Macroeconomic dialogue with the social partners on 13 March 2023

The Council presidency, the European Central Bank and the European Commission met today with European social partners to discuss recent developments of the economic situation, as well as a thematic topic chosen by the Presidency titled ‘EU productivity and competitiveness, trends, challenges and the

We have had a productive macroeconomic dialogue with many interesting perspectives being shared. The EU is facing macroeconomic uncertainty paired with persistent inflation and this affects all pillars of society. I appreciated hearing the social partners’ views on these challenges. While we need to address the challenges facing us here and now, we must also ensure the long-term competitiveness and productivity of the European economy. Businesses and workers are the backbone of our economy and therefore this is an important forum to exchange views on appropriate policy responses to manifest the EU as a competitive and productive economy.

Elisabeth Svantesson, Minister of Finance of Sweden which currently holds the presidency of the Council

The EU economy has recently endured multiple shocks, from the pandemic through to the impact of Russia’s war against Ukraine and has shown remarkable resilience. This testifies to the strengths of our economic and social model based on openness, competition, innovation, people’s welfare and skills, and a well-functioning Single Market. We should continue to build on these strengths to ensure our future competitiveness and prosperity in a sustainable way, with the help of social partners. Looking ahead, we need to stay the course of reforms and investments, address skill shortages and promote high-quality employment, reduce red tape to create a more agile business environment for our companies to thrive - especially smaller ones - and make sure that they have access to diversified funding sources via deep and integrated European capital markets.

Valdis Dombrovskis, Executive Vice-President of the European Commission

Today we had a really excellent discussion on a range of matters. The European economy has again shown its resilience in the face of many challenges with a solid growth outturn and a low rate of unemployment. That said, we are cognisant of the risks we face arising from Russia’s war of aggression against Ukraine and still high inflation. We need to continue to closely coordinate economic policies during these exceptional times to deliver growth and lower inflation. In this context, the discussion on competitiveness and future challenges was particularly appropriate given our investment needs. This again highlights the urgency for us to accelerate efforts to complete the Capital Markets Union.

Paschal Donohoe, President of the Eurogroup

Real wages have been collapsing at the same time as profit shares and dividend payments have soared. It’s clear inflation is being driven by a profits-price spiral and not a wage-price spiral. The EU’s response to inflation should reflect the fact that workers are the primary victims of inflation and not its cause. Wage restraint, the withdrawal of support measures and more generally speaking economic policy tightening are the wrong response to a problem caused by excess profits. The recently receding developments impacting consumer prices should be an additional reason for caution in this regard. The economic situation would be far worse if it weren’t for strong and broad-based fiscal support measures and these should not be withdrawn prematurely. When it comes to productivity, the slowdown can be explained by the fact that private investment as a share of GDP is currently half of what it was in 2000. The best way to support European industry and its workers is to increase productivity is by investing in technology and training and not through lowering standards. That means ensuring that businesses reinvest more of their profits in increasing productivity rather than in CEO bonuses and shareholder payouts. We must also make sure that future productivity gains benefit workers: If productivity increases had been translated into commensurately higher wages as is meant to be the case, European workers would have collectively received more than €100 billion since 2019.

Esther Lynch, ETUC General Secretary

The EU is lagging behind the US on subsidies to finance the transition, and especially on social conditionalities. The Green Deal industrial plan must come with strings attached on social dialogue, quality jobs and training. We also need a European investment plan to avoid increased regional inequalities. However, there is a huge danger of exploding inequality and not delivering on a fair transition if we follow again a path of economic and fiscal austerity.

Luc Triangle, ETUC, industriAll Europe General Secretary

EU industry is facing a long-term competitiveness challenge. In recent years, our companies have seen regulatory burdens increase more rapidly than in other major regions such as the US, whilst long-term energy prices have risen by more in the EU than elsewhere. Alongside these factors pushing investment away from the EU, support for industry seen in other major regions, most recently through the US's Inflation Reduction Act, is acting as a significant pull factor to invest outside the EU. If EU industry is to remain competitive in global markets we urgently need policymakers to increase their focus on long-term competitiveness, including by addressing high energy costs and creating regulatory breathing space for companies.

Markus J. Beyrer, Director General of BusinessEurope

The EU institutions have so far shown the will and ability to adapt to raising challenges. SGI Europe welcomes, for the occasion of the 30 years of the single market, the cultural shift that is taking place from enforcement of fair competition to active policy tools to channel productive investments for the benefit of competitiveness and sustainability. 2023 must also be the year to agree on the review of the European Economic Governance. SGI Europe calls on the ECOFIN Council to find a consensus that promotes reforms and investments in energy security, digitisation and the green transformation and that operates on the basis of more progressive adjustment paths. In parallel, we must think of where is the EU added value and what is the cost of non-Europe. This means understanding that the lessons of the recent crisis call for shaping new European Public Goods in the field of energy, healthcare and security. For SGI Europe this is an imperative to give the European Union a strong backbone for competitiveness and productivity.

Valeria Ronzitti, General Secretary of SGI Europe

European SMEs ask for clear, simple and predictable rules, allowing them to invest. In addition, the European economy requires more investments in skills and infrastructure necessary for the green and digital transition. For both transitions, the functioning of the Single Market has to be improved to make Europe attractive for private investments. Europe’s competitiveness cannot be ensured by additional subsidies, protectionism and trade wars. Therefore, the up-coming Green Deal Industrial Act together with an ambitious SME Relief Package has to deliver on the requirements for a competitive Europe.

Véronique Willems, SMEunited Secretary General

In the short run, we must make sure that in the fight against inflation the costs are distributed equitably. This is compatible with a sharp focus on the green and digital transition of our economies, seizing the full potential of our National Recovery Plans. In this transformation to enhance European productivity and competitiveness four pillars stand out as particularly important: clean energy at affordable prices, a state aid framework fit for purpose, green finance and multilateralism.

Carlos Cuerpo Caballero, General Secretary of the Treasury (future Spanish Presidency: Jul-Dec 2023)

Tackling the declining trend in productivity and competitiveness in the current geopolitical and economic context is key for the European Union and its economy. The implementation of the RRF, in particular its green dimension, and of REPowerEU should enhance resilience of the European economy by reducing its dependence on fossil fuels and by strengthening its productivity growth through innovation.

Steven F.M.C. Costers, General Counsellor, Treasury (future Belgian Presidency: Jan-Jun 2024)

The next macroeconomic dialogue will be organised under the Spanish presidency.