INTRODUCTION

Adoption of the European Union financial perspectives for the years 2007 - 2013 is in difficulty. The stalemate that prevented the conclusion of an agreement under the Luxembourg Presidency and that is still delaying a decision could reduce funds for the new Member States at the start of the new programming period. The lack of ambition of Europe’s leaders diminishes their credibility in the eyes of citizens. The ETUC has already denounced this situation, deploring the fact that declarations of intent are not being followed up by acts.

The ETUC wishes to take part in the debate on the future of the European Union by expressing its views on the question of the financial resources the Union needs to carry out its tasks, in particular in the areas of employment and social policy, social cohesion and quality of life, sustainable development and the environment. It also stresses the urgency of an ambitious response to these challenges.

Once adopted, the financial perspectives for 2007 - 2013 must serve as the framework for planning European budgetary expenditure for the medium term. They have to guarantee the availability of the resources needed to achieve the political objectives established in common. The EU needs the financial means enabling it to respect the commitments it has already made and to rise to future challenges, equal to its political ambitions and its global responsibilities.

For the ETUC, enlargement is a challenge of unprecedented scope in political, economic and social terms, from which the entire European Union will benefit. Unlike previous enlargements, however, it is clear that the latest enlargement has widened the economic development gap, shifted disparities geographically eastward and made the employment situation more difficult. In addition, the EU is preoccupied with other major challenges identified by recent European Councils, which also require common and coordinated responses and actions.

The major challenge ahead for the Union is to build solid foundations that make it possible to remedy the differences that deepened after enlargement and to integrate the new Member States in such a way as to exploit the potential of enlargement to increase the prosperity and quality of life of EU citizens. This task is all the more difficult as, while trying to respond to the sometimes contrasting expectations created by easy promises, the Union has just taken the decisions concerning the expenditures for the years to come (reform of the Common Agricultural Policy).

For the ETUC, meeting this challenge means first and foremost making a considerable financial effort to co-finance European policies in the less developed, as well new as old, Member States, based on solidarity and the prospect of return on this investment. This approach would be compromised however if at the same time the regions and citizens benefitting from current policies were suddenly obliged to do without them.

Accordingly, as part of the reform of the economic and social cohesion policy under way, the Union’s structural policies need to complement other policy areas to a greater extent, while ensuring that all Union policies include the essential aspects of economic and social cohesion and the creation of quality jobs. This coordination of Community policies must be matched with the coordination of taxation policies to prevent social and fiscal dumping. We have grave concerns about the negative impact of fiscal dumping on EU financing and more specifically on its threat to the financing of social policy.

An important challenge ahead consists of adapting EU policies and giving them the resources needed to achieve the Lisbon Strategy objectives, namely making the economy capable of sustainable growth based on knowledge and innovation, creating more and better jobs, and promoting greater social cohesion and environmental protection. The ETUC thus welcomes President Barroso’s proposal to raise the proportion of expenditure related to the renewed Lisbon strategy to at least one third of the EU budget.

The Union also has to accept its responsibilities as a global player. The ETUC expects Europe to make better use of its economic weight to promote its social and political values with neighbouring countries, via its trade, foreign, security and development policies.

I ELEMENTS OF THE INTERNAL STRUCTURE OF THE BUDGET

1 THE RENEWED LISBON STRATEGY

a)Social Policy Agenda 2006-2010

For the ETUC, social policy is a pillar of European integration that must be given sufficient financial resources to maintain and strengthen the European social model and to meet the challenges of and manage the changes brought about by enlargement, globalisation and an ageing population.

The main test of the next Social Policy Agenda will be to respond to citizens’ and workers’ expectations of Social Europe. This is all the more important when we note that the current Social Policy Agenda, which admittedly is still running its course, has not fully achieved certain aims, which require speedy action, and that some aspects of implementation have been negative.

Concerning the Commission’s proposal on the establishment of a Community Programme for Employment and Social Solidarity (PROGRESS), the ETUC considers that the budget heading must be increased appreciably if the EU wants to contribute effectively to implementation of the renewed Lisbon Strategy. This is particularly so because the proposed total budget is inferior to the current budget allocated to the five main areas of activity covered by the programme, namely: employment, social protection and inclusion, working conditions, anti-discrimination and diversity, and gender equality.

