Euro-Plus Pact

Workshop 11--Syndicate 1

Q4. Briefly explain the goals of the Euro-Plus Pact

The Euro-Plus Pact was approved by 23 EU countries in March 2011. The Pact stipulates a range of quantitative targets meant to strengthen competitiveness and convergence with the ultimate aim of preventing unsustainable financial imbalances from accumulating.

i. Fostering competitiveness

It will be evaluated by the national Unit Labour Cost (ULC). ULC is a quantitative measure of wage costs. It is to be addressed by both reducing the labour cost and increasing productivity. Labour costs can be reduced by reforming the "degree of centralisation in the bargaining process", the "indexation mechanisms" as well as decreasing wages in the public sector. In order to increase productivity, deregulating industries as well as improving infrastructure and education have to be conducted.

ii. Fostering employment

It will be evaluated by quantitative measures of long term and youth unemployment rates, and labour participation rates. The aim is to be achieved by promoting the “flexicurity” model as well as "lowering taxes on labour" and "taking measures to facilitate the participation of second earners in the work force".

iii. Contributing to the sustainability of public finance

This is the most important aim of the pact. Through increasing the “sustainability of pensions, health care and social benefits" and implementing "national fiscal rules", this objective can be addressed. The former idea means limiting the liability of the government to a more manageable level, which can be achieved by "limiting early retirement ... in the age tranche above 55", and implementing "schemes and using targeted incentives to employ older workers" reducing the burden on pension systems.

One of the most stringent conditions of the pact is given with respect to fiscal rules:

"Participating Member States commit to translating EU fiscal rules as set out in the Stability and Growth Pact into national...