Working Paper 5. The Luxembourg Process Five Years On Bernhard Jansen

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1 Working Paper 5 The Luxembourg Process Five Years On Bernhard Jansen I am very pleased and honoured to have been given the opportunity to write about the subject The Luxembourg Process Five Years On. Rather than simply taking stock of what happened throughout the last five years, I think this is a good occasion to share some thoughts about possible developments in the future. As many are aware, working with the Commission means to be orientated toward the future, so that I would find it rather incomplete and unsatisfactory just to examine past experience in my paper. This is all the more true as the Convention on the Future of the European Union has recently completed its work, so that we are all called upon to participate in this important debate and submit our contributions, as modest as they may be, to the ongoing process. However, to begin with, we need to look back in order to know on what experience we should build the future. There can be little doubt about the strategic importance of the social and employment policy for the European Union as well as for its Member States. The success of the employment policy may be decisive for the acceptance of a government by the citizens in a democracy and for the stability of the democratic system as such, as can be shown on the basis of the experience in Europe throughout the 20 th century and in the more recent past, in countries such as Argentina. It is worth recalling that there has always been an entire chapter on Social policy in the Treaty since its inception in 1957 (then Articles 117 to 128). The constant improvement of living and working conditions as well as the raising of the living standards were mentioned as being among the main goals of the European Community in the Preamble and in Article 2 EC already in its original version. Article 3 originally Director, Employment and Social Affairs DG of the European Commission. The positions expressed in this article are personal and do not necessarily reflect the position of the European Commission.

2 referred moreover to the creation of the European Social Fund in order to improve employment opportunities for workers. However, the chapter on social policy did not comprise in its original version any specific legal basis for derived Community legislation. While the fundamental importance of social and employment policies was thus recognised throughout the entire process of European integration, it was perhaps less visible than it is today because of the particular way in which the Treaty was implemented throughout the first three decades of its existence. In spite of the prominent position of social policy in the treaty language, during the first three decades of the EEC, the number one policy objective was very clearly the removal of all kinds of barriers which stood in the way of the full integration of a European single market, and it was widely assumed that social and employment prospects would improve more or less automatically as markets opened up. This assumption led to the strong reluctance of the Council throughout three decades to adopt derived Community legislation in the field of social affairs for which unanimity was required under either Article 100 (now Article 94, harmonisation of legislation for the internal market) or Article 235 (now Article 308, measures not otherwise foreseen in the Treaty). This made any progress in the social field excessively slow. In response to growing criticism of this method of proceeding with European integration, the policy goals in the area of social and employment policies were reinforced by the amendments to the Treaty agreed upon in Maastricht and Amsterdam. As the Treaty stands today, Article 2 EC refers specifically to a high level of employment and social protection and Article 3 EC mentions the promotion of coordination between employment policies of the Member States with a view to enhancing their effectiveness by developing a coordinated strategy for employment, a policy in the social sphere comprising a European Social Fund and the strengthening of economic and social cohesion. Moreover, the Amsterdam Treaty inserted a new Title VIII on Employment (Articles 125 to 130). The open method of coordination in the employment area finds its basis more specifically in Article 128 which is closely connected with a similar provision in Title VII of the Treaty on Economic and Monetary Policy, namely Article 99. These changes are clear evidence of the growing

3 awareness of the importance of concentrating on employment and social issues in parallel with further European integration. Finally, new provisions were inserted first by the Maastricht Social Protocol and then amended by the Amsterdam Treaty, providing a legal basis for derived Community legislation in the social area, giving a specific role to the social partners (Articles 137 to 139). These provisions allow for the first time the enactment of derived legislation in this area on the basis of co-decision between the Council and the European Parliament with the consequence that the Council may adopt such legislation by qualified majority so far as such legislation regulates the subject matters listed in Article 137 (2) of the Treaty. All this means that employment and social policies are higher up than ever on the agenda of the European Union, both in legal and in political terms. It has meanwhile become clear that the concept of European integration will not gain the necessary public support if it remains confined to the liberalisation of markets and does not sufficiently take into account the social consequences of the changes in the market place. The present popular movement against globalisation shows that even at world-wide level, there is an increasing awareness of the need to cater for the social consequences of economic integration. In Europe the social model is different from that in other parts of the world, with particularly high expectations regarding social and employment security, which must be taken into account in the process of European integration if it is meant to be a success. Thus, the Luxembourg process launched in 1997 was the starting point of a stronger integration of European labour markets with commonly set employment objectives, recommendations and guidelines which commit all EU Member States to provide more and better jobs. This new strategy is carried out under the so-called open method of coordination through national action plans for employment and through a policy of promoting mobility, skills, employment adaptability and equal opportunities within labour markets. This open method of coordination works on the basis of so-called indicators, i.e. selected statistical data whose relevance is recognised. They constitute the yardstick for the performance of the labour markets of the EU Member States. The performance of

