Conference "Europe at a Crossroads"

"More and better jobs have to go hand in hand with fiscal and monetary policies in Europe"

Speaking at the ETUC-ETUI Conference "Europe at a crossroads. Which way to quality jobs and prosperity?", ILO Deputy Director-General Gilbert Houngbo called for a balanced approach where job creation and fiscal and monetary policies go hand in hand.

Statement | Brussels | 25 September 2014
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First and foremost, on behalf of Guy Ryder and the International Labour Office, may I thank Bernadette Ségol, ETUC General Secretary, for the invitation to be at this timely Conference.

Let me say how privileged I am to join you and other distinguished trade unionists, guest speakers and dear participants.

I recognize Commissioner Andor, Honourable Casa and Madame Berger.

I acknowledge Mr. Schulz, the re-elected President of the European Parliament. In a special way let me send you my word of congratulations, and best wishes as you continue to steer the august house.

And congratulations to Commissioner Moscivici for his recent nomination,

And finally, Mr. Toxo our Moderator. I look forward to your stewardship of this evening’s discussion.

Always a pleasure to be in Brussels, the crossroads of Europe, where we are meeting under the theme “Europe at a crossroads”.

In August we marked the 100th anniversary of the start of World War I – a devastating War in which some 8.5 million people lost their lives, while another 20 million were severely wounded. World War I and its aftermath also brought millions of women into the work force, hastening their legal right to vote, higher wages and benefits to workers, a renewed conscience of their rights, and determination to assert them. And the Treaty of Versailles which ended World War I established the International Labour Organization.

Then came World War II which unleashed renewed and merciless misery all over the world, including Europe. But in a renewed effort to prevent such wars the European project was set in motion – eventually leading to the EU we have today –through which former enemies agreed to work together for the peace and prosperity of the Continent.

We neglect our history at our peril.

The road chosen by Europe was built through increasing economic integration within Europe and between Europe and the rest of the world. This has had steadily accumulating consequences for the world of work which Europe has sought to address with a parallel drive to strengthen the social dimension of integration.
However, Europe’s response to the global financial, economic and employment crises has left many European citizens wondering what happened to that vitally important social dimension of the project.

The European trade union movement has played a key role in shaping the European project, tirelessly advocating that its social dimension must be as strong as the economic if political unity and momentum is to be maintained.

The ILO too was and is intimately involved in the history of Europe. And I have to say it seems to us that the economic and social dimensions of integration are slipping out of balance. The consequences are serious for Europe and its global partners.

…so yes, Europe is at a crossroads, at which it has to choose whether to carry on down a road in which social priorities are pushed below a search for financial rectitude or to seek a new stronger balance in which a focus on more and better jobs works hand in hand with fiscal and monetary policies.
The European economy’s stuttering recovery is in danger of stalling. The ECB has announced new initiatives but they need to be accompanied by investment and employment policy initiatives to be effective.

Employment in Europe (EU28) – estimated at around 217 million in 2013 - is still below the pre-crisis level of nearly 223 million in 2008, and unemployment rates are approaching historically high levels – recorded at 10.2 per cent in July 2014.

The labour market situation remains particularly difficult for young people under 25, with an unemployment rate of 21.7 per cent in July 2014, equating to approximately 3.3 million youth unemployed. This forms part of the 7.4 million young people not in education, employment or training.

Inequality is also on the rise, as we have seen in recent publications, notably by the OECD, IMF and others.

Reductions in public spending have weakened social protection as well as the quality and availability of public services.

An ageing population presents new challenges to society, the economy and not least the labour market. The welfare state of the future will need to adapt significantly, to longer life expectancy. Ensuring that hundreds of thousands new entrants to the labour market anticipated over the next 5 years, according to ILO projections, find decent and productive employment is a big part of meeting these challenges.

Migration within Europe and into Europe from other parts of the globe is at an unprecedented level, causing unease in some quarters.

Social dialogue and collective bargaining are effective tools to mitigate the impact of the crisis and relaunch the economy. But today they are at risk in several member states as labour market reforms have entailed a curbing of collective bargaining powers, weakening job security in the process.