Obviously, the ETUC also recommends a higher budget for the second heading, ’Sustaining social dialogue, free movement of workers and studies and special reports in the social field’. The idea is to provide financial support to:

 promote and facilitate social dialogue at European level

 train and provide information for workers’ representatives

 strengthen the EURES network and in particular the cross-border EURES Partnerships; new partnerships need to be developed, notably in cross-border regions with and between new Member States

 support information, consultation and participation of workers in companies.

The ETUC reiterates that the Structural Funds must be the main instruments used to implement the Social Policy Agenda 2006-2010.

b) Research and development

The ETUC supports the Commission’s choice of putting the accent on knowledge, research and development, and the new technologies, and of allocating adequate resources by doubling the European R&D budget. The return of growth, vital for creating jobs, requires a high level of training and innovation.

Sustainable development, as the Union’s first objective, requires systematic and long-term efforts in the field of research and development, encompassing the three pillars - economic, social and environmental..

We reiterate our attachment to the objective of attaining 3% of Member States’ GDP for public and private research budgets in 2010, which forms an integral part of the Lisbon Strategy. However, this objective can only be attained if the European R&D budget is reinforced and if the European Research and Innovation Area is developed further to the benefit of all.

This holds for both fundamental research and industrial research. On the latter aspect, the joint technology initiatives proposed for aeronautics, space surveillance, hydrogen, innovative medicines, nanoelectronics and on-board computer systems constitute a positive innovation.

The ETUC has asked the Council of the European Union to table a new directive proposing a new European growth initiative and inviting the Member States to draw up national plans to stimulate growth by investing 3% of their GDP in Lisbon Strategy activities such as research, education and training, and active policies for the labour market, moderate-rent housing, clean technologies and renewable sources of energy.
The ETUC has also pressed for the mobilisation of adequate public means for a European public research and development policy oriented towards energy sources with the potential to reduce greenhouse gases (to combat climate change) and improve energy efficiency.

c )Education and training

Europe needs massive investment in people, in human resources, the most important competitive asset of any society. Such investment must integrate the anticipation of social changes resulting from the knowledge-based society and provide responses to the problems of maintaining and creating jobs, developing worker’s qualifications and skills, raising the productivity of European companies and achieving innovative and more effective work organisation, through real investment in the development of workers’ skills, social inclusion and the promotion of equal opportunity.

A dual approach based on prevention and cure is essential and must work in tandem with active and innovative policies and strategies at local, regional and national level, comprising the creation of networks and of enhanced partnerships.

d)Community networks

The Commission proposes to develop environmentally acceptable trans-European infrastructures, allocating resources well above the level of the previous period. The ETUC believes the trans-European networks can contribute to territorial and social cohesion. We call for an ex-ante evaluation to measure not only their economic and environmental impact, but also their social impact. By social impact, we refer to the employment generated by the connection of regions to the main networks.

The transport policy needs to be given a new direction. The Union is the level best suited to breaking down national resistance and giving impetus to better balance in means of transport in favour of alternatives to road transport.
Rail infrastructure and motorways of the sea should be priorities. The building of these infrastructures has already been delayed too long; this element of the financial perspectives must not be reduced.

In the scope of the Structural Funds, projects related to transport infrastructure must be defined in a way consistent with European transport policy. We therefore support the proposal for using the Structural Funds to supplement the subsidies granted under the Trans-European Networks budget.

Infrastructure development has moved forward in the EU 15, but this is not the case in the new Member States. While taking care not to fragment interventions, balance needs to be struck between investments in infrastructure and those in human capital, while integrating the employment objective in infrastructure projects and tying them in to a forward-looking human resources policy.

e)Structural Funds

The ETUC stresses the importance of strengthening Community structural policies in an enlarged Europe, because the principles of cohesion and solidarity are enshrined in the Treaty and constitute two of the most important vehicles of integration of both peoples and regions.

The ETUC reiterates that the future cohesion policy must provide responses to those challenges, helping to reduce disparities between regions and to promote a society of full employment, equal opportunity, social inclusion and cohesion, and more broadly, the European social model.

In the same vein, the ETUC recalls the Presidency Conclusions of the European Council of March 2005 stressing the need to relaunch the Lisbon Strategy, and in particular that ’the Union must mobilise to a greater degree all appropriate national and Community resources - including the cohesion policy’.

The ETUC warns against the development of a two-tiered cohesion policy, even though we recognise that priorities can differ depending on whether an action targets the least favoured regions of the EU 15 or those of the new Member States.

Between 1989 and 1999, the financial effort rose from 0.27% of the Union’s GDP to 0.45%. This level of investment of EU public resources is relatively modest compared to the positive results obtained, particularly concerning the level of improvement of the less favoured regions and the beginning of real convergence. The ETUC subscribes to the Commission’s view that the level of 0.45% of GDP is a minimum, below which the credibility of the future cohesion policy would be jeopardised.

