Vice-President Dombrovskis' keynote speech at the Brussels Economic Forum 2017

Ladies and gentlemen,

I am glad to see that the Brussels Economic Forum has brought together such a distinguished group of thinkers and actors around a theme on which so much of the EU's energy is focused.

There is no doubt that economic inclusion is on people's minds across Europe:

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  More than 8 out of 10 Europeans consider unemployment, social inequality and migration as top challenges for the European Union to tackle.

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  7 in 10 fear that social policies are insufficiently managed.

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  And more than half believe not everyone has a fair chance to succeed, and that life will be more difficult for the next generation.

These perceptions reflect a sense of anxiety about the resilience of our social model. Europe is one of the most equal societies in the world, although differences persist also in Europe. We have so far always managed to combine growth, open trade, global competitiveness and high social standards. And people want this to continue to be the case.

We have to take that into account in all our policies and focus on delivering inclusive growth.

But we first need to get the diagnosis right.

What is really driving inequality?

The crisis has shown that part of the good growth performance in the preceding years did not have solid foundations. Much capital was misallocated, debt accumulated and ultimately we had a growth model which was not fully sustainable in several countries. Moreover, the feedback between slowing productivity and incomes acted as a drag on growth.

Since then, the EU has worked hard on a combination of reforms at country and EU level.

Today, the European economy is in its fifth year of recovery, now reaching all EU members. Growth is expected to be 1.9% this year and next.

The title of this panel calls our growth 'modest'. The recovery has indeed been slow to take off. But Europe is now really gaining traction.

We need to use this opportunity to go further: to ensure the sustainability of our recovery; to further improve our resilience to future economic shocks; to tackle major social challenges.

We have to redouble efforts on investment, structural reforms and responsible fiscal policies. And, as the Annual Growth Survey put it: we need to keep the focus on social fairness and more inclusive growth for all, especially the weakest in our societies.

The Commission's country-specific recommendations, issued last week, outline the way forward at national level.

In recent years, we have made headway with structural reforms, but there is a risk of losing the reform momentum. This is possibly the biggest domestic risk to the recovery, and it would be a huge mistake.

Ladies and gentlemen,

Without robust and sustainable growth it is much more difficult - if not impossible - to address the social challenges we face. But growth in itself is not enough. We need to combine economic and social convergence. We need targeted policies.

Rapid technological innovation, the digital revolution and globalisation are transforming our lives.

Mostly for the better. For instance, globalisation on balance creates jobs: in Europe, every billion euros of exports supports 14.000 jobs.

But it must be said: these trends do increase pressure on our companies, workers and governments to adapt. Policies to address trade- and innovation-related adjustments are crucial.

There is no indication that more open economies should be less inclusive. Some of the more competitive economies are also among the most inclusive - many among them EU countries.

The social market economy model has served us so well in the past, but needs to be adapted to be able to face current challenges. And let me highlight the role of the social dialogue as well as the civil society - both represented in this panel by ETUC and the Social Platform - to ease transitions and to contribute to resilient societies.

As presented in the recent Commission's reflection paper on the social dimension of Europe, the world of work is changing and becoming more complex. In the space of a generation or two, the average European worker may have gone from having a job for life to having up to ten jobs in a career.

New forms of contracts and greater geographical mobility offer opportunities for jobs, but also challenges for protection of workers and safeguards for when they retire.

They also create new issues for the financing of the state, via pressure on taxes or on social contributions.

We also need to do better at equipping all our people with the skills and training to compete in open and changing markets. Our education systems need to provide the skills that meet labour market demands.

In adult learning, average participation remains stuck around 11%, despite a fast-evolving variety of needs. Besides, low-qualified adults are only half as likely to participate in learning as others.

Going forward, even the most basic tasks in our economy will increasingly require a broader set of digital, service and people-oriented skills. Through our New Skills Agenda, we offer the framework for our governments, stakeholders and our citizens, to make that shift.

Our social protection systems are also under strain, with demography the most influential factor. By 2060 there will only be two people of working age for every elderly person, compared to four in 2008.

Because of the ever-smaller basis, we definitely need to boost the efficiency of our social systems.

