Is this proposal any different from the Commission (2017) communication on flexibility in EU fiscal governance? Very much so; this for six – if not more – reasons.
Politically, in the first place, the proposal is explicit substantively with a future-oriented social focus on long-term EU action, consistent with delivering on the ESU. We are not talking about some underspecified discretionary fiscal wiggle-room for countries in budgetary difficulties on a year-to-year basis. To wit, already the current flexibility clause of the Commission is looked upon with suspicion by some of the more fiscally austere Northern member states governments, currently organised under the so-called Hanseatic League of the Netherlands, Finland, Denmark and Austria.
Second, the proposal concerns a concrete commitment to human capital ‘stock’ improvement and is therefore easily monitored and more likely also to engender stronger member-state legitimacy to EU action.
Third, in our era of nationalist resurgence, domestic reform ownership is crucial. That’s why in this proposal the political initiative explicitly lies with responsible national political actors with considerable freedom of policy choice. Italy and Spain could, inter alia, opt for the creation of immediate (and primarily female) jobs by making major investments in high-quality childcare centres, while France would be able to pursue a radical improvement of its system of vocational education and training, based on the German example, and Belgium, the Netherlands and Slovenia could ramp up their rather regressive lifelong learning arrangements, after the Finnish model. The investment aid would strongly incentivise countries fiscally constrained to join the bandwagon of social investment reform, while conditionality would reassure countries in better fiscal shape. It goes without saying that discounting human capital ‘stock’ investments must be closely monitored through the European Semester in terms of effective open coordination with regard to labour market regulation and employment relations that help ease labour market and life course ‘flows’ for individuals and families, together with progress towards make social security ‘buffers’ more ‘inclusive’ across the member states. The third reason touches on the conundrum that political commitments to long-term investment, in a context of short-span electoral cycles, are tough to get off the ground. Especially today, there is a need for institutional levers of more long-term orientation. Voters are most concerned about today’s policy consequences than about longer term consequence, as they face essential informational constraints to make prospective (rather than retrospective) inferences.
Likewise, and in the fourth place political elites’ craving for popular consensus is also drawn into immediate problems. As political problems whose consequences have not yet emerged are less likely to emit attention-generating signals and are, as such, at a disadvantage in the political competition for investment decisions (Jacobs, 2011). Given that the EU is somewhat more shielded from the immediate domestic political tussle, it potentially allows for a longer time horizon, as the partial successes of the single market and the single currency suggest. Mario Monti is purported to have labelled the EU as the “trade union of the next generation”. Today, arguably, the EU, and more in particular the Eurozone, is not doing an outstanding job for its youngsters. However, given the relatively strong evidence of employment growth through upward social investment recalibration, this predicament of temporal inconsistency can possibly be breached by an EU policy strategy that allows member states to explicitly commit to long-term social investment.
Fifth, anticipated institutional convergence through social investment progress, aligned with improved work-life ‘flows’ and more inclusive social security ‘buffers’, as I have argued above, can feature as a precursor to the introduction of ex post social re-insurance mechanisms, as suggested by Vandenbroucke, with the cumulative advantage of strengthening the long-term resilience of the Eurozone.
Finally, to the extent that, over time, the Eurozone would thus turn into a credible ESU, this would surely attract, not so much the likes of Vitor Orbán and Jaroslaw Kaczyński to join the Eurozone, but more likely younger voters in Hungary and Poland wishing to be member of a single market and currency union with significant future-oriented and inclusive social wellbeing bite. In this sense, turning the Euro into a social success is key to the future success of the larger European project.