the crisis. Finally, the authors make a number of recommendations on how to bridge the gap between Europeans‘ expectations and reality.

Solidarity and cohesion. CHALLENGE EUROPE Issue 22. Challenges and new beginnings: Priorities for the EU's new leadership, September 2014

In the past five years, the concept of solidarity has quietly lost much of its traction in the public discourse in Europe. Widely used at the time of the creation of the single market, the emergence of the common currency and during the EU's big bang enlargement of 2004-2007, it has recently become a more confused organising principle. The European system has been affected by growing levels of distrust, which has much to do with the way in which the euro zone crisis was tackled. In spite of massive resources having been mobilised to support countries in need, mutual accusations and discord have become ever more present in the EU's policy-making process.

Fostering social cohesion: the missing link in the EU's exit strategy from the crisis. EPC Discussion Paper, 31 March 2015

In this Discussion Paper, Claire Dhéret argues that the EU should consider the level of social cohesion as a concrete policy priority in its long-term exit strategy from the crisis.

Linking Cohesion Policy to European Economic Governance: an Idea Up for Improvement. European Policy Brief No. 3, September 2011

The idea of linking cohesion policy to EU economic governance has received the support of several EU institutions. The nature of such link is still to be agreed upon and is likely to lead to intense discussions. This Policy Brief argues that while the Commission’s envisaged proposal has its merits, it would nevertheless result in a partial and inconsistent link between the cohesion policy and EU economic governance. A more flexible and coherent approach is proposed.

Macroeconomic Conditionality in Cohesion Policy: Added Value or Unnecessary Burden? European Policy Brief No. 13, November 2012

Macroeconomic conditionality has become one of the major elements in discussions on the future of EU cohesion policy. Such conditional-ity would make the cohesion budget dependent on EU economic governance rules. This would have advantages for economic governance and, to a lesser extent, the efficiency of cohesion policy and the EU’s Multiannual Financial Framework negotiations. Yet, conditionality also risks entailing serious disadvantages for the end beneficiaries and cohesion policy itself. If the EU decides to put macroeconomic conditionality in place, it needs to reconsider the design and agree on an ample cohesion budget.

The History and Challenges of Cohesion Policies. Jean Monnet/Robert Schuman Paper Series Vol. 14 No. 2, February 2014

From Introduction. Regional economic disequilibria was viewed as both an obstacle to and result of integration (European Commission 1965; European Commission 1962; European Commission 1969). Even within the Treaty of Rome, the Community tried to establish mechanisms to alleviate regional inequality. However, it was not until 1975 that the main mechanism of regional policy was established as a result of British and Irish enlargement: the European Regional Development Fund (ERDF). Since then, cohesion policy has become a significant EU expenditure accounting for €347bn, or 35.7% of the total EU budget for 2007-13(European Commission Regional Policy-Info Regio 2012). It has also become a key policy linked to enlargement. The underlying principle of cohesion policy assumes that the market alone cannot solve development problems and therefore government intervention is needed. This notion is in direct contrast to the underlying principle of EU competition policy, which asserts that the free market can solve economic development problems (Meadows, interview by author, 2003). The logic underlying cohesion policy is not only counter to EU competition policy, but also regulatory policies. Unlike other EU policies, cohesion policy is not a sectoral policy, but rather territorial in nature (Leonardi, 2006). Thus at times EU regulatory policy has also unintentionally worked counter to the goals of regional policy, sometimes disadvantaging poorer regions (Dudek, 2005). As the Community has sought to ameliorate regional disparities, it meant that all levels of government: local, regional, national and supranational would need to be involved, however, member states have different territorial governance and European regional development programs have to varying degrees impacted the relationship and policy responsibility of different levels of government (Leonardi, 2006; Bachtler and Michie 1993; Marks, 1993). The very nature of regional development policy has provoked a re-examination of subsidiarity, or which level of government is the lowest and most appropriate level. The discussion of policy formulation and implementation at the lowest level possible also addresses the issue of the democratic deficit. Some argue that the closer government is to the people the more responsive and representative it is. Democracy, however, also implies that public funds are used in a transparent way and for public rather than private good. Yet, as we examine the history and current situation of EU regional funds we find that corruption and misuse still abound. Thus, to understand the history of regional policy it is imperative to look at the major transformations of the policy, how regional policy has impacted subsidiarity and the quality of democracy, become an important instrument of enlargement and contradicted or conflicted with other EU policies.

The long-term EU budget: size or flexibility? Bruegel Policy Contribution 2012/20, November 2012

The EU is in the process of negotiating its 2014-20 financial framework. Failure to reach an agreement would imply a delay in the preparation of the strategic plans each member state puts together to explain how it will use Structural and Cohesion Funds. Even if solutions are found – for example annual renewals of the budget based on the previous year's figures – there will be political and institutional costs. EU leaders have too often and too forcefully advocated the use of the EU budget for growth to be able to drop the idea without consequences. • The overwhelming attention paid to the size of the budget is misplaced. EU leaders should instead aim to make the EU budget more flexible, safeguard it from future political power struggles, and reinforce assessment of the impact of EU funded growth policies. • To improve flexibility a commitment device should be created that places the EU budget above continuous political disagreement. We suggest the creation of a European Growth Fund, on the basis of which the European Commission should be allowed to borrow on capital markets to anticipate pre-allocated EU expenditure, such as Structural and Cohesion Funds. Markets would thus be a factor in EU budget policymaking, with a potentially disciplining effect. Attaching conditionality to this type of disbursement appears legitimate, as capital delivered in this way is a form of assistance.