4 individual Member States is compared on the basis of these indicators with the performance of fellow Member States in order to be able to identify successful labour market strategies. The whole exercise resembles some sort of competition between the Member States with the aim of identifying best performance. The so-called Lisbon strategy agreed upon at the European Council in March 2000 added the strategic goal of full employment by the year 2010 and strengthened the employment strategy by underlining the need for more and better jobs in a knowledgebased society. All these are ambitious targets, and the competition between best practices within Member States helps in the process of realising such targets. I think that since the start of the Luxembourg process five years ago, a number of important events have taken place which need to be kept in mind simultaneously. I will just mention the most outstanding of these, namely the completion of monetary union in twelve of the fifteen present Member States of the European Union, with the physical arrival of uro coins and bank notes in the pockets of the citizens of these countries. The expectation is of course that the three remaining Member States will join the monetary union before long. The following considerations are thus based on the assumption that monetary union will embrace all European Union Member States, present and future. The role of the social partners in shaping this policy is decisive. One of the major achievements of the Treaty on European Union conceived in Maastricht is the enhanced role that social partners were given when developing EU legislation in the area of labour law. It is worth our while to consider whether the role of social partners could not also be enhanced in the area of employment policy based on the Luxembourg process and the Lisbon strategy. Economic developments are obviously of crucial importance for achieving these goals. Thus, the linkage between economic and monetary policy on the one hand and employment policy on the other needs to be improved. This means that economic and monetary policy and employment policy must go hand in hand. The Commission has made proposals on structural improvements regarding the different Council bodies in

5 order to pull these policies together. The golden triangle between economic, employment and social policies underpins the European Social Agenda adopted at the European Council in Nice in December All this means that the awareness of common goals in all these areas has become much greater than it ever was before in the European Union. Monetary union moreover means that one of the possible escape routes that existed in the past is no longer available within the European Union, namely devaluation of the national currency in order to improve the performance of the Member States vis-à-vis each other. It must be recalled at this juncture that before monetary union was created, devaluation or re-evaluation were sometimes used in order to escape from the need for internal economic adaptation to a changed market situation, and thus could enter into conflict with the ultimate goal of the single market where adaptation should be based exclusively on market mechanisms in order to correct mistakes in good time. Improving the quality of employment is one of the main goals identified in the conclusions of the European Council in Lisbon in March Europe will only be able to gain a competitive advantage over others if it maintains a high level of education and qualification of its workforce. It must actively promote and improve its position in this respect. While it must be admitted that jobs which do not require any particular qualification are better than no jobs, they are simply not the kind of jobs where European workers are likely to be sufficiently competitive. By contrast, qualified services are among the kinds of activities for which a high level of education is required and where our workforce can be competitive if we continue to concentrate our efforts on skills and qualifications. The keywords for our employment strategy are thus innovation and quality jobs in a knowledge-based economy. This is the recipe for growth and competitiveness which is needed in order for Europe to continue to prosper. It is also the recipe for tackling the inevitable problems that we will come across in the context of the imminent enlargement by a number of Central European countries which have long been excluded from the advantages and the fruits of the market economy as we know it.

