Europe's greatest priority - creating jobs

Chancellor Viktor Klima of Austria, President of the European Council of Ministers and Leader of the Austrian Social Democratic Party, SPÖ, examines the principal tasks facing the European Union

Issue 3, Volume 47, 1998

We are all aware that unemployment is the most dramatic concern of Europe's societies today. If we look at the correlation between unemployment figures and the results of opinion polls, it becomes all the more obvious that there is a very real need to act on this issue. We have to help those who are unemployed, and at the same time, we have to strengthen the European public's identification with the European Union. However, people will not identify with the Union if we do not give them very good reasons to do so. These reasons cannot be purely technocratic ones, such as the economic efficiency of a common market, the possibilities provided by a strong new European currency, or the growth prospects of new export markets. The real problems - that is to say those issues which are vitally important to persons on an individual level - such as finding a good job or enjoying a decent quality of life - can no longer be dealt with only at the local or even solely at the national level. These issues and the challenges which they involve must be addressed and resolved at a higher level.

Let's take employment as an example: the current level of unemployment is certainly the biggest challenge that we face in our efforts to push the European project forward. The success of further integration will depend crucially upon our collective success in creating more jobs and reducing unemployment.

Many years had to pass until all of the EU's member-states came to acknowledge that employment policies must have several dimensions: there is, of course, a national dimension - but there is also a European and a global dimension.

The global dimension arises from the necessity of reaching agreement on common standards for international trade - standards that must be based on a minimum acceptable set of social and labour standards. These minimum acceptable standards include, to mention just two examples, a comprehensive ban on child labour and adequate socio-economic roles for trade unions.

The European dimension of this issue is rooted in the fact that we need to unite our efforts to effectively fight unemployment in Europe. We need to fully exploit the common market's potential by pursuing common research and development efforts, common technical standards and, to some extent, common infrastructure projects.

We need a European dimension in which the advantages of cooperation are not only recognised, but seized. Such a dimension would allow the harmonisation of those policies which countries frequently use as instruments of competition for mobile capital, such as special tax advantages or low environmental standards. A sensible cooperation in restricting this kind of unfair competition will bring about long-term benefits for all the EU's member countries.

The stubborn opposition of Conservative governments was one of the primary reasons why it took so long for unemployment to figure prominently on the European agenda. However, with eleven out of fifteen EU member-states now under the guidance of social democratic leadership, we can no longer point to the Conservatives as the reason for inactivity.

I believe that another reason why we had previously failed to achieve better results in the fight against unemployment lies in the fact that the policy debate had become mired in traditional categories of `market vs. state' - this was a situation that didn't really provide any new solutions and only provoked reflex-like opposition on both sides of the political divide. As the strongest political movement inside the European Union, social democracy is now called on to develop and implement new instruments - and to do so in a manner that is both creative and non-dogmatic.

Therefore, it was certainly a wise decision on the part of the Commission and the Luxembourg presidency in 1997 to introduce the instrument of comparing `best practices.' Given the huge dimension of the problems which need to be resolved, as well as the fact that there is no single `best' solution, a competition of ideas has been and will continue to be very useful.

Reform is necessary if we want to find solutions to the problem of unemployment in Europe - and reform is also possible. It can take the form of a gradual transformation that builds on a society's traditional strengths. However, reform does require both an openness to new ideas and the willingness to breach traditional ideological fences.

We must avoid falling into the trap of a new conservatism of the right - a dogma which interprets deregulation only as an incentive to cut employee benefits, views the issue of flexibility only from one side (namely that of the employers), and regards wage reductions as the only possible solution to the problem of unemployment. A new approach is needed, one that recognises the extent to which the world around us has changed. When designing employment policies for the present and the future, we must bear in mind that traditional forms of labour - such as the prototypical full-time male `breadwinner' - are no longer the norm. We have to change both the rules and the structure of the welfare state, taking into account that economic realities, as well as individual lifestyles, have been changing.

We must also reconsider our attitude towards entrepreneurship - and I say this very consciously as a social democrat. The old dividing lines between workers and employers no longer exist - and to a large extent, newly-founded firms are those which are most likely to create the jobs that Europe's citizens need.

However, we must continue to provide security in society amidst all the changes that are taking place: an ever-widening gap of income inequalities and the loss of social cohesion are simply unacceptable. We must rebuild the welfare state to make it responsive to new requirements - but we cannot and will not dismantle it.

In all our actions, we must ask ourselves: Will it be good for the people? Will it improve social justice? And, will it promote our future?

Therefore, as far as the programme of the Austrian presidency of the EU is concerned, we will place special emphasis on the following issues:

Intensifying social dialogue at the European level;

Reinforcing those measures which promote equal opportunity, such as improvements in the compatibility of jobs and family life for both women and men;

Giving a new impetus to economic growth, as this is what we need for new jobs - growth resulting from innovation, new products and new technologies, and from lifelong, continuous learning.

