Download UEAPME`s Position paper on Broad Economic Policy Guidelines 2003

UNION EUROPEENNE DE L’ARTISANAT ET DES PETITES ET MOYENNES ENTREPRISES
EUROPÄISCHE UNION DES HANDWERKS UND DER KLEIN- UND MITTELBETRIEBE
EUROPEAN ASSOCIATION OF CRAFT, SMALL AND MEDIUM-SIZED ENTERPRISES
UNIONE EUROPEA DELL’ARTIGIANATO E DELLE PICCOLE E MEDIE IMPRESE
European Commission's proposal for the BEPG 2003
or shortcomings of Europe's economic policy
Position paper on Broad Economic Policy Guidelines 2003
1. General remarks on BEPG 2003
Europe's economy in deep crisis
In the first half of 2003 Europe's economy is in the deepest crisis since the beginning of
phase 3 of the EMU. This is a result of different external effects (collapse on stock
markets, war in Iraq, SARS) but also of internal shortcomings (low level of investment
and employment, unbalanced macroeconomic policy mix for large European economies,
deficits in structural reforms - Lisbon implementation). Both lead to high level of
uncertainty amongst all economic actors and hinder the recovery of the economy.
More of the same - right answers to wrong questions
Therefore, UEAPME fully supports the analyses and the recommendations made by the
European Commission in its proposal for the BEPG 2003 regarding the necessary midterm (structural reforms) and long-term (sustainability) policies, which are very much in
line with the last BEPGs. UEAPME also welcomes the streamlining of the BEPG with
the European Employment Policy Guidelines.
At the same time Europe's SMEs are disappointed by the total ignorance of the BEPG
proposal on short-term problems. Europe can not just wait for a stronger recovery of the
US economy. The current macroeconomic environment is not supportive to economic
growth and without co-ordinated actions from the main economic policy players, Europe
will not get out of the crisis. The European Central Bank, the national governments and
the social partners have to accept the responsibility for the development of Europe's
economy and UEAPME expects clearer words from the European Council about wrong
developments and missing decisions.
Even if it is absolutely necessary to implement the structural reforms and to consolidate
the national budgets in a mid-term perspective, Europe's economy needs a policy now,
which puts it back on a growth path and allows the necessary reforms to be
implemented.
2. Rethinking the macroeconomic policy mix - make growth possible
Europe's business sectors and especially SMEs strongly support the strategic targets of
the Growth and Stability Pact and the Lisbon agenda. Enterprises know the importance
of a stability orientated economic environment which is sustainable and allows market
forces to develop. However, the economic crisis makes it necessary to focus also on
short-term policies, which allow the economy to recover. The current macroeconomic
policy-mix is not supportive of economic performance and the key players have to use
their room for manoeuvre.
The European Central Bank has to ease the monetary conditions as far as possible
without endangering the price stability
UEAPME recognises the importance of stable prices for the economy and the efforts
made by the ECB in the past to ensure this. However, high inflation rates are not the
problem at the moment and we ask the ECB to use the room for an interest rate
reduction for a more proactive approach towards the monetary environment:

Low levels of demand (private consumption and investments), decreasing oil prices
and the strong Euro are reducing the pressure on inflation.

High inflation differentials between member states make it necessary to rethink the
inflation targets in order to avoid the danger of deflation at the lower end of the
scale.

If deflation happens, monetary policy will lose most of its instruments, therefore,
everything has to be done in order to avoid it from the start.
The main goal of the Stability and Growth Pact is financial sustainability - shortterm flexibility is necessary in order to achieve the long-term targets
UEAPME supports the Stability and Growth Pact (SGP) and its main goal, to ensure
financial sustainability. It was also necessary to strengthen the Euro during the first
years. It is also clear that its long-term targets can only be met if the economy develops
well. Therefore, fiscal policy should not only focus on structural aspects, but also has to
support different economic situations. A pro-cyclical policy has to be avoided:

While the main focus of the SGP is the reduction of structural deficits close to
balance or in surplus, the cyclical deficit has to be accommodated to the economic
situation.

During economic crises or even a recession, necessary reduction of the structural
deficits should be implemented in a way which does not endanger economic
recovery. Successfully implemented structural measures increase the room for shortterm anti-cyclical policies in order to stabilise public demand.

Necessary tax reduction has to be financed by a decrease in consumptive
expenditures by public administrations.

The European Commission and the ECOFIN has to interpret the SGP in a way,
which forces the Member States to implement the structural reforms without procyclical effects.
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Wage development has to be in line with inflation targets and must be supportive to
new investments without negative effects on purchasing power
Social Partners have the responsibility to ensure a wage development, which is
supportive to economic growth. Therefore, they have to find the right balance between
economic competitiveness and purchasing power.

On an aggregated level wage increases have to be in line with inflation targets. This
means that exogenous shocks should be absorbed in order to avoid economic
contraction.

In order to support competitiveness and job creation, which is a main source for
gaining purchasing power, wage developments have to be in line with productivity
increases. Therefore, more focus on wage differentiation is necessary, especially on
the lower end of the labour markets. A desirable level of net income for low
productivity jobs has to be tackled rather by social or fiscal policy schemes than by
wages costs.

In some Member States the Trade Unions have to focus more on job creation than on
the wage development of those who are already employed.
3. Make structural reforms happen - Member States have to overcome the
delivery gap
The implementation of the structural reforms, which are already agreed in numerous
BEPGs and the Lisbon Strategy, is not only necessary in order to increase the potential
growth rate in Europe, but also to give more room to ease the monetary policy and to
support budget consolidation. As long as the national governments only agree on these
reforms at meetings at European level without feeling responsible to do the next step at
home, the economic recovery will not happen and the Lisbon targets will be fare from
achieved. The same is true for the policies of important national stakeholders. It is not
enough to agree on reform strategies at European level without supporting the national
governments when it comes to implementation.
From Europe's SME point of view, the most important structural reforms, which are
needed and where are delivery gaps, at least in some Member States, are in the fields of:

regulations in the social security systems, which discourage people from staying in
the labour market or entering it (early pension schemes, family taxation schemes,
unemployment schemes, etc.);

flexibility of labour markets regarding work contracts, wage differentiation, time
flexibility;

administrative burdens regarding health and safety, taxation, business start ups,
transfer of business;

shortcomings in the internal market, especially in the service sector;

access to finance and to new technologies
UEAPME
2003-06-03
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