Commission Communication urges coordinated modernisation of social security systems

A European Commission Communication adopted in July 1999 argues that, in the light of EU Economic and Monetary Union, national social security systems should be reformed to meet the key objectives of: making social protection systems more conducive to job creation; dealing with the ageing population; combating social exclusion; and offering affordable healthcare for all citizens.

On 14 July 1999, the European Commission adopted a Communication entitled A concerted strategy for modernising social protection (COM(99)347 final). The Communication emphasises the key role played by social protection systems in supporting public health and well-being and in redistributing wealth. It is argued that, without social security transfers, nearly 40% of EU households would be living in relative poverty (compared with the actual rate of 17%). Spending on social protection accounts for an average of 28.5% of GDP.

The Communication argues that the advent of EU Economic and Monetary Union (EMU) has enhanced the need for a coordinated approach to the modernisation of social security systems. Emphasis is to be placed on the following key objectives:

  • making social protection systems more conducive to job creation. In order to encourage employment creation, it is stressed that tax and benefit systems should be designed to make it worthwhile to seek work, thus reducing the so-called poverty or unemployment trap. Social security systems should also pose no obstacles to training or mobility. The Communication emphasises that a way must be found to fund social security systems which does not place an excessive burden on employers keen to hire low-skilled individuals;
  • dealing with the problem of an ageing population. The increase in dependency ratios (ie fewer active workers and more retired people) and the forecast labour shortages resulting from the decline in birth-rates, as well as the financial difficulties facing public pension systems, have triggered a series of policies designed to more away from the emphasis on early retirement. The Communication calls for the development of further policies aimed at maintaining older workers in the labour market and giving them the opportunity to renew and review their learning;
  • combating social exclusion. Social security needs to provide an effective "safety net "to prevent social exclusion and should therefore be focused on active measures. A basic income should be provided, preferably through a combination of work and, if necessary, in-work benefits; and
  • offering affordable healthcare for all citizens. Healthcare systems should emphasise prevention of illness and particular importance should be attached to the provision of support for long-term care of older people.

The modernisation of social protection systems is also seen to be a particularly important issue for the accession states seeking EU membership, in order to prevent the establishment of a two-tier society.

The Commission has been promoting debate on the future of social protection systems since the early 1990s, which resulted in the 1997 Communication on Modernising and improving social protection (EU9705124F). According to the Commission, this debate "established a consensus among Member States and the EU institutions that, given the changing nature of European society, social protection systems need to be updated if they are to continue playing their traditional and valued role". The new Communication aims to take the debate a stage further. The strategy it outlines will be supported by enhanced mechanisms for exchanging information and monitoring policy developments, in order to give the process a higher public and political profile. Member States will thus be invited to designate senior officials to act as focal points in this process. In future, the Commission will issue an adapted report on social protection, on an annual basis, drawing on contributions from the Member States and the other EU institutions. This will be the basis for an annual debate (and conclusions) in the Council of Ministers.

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