6 Flexibility and adaptability of our workforce are further requirements that we must be capable of fulfilling. Adaptability is related to the changing working environment, be it by technological change, in the organisation of work, in work patterns concerning working time, or in other features. We are exploring with the social partners ways in which the quality of employment can be improved by actions of all kinds related inter alia to life-long learning, tele-working, and new types of working time arrangements, to name just a few examples. Flexibility means work patterns not falling under the classical definition of full-time work within a stable working environment. New technologies help us to overcome space and time to an extent never known before. For this reason, a new degree of flexibility in work organisation is required. Large law firms are a good example for this profound change, since they can share out their work between different teams world-wide and thus work practically around the clock. This has never before been possible nor even conceivable. As these considerations show, the present Treaty provisions and the policy developed on this basis in the area of social and employment policy are relatively recent and are just starting to bear fruit. The question of any changes brought about as a result of the Convention which took place in must therefore be treated with particularly care. Surely, the formal inclusion of the Charter on Fundamental Rights into the new constitutional environment of the European Union would be an improvement in this regard, since the Charter contains fundamental rights also in the area of social policy. It must be expected however that this would lead to little more than a rather formal change, because the fundamental rights contained in the Charter are already presently guiding the policy of the European institutions. Although there is as yet limited experience, everything indicates that the open method of coordination used for coordinating the economic and employment policies of the Member States is a successful tool which combines a comparatively smooth method with a strong incentive to improve performance. It is not of a legislative nature but has a compelling element in the sense that it obliges Member States to plan ahead and measure their performance in comparison with that of fellow Member States. It is also

7 based on guidelines developed at European level. So it has much to be commended as a model in policy areas where legislation does not appear to be a viable option but where a harmonised policy approach is nonetheless required. It might work in areas such as social security and social inclusion which are areas in which better harmonisation at European level is desirable, but where legislative action by the European Union is considered to be too intrusive into the divergent national systems. Another important issue is the involvement of the social partners in preparing legislation in the social field, to the extent that the competences of the European Community in the social field were to be extended to areas other than those enumerated at present in Article 137 of the Treaty. While it is perhaps not obvious at the moment whether it is desirable to expand the competences of the European Community beyond the area presently covered by Article 137, it would certainly be necessary fully to involve the social partners at European level in the same manner as currently provided. This gives both the European Community institutions and the organisations of the social partners a degree of legitimacy in the social area that they could not otherwise achieve. An important issue is whether there could be a role for the European Parliament under Article 139 of the Treaty which deals with agreements between management and labour. The issue is very complex, as this is an area where the social partners enjoy autonomy. At the same time, where an agreement between the social partners is implemented by a legal instrument adopted by the Council, the exclusion of the European Parliament in the legislative process does not appear to be justified. Another important issue is the question whether Article 13 of the Treaty, dealing with anti-discrimination policy, should be granted direct effect. At present, this provision is no more than a legal basis for more detailed legislation at the European level. This distinguishes Article 13 sharply from Article 141, the former Article 119, which the Court has held to be directly effective since the 1970s. The most important element in the area of employment and social policy is however that the parallelism with economic and monetary policies needs to be fully maintained. The concept of the golden triangle with a mutually reinforcing economic and

8 monetary policy, employment policy and social policy is the recipe for better acceptance of the process of European integration on the internal plane. Both on the internal and the external plane, we must be able to show that the European Union is founded on a community of values and principles of general recognition throughout our continent. The Union has to be seen as a guarantor of democracy and promoting fundamental rights, including fundamental social rights also with a view to the forthcoming enlargement. If I may now summarise the main points of my paper, it is that European integration needs continuing support in a democratic society. We need to maintain our European social model on the basis of more and better jobs, social inclusion and nondiscrimination against minority groups and between men and women. Without a common resolve to do so, there is a very real risk of losing public support and a movement against European integration by either right-wing or left-wing extremists or so-called populists as we have recently experienced in several Member States of the European Union. The unholy ghost of these movements is haunting us again, in spite of the lessons that the 20 th century has taught us about the dangers which extremism represents for an open and pluralistic society. Let us not forget that European integration was the answer, by forward-looking men such as Winston Churchill and Robert Schuman, to the devastating wars that had been triggered by Europe s extremist nationalist movements in the first half of the 20 th century. European integration is today without any serious alternative, as the recent events in the Western Balkans show where violations of the most basic human rights have occurred because unfettered nationalism was once again allowed to have its way. Moreover, we do not need to look very far in order to understand that extremist parties may pop up anywhere on our old continent. All this means that searching for an answer to the challenges in the area of social and employment policies is by no means a luxury issue. We cannot rely on the somewhat simplistic assumption that strengthening the single European market will be sufficient to deal with social issues as well. We have to take action in the social field as well, and at all levels, including the European level.

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