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26 September 2017

AK/ETUI debate: How to get European economic recovery to full speed?

ak etui debate

On the 19th September, the ETUI and AK Europa organized a public debate engaging economists from the TUREC network, EU economic policymakers and the European social partners on how to get European recovery to full speed. The event was chaired by Sotiria Theodoropoulou, senior researcher at the ETUI, while the panel consisted of Jose Leandro (DG Ecfin, European Commission), Markus Marterbauer (AK Wien), Matthieu Méaulle (ETUC) and James Watson (Business Europe).

Jose Leandro opened the debate by presenting the current macroeconomic situation in Europe. He characterized the economic recovery currently under way as ‘incomplete’, because despite the increasingly positive macroeconomic figures he mentioned, there is still a lot of slack in the economy, with domestic demand lacking momentum. This unused capacity seems to be behind the weakness in wage increases and the still below target inflation in the Eurozone. In his view it is still too early to withdraw policy support, yet, the European Commission, he added, will most likely recommend a neutral fiscal policy stance for 2018.

Markus Marterbauer argued that we need to make the economic upswing broader, not only geographically but also in terms of social groups that benefit from it. To that end, we should not repeat past mistakes: monetary policy in the Eurozone should remain accommodating while European fiscal rules should be used more flexibly to allow for more public investment which supports long-term growth. He also stressed that we need to focus on bringing down unemployment and use the support of active labour market policies and public works for that. He suggested that several tools could be used to help wages grow faster, such as minimum wages but also strengthening national collective wage bargaining.

Matthieu Méaulle pointed out that a neutral fiscal policy stance in the Eurozone would not be supportive of the recovery and that in order to increase potential output growth, we need investment. The main impediment for investment to pick up has been weak demand. He also stressed that weak wage growth does help neither investment nor profits to grow insofar as they underpin weak demand.

James Watson called for more innovation and higher skills in the workforce. Business Europe would be in favour of the Stability and Growth Pact rules to be used so as to motivate governments to spend more on public investment. In his view, labour market reforms should bring people into the labour market and encourage them to stay employed.

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