To continue down the road to success, the ETUC considers that an even greater effort is needed to stimulate growth, employment, competitiveness and the quality of the environment in the less developed regions, the impact of which is very significant throughout the Union. Any other approach would run counter to the objectives of the EU Treaty by failing to slow the increase in disparities in the enlarged Union.

The ETUC supports the EU proposal to raise the proportion of expenditure related to the renewed Lisbon Strategy to at least one third of the EU budget. For the Structural Funds, however, the ETUC cannot accept President Barroso’s proposal whereby each Member State would set a target aimed at bringing the share of cohesion expenditure devoted directly to competitiveness to an average minimum of 60%. It is our view that, in terms of spending, there has to be a balance among the three pillars - economic, social and environmental - of the Lisbon Strategy.

The European Social Fund (ESF) is the privileged instrument for implementing the European Employment Strategy and must remain so in the future. The EES must become part and parcel of national, regional and local labour market policies and of the ESF objectives. This means that the ESF must make a greater contribution to attainment of the objectives set at the Lisbon European Council for the transition to a knowledge-based society and the promotion of lifelong learning.

Likewise, as far as the ESF is concerned, the ETUC supports the Commission’s proposal whereby, under the convergence target, at least 2% of ESF resources would be allocated to capacity building and activities undertaken jointly by the social partners.

In view of the above, the ETUC strongly supports the Commission’s proposal that, in accordance with the new impetus given to the Lisbon Strategy for growth and employment, the cohesion policy must give greater priority to knowledge, research and innovation, and human capital, and that doing so implies a significant increase in the overall financial effort.

On economic restructuring, the ETUC applauds the Commission proposal for putting into place permanent monitoring systems involving the social partners, businesses and local communities, whose role will be to review economic and social changes at national, regional and local level, and to anticipate future developments in the economy and the labour market.

The ETUC believes it necessary to add an Employment Guideline urging Member States to ensure that all dismissed workers are entitled to reintegration into the labour market (retraining, vocational guidance and outplacement services). The Structural Funds should support the conclusion of collective agreements establishing this right.

Finally, while the proposed ’mono-fund’ approach could simplify management and implementation, an overview and parallels must be established, particularly to avoid any duplication of the Funds. The effort to achieve integrated implementation of the Funds must be maintained, moreover.

The ETUC considers that the two new initiatives presented by the Commission, namely JASPERS (joint assistance to support projects in the European regions) and JEREMIE (joint European resources for micro to medium enterprises), based on cooperation between banks (EIB, EBRD and EIF), must indeed enable the national and regional authorities to make better use of resources in the regions. The social partners at different levels must be involved in the related processes.

f)Globalisation Adjustment Fund

The ETUC welcomes President Barroso’s proposal for the creation of a Globalisation Adjustment Fund that would not form part of the financial framework and would allow a rapid response to the problems of workers who lose their jobs owing to restructuring. The Fund would cover training, relocation of workers and outplacement.

Such a fund should be used consistently with the future Structural Fund programmes referred to above, aimed at putting into place permanent monitoring systems involving the social partners, businesses and local communities, whose role will be to review economic and social changes at national, regional and local level, and to anticipate future developments in the economy and the labour market.

Along the same lines, the ETUC calls for the social partners at different levels be involved in all stages of the process of managing actions carried out in this framework.

g)Growth Adjustment Fund

The Growth Adjustment Fund aims to allow growth and cohesion targets to be adjusted to cope with unexpected events having important consequences or an impact more severe than expected on growth and employment, and to react to crises resulting from international economic and commercial developments. The ETUC considers that it is essential for management of this Fund to be consistent with the future Structural Fund programmes referred to above and the Globalisation Adjustment Fund.

Along the same lines, the ETUC asks that the social partners at different levels be involved in all stages of the process of managing actions carried out in this framework.

h)EU Solidarity Fund (EUSF)

The ETUC applauds the Commission’s proposals to extend the scope of the Solidarity Fund and to enable it to react rapidly in crisis situations in regions of the Member States and applicant countries. Certain elements must nonetheless be improved to make the Fund an effective and flexible instrument and to ensure that the populations of the regions concerned do indeed benefit from EU solidarity assistance. Among other things, this involves extending the scope of the EUSF to drought.