The share of social spending on the elderly keeps increasing, and that to other age and needs groups - children, unemployed, disabled amongst others - is now less than half of all social protection spending. Over the past 30 years, youth has replaced the elderly as the group experiencing the greater risk of income poverty.

Clearly, our social security spending needs to be better targeted.

We also see that the effectiveness of taxes and transfers to narrow inequalities has been declining since the 1990s. In the past, redistributive policies in OECD countries have rebalanced about one quarter of market income inequality. This is less the case today.

Here, let me recall the ongoing efforts to achieve fairer taxation, so that everybody pays a fair share.

There is a growing international consensus on the OECD action plan to fight base erosion and profit shifting. The EU is in the lead and, indeed, we go even further with our own regulation, for instance on exchange of information on tax rulings and country-by-country reporting.

We are also recommending governments to address tax evasion and to shift the tax burden away from labour - especially low-paid labour - to tax bases which are less detrimental to growth.

Reforms in the areas I have outlined above are complex, but nevertheless imperative for inclusive growth.

Ladies and gentlemen,

The EU level contribution to an agenda for inclusive growth spreads across policy areas. From initiatives directly promoting more inclusive polices to the mainstreaming of social concerns into all wider EU policies.

The European Pillar of Social Rights is emblematic of our will to provide guidance to steer policies to support well-functioning labour markets and fair welfare systems. It will serve as a compass for a renewed process of convergence.

I have already mentioned the Skills Agenda.

Let me also recall that millions of young people have benefited from the Youth Guarantee, which is supporting the gradual improvement we see in youth employment. The Youth Guarantee has created broad momentum for reforms of education and labour market systems and provided tailor-made jobs and training support programmes for young people throughout Europe. Hence, we have proposed to increase the funding of the Youth Employment Initiative substantially, from EUR 6.4 to EUR 8.4 billion until 2020.

Our action also includes recommendations for national reforms of economic and social policies, such as on how to develop effective minimum income schemes and anti-poverty strategies. And we have been working on initiatives to do away with barriers to investment and innovation for small companies and for fairer taxation.

A well-functioning Economic and Monetary Union also contributes to inclusive growth.

We have issued our reflection paper on completing EMU just yesterday. It outlines principles and options for reform with the aim of fostering a constructive debate on the completion of EMU, hopefully leading to agreement on concrete steps.

The euro is one of Europe's most significant achievements. It is much more than just a currency.

It was conceived as a promise of prosperity. To keep that promise for future generations, we need to have the political courage to work on strengthening and completing the Economic and Monetary Union now. We need EMU to inspire confidence, and to work more effectively as an engine for convergence both within and among countries.

EMU is more robust after the reforms undertaken during the crisis, but it still has shortcomings. These need to be addressed by working in multiple directions.

We need a full financial union, one which is stable and able to provide finance for all companies, especially SMEs, and to support innovative projects.

We need to advance on the economic and fiscal union, with important consequences for inclusive growth:

It could involve strengthening policy coordination towards more resilient economic structures. This would reduce the risk of sharp economic fluctuations which tend to disproportionately affect the weaker part of our societies.

We could opt for binding standards on, for instance, the quality of public spending, investment in education and training, or fair and efficient tax and benefit systems.

And we should reinforce the support from the EU budget to structural reforms.

It would also involve better protection from large economic and financial shocks, possibly through new euro area fiscal stabilisation function. This could be for instance a European Investment Protection Scheme to safeguard investment levels during recessions. There are also other options being discussed in the reflection paper, such as a European unemployment benefit reinsurance scheme or a rainy day fund.

Ladies and gentlemen,

To sum up: I believe we can fight inequality by pursuing policies which aim at sustainable growth and at social inclusion at the same time.

I believe the political will and determination are there.

It is a global commitment, to which we have subscribed as part of G7 "Bari Policy Agenda on growth and inequality".

And Europe will be at the forefront of worldwide efforts for more inclusive growth. In the Rome declaration in March, EU leaders reaffirmed their ambition to remain 'a major economic power with unparalleled levels of social protection and welfare', and their belief in 'a Social Europe [which] promotes economic and social progress as well as cohesion and convergence.'

The debate now is how best to put this in practice - and your contribution to this debate is much appreciated.

Thank you very much.

SPEECH/17/1504