The employment guidelines introduced at the Luxembourg summit were designed to promote policies that reduce the rigidities in the labour markets. If those measures are put into place, there should also be more room to implement growth-oriented policies without bringing about more inflation or giving up the tenet and practice of fiscal stability.

Promoting further harmonisation in fields such as tax policy in order to reduce harmful competition for mobile capital among countries, competition which often results in a downward spiral of social standards and fiscal resources.

The paramount integration project of this decade - Economic and Monetary Union, EMU, - is steadily approaching its final target during the Austrian presidency: the transition to the third stage of EMU will take place as provided by the Treaty on the 1st of January, 1999 - the very day after the end of Austria's term. At present, the world currency environment is heavily dominated by the US dollar. However, if EMU is successful, it will propel the Euro into a very strong position as a vehicle for international trading transactions, as well as a stable investment currency. The Euro will have to establish itself in world finance markets as a strong, stability-oriented currency in order to obtain credibility in the markets - and I need not underline that this role as a trustworthy currency would also allow the Euro to make an effective contribution to the fight against unemployment.

What are the conditions necessary for the economic success of a larger Monetary Union? The European Central Bank will have to conduct a prudent and stability-oriented monetary policy on a sustainable basis. Furthermore, European macroeconomic policy will have to adjust successfully to its new regime. This adjustment entails coordination between the EMU members' fiscal policies, coordination of EMU fiscal policy with that of the `pre-ins', those members of the EU who have not yet joined the EMU, and - as established at the most recent Luxembourg Council - cooperation between EMU fiscal policy and the European Central Bank.

What benefits will the Euro bring for the people of Europe? I think that there are several which deserve to be highlighted. First, on very practical terms, a common currency will be an important contribution to the further development of a common European identity.

Secondly, a common monetary and exchange rate policy will considerably increase cooperation between countries in that it gives them a strong incentive to promote their common interests, because the individual countries no longer have the possibility of `solving' their adjustment problems through competitive devaluation.

Finally, a common currency for such a large market should increase the stability of the international trade and financial system, thereby implicitly contributing to economic growth and employment.

We Austrian Social Democrats hope that EMU will include as many EU member-states as possible. Recent contacts with other heads of state and government confirm my conviction that we may well agree on a large number of participants, while at the same time remaining dedicated to fully safeguarding the future stability of the single currency.

While EMU will undoubtedly go ahead, it is important not to generate a Europe at several speeds. Both the EMU participants and the `pre-ins' will have to undertake sincere efforts to prevent the emergence of new divergences on account of monetary union.

All of these goals are addressed not only to the peoples of the present Union, but also to those of a wider Europe. As Austria's Chancellor, I need not further underline that Austria has a very self-evident and very strong interest in the enlargement process - after all, Austria borders on four of the candidate countries and has the longest EU external border of all of the Union's present member-states.

The project of Enlargement requires the removal of barriers. We know that there will be migration - and we realise that uncontrolled migration would produce considerable social tensions in our countries. Yet, I find it thoroughly inconceivable that we should put up new barriers to keep people out - such barriers would be likely to reinstate the Iron Curtain's bifurcation of Europe. For this reason, the only sensible policy to deal with migration lies in promoting economic growth and thus bringing about increases in the standards of living enjoyed by the peoples of Central and Eastern Europe.

The project of enlargement also requires inclusion. Inclusion involves providing all of Europe's countries with a reasonable prospect of eventually joining the Union. In this context, Austria has a particularly strong interest in preventing the Slovak Republic from becoming isolated. Our interest is not only on account of our geographical proximity, but out of concern for political stability in Central Europe.

Of course, enlargement is also an economic project. The fundamentally positive economic perspective which enlargement provides does not rule out the need for substantial structural adjustments, both on the part of the European Union, as well as on the part of the candidate states. If left unattended, the fears and resentments that stem from the huge gaps in economic and social standards and structural imbalances could easily turn public opinion against the challenges posed by enlargement.

One of our major goals must be to make certain that the creation of a single Europe does not lead to even stronger social divides between the peoples of old and new member-states. Therefore, it is necessary to carefully prepare the accession process and to provide sufficient adjustment periods before markets - in particular, labour markets - can be opened completely.

The Austrian presidency intends to dynamically pursue the enlargement process. The Council in December in Vienna will rely on the European Commission's report to thoroughly examine the progress made by the applicant countries.

Institutional reform within the Union is, of course, an important prerequisite for the enlargement process. However, I believe that enlargement will have the positive effect of acting as a catalyst for this reform process.

The European project is still an imperfect one: many of the critical arguments being made with regard to the process of integration are justified; many problems remain to be resolved; many deficiencies still need to be removed - but I am firmly convinced that social democracy has the best potential to meet these challenges, because a peaceful and prosperous Europe can only be brought about on the basis of the social democratic principle of solidarity.



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