So we need to pick the social and employment road. What does a new job-centred recovery plan for Europe look like?

The ILO is encouraged that growth and jobs are the top priorities of both the current Italian Presidency of the EU and of the recently elected President of the European Commission, Mr. Jean-Claude Juncker, whose s ten-point plan for Europe - "A new start for Europe: my Agenda for Jobs, Growth, Fairness and Democratic Change" is an important signpost at the crossroads we are discussing.

Growth for jobs and jobs for growth: Key policy messages

The 9th ILO European Regional Meeting held in Oslo, Norway in April 2013, delegates adopted The Oslo Declaration: Restoring confidence in jobs and growth, in which they reaffirmed that the ILO is well-placed to assist constituents to address social and economic crises and to help design sound and equitable reform policies.

So, let me share a few thoughts, based on the tripartite consensus at the Oslo conference, on how we could move Europe beyond the crossroads, and also where I see the ILO playing a crucial role.

Firstly, a strategy that puts jobs and people at the centre of the recovery efforts is needed.

The slow resurgence of growth has not yet been accompanied by job creation, so it is important to re-examine the balance of the current policy mix.

The European economy is suffering from a deficit of demand. Government spending is at best inching forward in some countries and still tightly squeezed in many others. Private investment is not picking up, in large part because household consumption too is flat. The main reason is that wages have been lagging productivity for years. There is some sign of wage recovery in Germany which is welcome and to be frank the main source of hope of an early pick-up in growth. It is also important to invest in supply side measures such as improved skill development and strengthened active labour market programmes.

Maintaining an employment-friendly social protection floor is an effective means of tackling poverty and stimulating demand and growth.
One of the most important lessons emerging from this crisis is that the idea of growth first, jobs second does not work. On the contrary, well-designed employment and social measures can support growth and the overall recovery process.

According to the ILO’s 2014 edition of the World of Work Report, living standards improved more in countries that have made the greatest investment in quality jobs from the early 2000s than in countries that paid less attention to quality jobs.

So, in short: We have seen that growth does not necessarily create jobs, but that job creation boosts growth.

Secondly, the private sector must take the lead on creating jobs.

This can only be achieved however, if there is a renewed emphasis to encourage productive investment.

For a start, by ensuring access to credit and financing for small and medium-sized. These are after all, the engines of employment creation. This can be done for instance through the provision of credit guarantees.

Looking forward, governments and employers need to ensure that resources are dedicated to productivity-enhancing private and public investment. And here, making sure that the financial system acts as the “enabler” for this to take place, will be essential. To date, the sector has been all too pre-occupied with short-term gains.

Thirdly, policy makers must be mindful of the long-term implications of changing employment legislation.

Poorly-designed changes may have long-term, unintended consequences that will be difficult to undo.

For instance, in recent years, several governments have embarked on a process of deregulation in an effort to boost job creation in an environment of strained public finances. The view was that less regulation and more restrictions to collective bargaining would be a ‘costless’ way to create jobs and make the labour market ‘more flexible’.

This has also changed the legal framework for collective bargaining in some countries. Coverage of collective agreements has fallen sharply in some counties. We need to ensure that evolutions in labour regulation reinforce not weaken collective bargaining. In this context wage-setting mechanisms and labour regulations need to be properly designed.

Fourthly, there needs to be a renewed sense of coordination.

The crisis has reemphasised the fact that the global economy remains highly-interconnected, which is even more relevant in the context of the Eurozone. Here, a common currency must go hand-in-hand with common institutions, particularly with regards to fiscal policy, financial systems and strengthening of redistribution mechanisms.

By improving cooperation, the effectiveness of a coherent job-rich strategy can be enhanced and even multiplied. Inward-looking policies will only be detrimental to the greater good.

Lastly, and equally important, it is only by working together and leveraging the power of tripartite social dialogue that Europe can move from the current crossroads towards a sustainable and job rich, growth and recovery.

Because of our tripartite structure and mandate, the ILO remains at the service of governments, trade unions and employers’ organizations in their quest for quality jobs and prosperity for all.

I thank you.