Expectations and outcomes of the Cologne European Council

Prior to the European Council meeting in Cologne on 3-4 June 1999, the European Trade Union Confederation called for an investment-led employment and growth pact, while the Union of Industrial and Employers' Confederations of Europe re-emphasised its call for structural reform and greater labour market flexibility. In the event, the summit meeting delivered a little of both, with the announcement of additional funding for a variety of investment and labour market initiatives and calls for a review of national tax systems to make them more "employment-friendly".

In the run-up to the European Council meeting held in Cologne on 3-4 June 1999, the European Trade Union Confederation (ETUC) reinforced its support for the German Presidency's proposal for an "employment pact" (EU9905174N). It argued that an effective strategy for reducing unemployment was necessary to strengthen the European Union's credibility with workers and the public. In a statement on the eve of the summit, ETUC welcomed the inclusion of the employment chapter in the Amsterdam Treaty, which came into force on 1 May 1999 (EU9905175N), and the process of formulating and implementing Employment Guidelines (EU9810130F), but argued that in itself this was insufficient. It strongly argued that labour market policy measures had to be effectively combined with growth-oriented economic policy measures: "active employment and labour market policies coupled to essential economic reforms can help create the jobs Europe needs only if they are part of a strong growth scenario than we have today."

ETUC regards dialogue between all "stakeholders" to be essential in achieving this goal and in its statement emphasised its willingness to shoulder its responsibilities in such a macro-economic dialogue. It also commends the employers' organisations for having "put their long-standing misgivings aside and chosen to face up to their responsibilities".

However, it is on the question of the method by which sustainable economic growth and employment is to be achieved, that the opinions of ETUC and of the Union of Industrial and Employers' Confederations of Europe (UNICE) diverge.

ETUC argues that monetary policy alone is insufficient to achieve this aim, but must be supported by active budgetary and structural policies to keep the economy buoyant. The Broad Economic Policy Guidelines and the Cologne Council agenda were perceived to be insufficient to meet this task. ETUC calls for a commitment to 3%-plus growth rates, and states that the Broad Economic Policy Guidelines must also stimulate investment in trans-European networks, innovation and research, human resources and training. In addition, Europe-wide coordination and harmonisation of taxation must also be stepped up to underpin the employment strategy.

For its part, UNICE, in its pre-summit statement issued on 28 May 1999, calls for more decisive structural reform of the labour market as part of a European employment pact. It argues that policy coordination at EU level needs to respect the principle of subsidiarity and should not be pursued for its own sake. UNICE calls upon the EU to concentrate on facilitating cooperation and exchanges of good practice. In the light of these concerns, rather than aiming for a "pact" possibly involving binding commitments, UNICE considers it more appropriate to strengthen the voluntary process of exchange of information and dialogue at the EU level.

This dialogue on macro-economic policy at EU-level, while welcomed by UNICE, should maintain its strictly bilateral and autonomous character in full respect of the independence of all parties involved. In relation to the employment process launched at the November 1997 Luxembourg summit (EU9711168F), UNICE emphasises the importance of Member States making greater efforts to tackle issues which have, it is claimed, so far been neglected as too controversial, namely the reduction of the overall tax burden on business and of indirect labour costs.

The Cologne European Council reaffirmed that higher employment continued to be Europe's top objective and therefore approved the "European employment pact aimed at a sustainable reduction of unemployment. The ... pact embodies a comprehensive overall approach bringing together all the Union?s employment policy measures." The Council thus endorsed the three "pillars" of the pact:

  • the coordination of economic policy and improvement of mutually supportive interaction between wage developments and monetary, budget and fiscal policy through macro-economic dialogue between the Council of Ministers, the European Commission, the European Central Bank and the social partners, aimed at preserving a non-inflationary growth dynamic (known as the "Cologne process");
  • further development and better implementation of the coordinated employment strategy to improve the efficiency of the labour markets, by improving employability, entrepreneurship, adaptability of business and employees, and equal opportunities for men and women in finding gainful employment (the "Luxembourg process"); and
  • comprehensive structural reform and modernisation to improve the innovative capacity and efficiency of the labour market and the markets in goods, services and capital (the "Cardiff process" - EU9806109F).

As part of the implementation of the Luxembourg and Cardiff processes, the European Council called upon the Commission to distil from the comparisons of best practice gathered so far specific recommendations for employment-boosting measures, and to report them to the Helsinki European Council later in 1999. The Commission is also called upon to submit in September 1999 its proposals for both the joint employment report and the new Employment Guidelines for 2000.

The Presidency conclusions emphasise the following measures as particular priorities:

  • taking full advantage of the current structural change in the direction of a "services society", in particular identifying and exploiting areas with particular employment potential, and removing barriers to employment-intensive services;
  • introducing employment-boosting and socially beneficial innovations on the employment markets. In particular, Member States are called upon to examine how to derive more employment potential from the creation of jobs in the labour-intensive part of the services sector, to make the Luxembourg process more effective by setting additional verifiable quantitative targets and to achieve more transparency in the formulation of the National Action Plans (NAP s) on employment produced in response to the Employment Guidelines; and
  • to make changes in work organisation and working time to help generate new jobs.

A decision was taken to convene a special meeting of the European Council on the issues of employment, economic reform and social cohesion under the Portuguese Presidency in spring 2000, in order to review the progress made under these three pillars.

In the meantime, additional funding is to be made available to provide higher incentives for investment and employment. An extra EUR 500 million are to be released from the current "high-risk" budget to double the resources for the European Technology Facility. An extra EUR 1 billion is also to be made available for risk-capital funding benefiting high-technology investments by small and medium-sized enterprises. Furthermore, credit allocation is to be widened for urban renewal, education and health initiatives and environmental protection. The Communities' structural and regional assistance is to be supplemented, particularly for those areas losing out as a result of the reform of the Structural Funds. Between 2000 and 2006, resources available from the European Structural and Cohesion Funds will amount to EUR 213 billion, and EUR 4.6 billion will be available for the development of trans-European networks by 2006.

Finally, the European Council called on Member States to review their tax systems to make them more "employment-friendly".

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