Policy Research Forum on the Social Dimension of the Economic and Monetary Union

The European Commission's Joint Research Centre (JRC), together with the College of Europe, will bring together financial and fiscal experts, representatives of the scientific community, international organizations and policy makers to review relevant research findings on the social dimension of EMU, and to discuss which tools and methods could support policy responses for building social fairness while implementing necessary structural reforms. The Forum will focus on two topics: the social dimension of taxation and the financing of inclusive growth within the European Union.

A lesson learned from the crisis is that a "triple-A Economic and Monetary Union (EMU)" must combine competitive economies, which can innovate and succeed in an increasingly globalized world, with a high level of social cohesion¹. The social dimension is thus central in the European Commission policy agenda. As underlined by President JUNCKER in his political guidelines in July 2014: “the stability of our single currency and the solidity of public finances are as important to me as social fairness in implementing necessary structural reforms”. Economic actors – individuals, households, firms – are both the fundamental contributors to economic progress, and the ultimate objective of policies. Social aspects must therefore be an integral part of Europe’s economic, fiscal and financial framework and governance, as also underlined in the Five Presidents' report on completing Europe's EMU².
The European Political Strategy Centre's paper on the social dimension of EMU also emphasized the need to put human capital investment, social benchmarks, well-functioning labour markets and mobility in the centre of this Union³.

Social dimension of taxation

Member States are called on to make their tax structure more growth-friendly, to improve tax administration efficiency and at the same time, keep a strong emphasis on social fairness. Besides generating government revenues, taxation can be a powerful tool to fight inequality, to promote productivity, sustainability and inter-generational fairness. Some economists also argue for negative income taxes or even a general base income. Tax systems can also be fine-tuned to tackle various pressing socio-economic issues. For example, a carefully designed tax and benefit system at the low end of the income distribution can deliver double benefits, in terms of boosting economic activity and increasing inclusiveness. The proper taxation of household savings and assets, together with income tax incentives around retirement can be part of the policy reaction to ageing societies. Research can support such policy options by providing analysis on determinants and potential outcomes. Research is beginning to use more disaggregated data and models in policy evaluation and support. A novel approach in this context is the use of administrative databases, allowing researchers to better exploit variations in individual behaviour and to assess the detailed impact of policies on subgroups or even individuals.

Financing the inclusive growth in the European Union

Though there are already signs of economic recovery, the risk of stagnating growth together with high debt levels and double-digit unemployment in many countries remain a major social challenge. Slowdown of capital flows is still engendering liquidity constraints especially for small enterprises, while structural differences among Member States are preventing the efficient use of monetary and financial resources. In this fragile context, policy makers and researchers need to find new ways to make households and firms the engines for progress, which is key for inclusive recovery and growth. For this purpose, generating evidence to better understand determinants of household finances, income and wealth inequality, bank and non-bank financing is useful to define future policy measures.

Programme