The role of the EUSF must make possible a speedy return to a normal situation and the usual functioning of the infrastructures of economic and social life. It must also serve as a clear political signal given by the EU to the citizens affected by serious emergency situations.

The proposed budget should also make it possible to cover the needs created by exceptional situations resulting from a major catastrophe such as an earthquake or tidal wave.

The ETUC considers that EU citizens must be the final beneficiaries of the actions implemented. State bodies should not be the only recipients of the public resources made available in this context; the social partners participating in operations should also have access to such funds.

i)Environment

The European agenda for the environment and health must be sustained and strengthened, maximising the positive synergy with the European agendas for employment and growth.

This is also a question of social equity to the extent that Europe’s poorest populations are also most exposed to environmental problems (noise, pollution, risks of floods). From that standpoint, the rate of Structural Fund financing for environmental activities must be maintained during the next financing period. The Funds must support measures that make it possible to uncouple economic growth and the use of resources while improving social cohesion, for example through improved energy efficiency, the use of renewable energy sources in moderate-rent housing, and the transition from road transport to alternative means of transport accessible to all.

It is essential for sufficient funding to be granted for implementation of the future European legislation on chemicals (REACH) and the future European chemicals agency.

The European Climate Change Programme (ECCP) must be stepped up to respond to the European Union’s commitments under the Kyoto Protocol and to the undertakings of the European Council of March 2005 to reduce greenhouse gas emissions by 15 to 30% by 2020. The Commission has also proposed to include major new objectives, such as the prevention and management of the consequences of climate change in the social, economic and environmental spheres.

The implementation of the Environmental Technology Action Plan (ETAP) must be sustained, in order to exploit fully the potential of eco-efficient technologies for job creation, the preservation of natural resources and economic growth.

2 REFORM OF THE CAP

The ETUC considers that the Common Agricultural Policy is and must remain the main instrument for implementing EU farm policy.

Since its inception, the CAP has evolved from a fundamental instrument for guaranteeing the security of the Union’s food supply to one steered towards sustainability, rural development, the quality of food products, environmental protection and the improvement of social conditions in the agriculture sector.

The mid-term review of the CAP agreed in 2003 sets expenditure under the first pillar of the CAP (market-related expenditure and direct payments) up until 2013. It uncoupled direct payments from production, and introduced environmental conditions corresponding to compliance with existing regulations, thus giving the Union considerable margin in the multilateral negotiations currently under way in the WTO. In contrast, the ETUC regrets that the coupling of future payments to job creation or maintenance was rejected. The ETUC also regrets that the reviewed CAP still does not guarantee a fairer and more transparent redistribution of the benefits.

In the future, the ties between the CAP and the sustainable development objectives set by the Lisbon and Gothenberg strategies (creation of quality jobs, environmental protection) must be consolidated and reinforced. The reform of the CAP must lead to greater convergence and consistency with the cohesion policy and take on a societal dimension. That implies evaluating the impact of the CAP on employment, the environment, local development, the quality of products and food safety, and redirecting it as necessary.

In parallel with the overhaul of the CAP, rural development funds should be substantially increased in order to tackle the employment and competitiveness problems of rural areas, particularly in the new Member States. The proposal for a new rural development regulation, which would introduce new activities under Natura 2000 in the ERDF, makes this all the more necessary.

In this respect, the rural development programmes to be implemented as part of the future European Agricultural Fund for Rural Development (EAFRD) must be complementary to the CAP and coherent with the objectives of the renewed Lisbon Strategy.

3 THE EU AS A GLOBAL PARTNER

The Commission proposes to reinvigorate its development, trade and neighbourhood policies, with the aim of making Europe a player in shared prosperity. The ETUC shares this ambition for the Union and stresses that the funding of external actions must be high enough to enable the Union to achieve its political ambitions and its international undertakings, especially considering that these undertakings are increasing.

Concerning the recognised applicant states (Bulgaria, Romania, Croatia and Turkey) and potential applicants (Balkan states), the ETUC supports the Commission’s proposal to set up the Pre-Accession Instrument (PAI) to replace the existing instruments (PHARE, ISPA, SAPARD, the regulation on Turkey and the CARDS programme).

In the wake of enlargement, moreover, the EU external borders have moved, shifting structural problems as well to these new regions. The ETUC is of the view that special attention has to be given to these regions, making optimal use of the New Neighbourhood Instrument, but without neglecting efforts to assist border regions within the EU.

The Union must especially honour its commitments to help the developing countries to attain the Millennium Development Goals (MDG) by 2015. That will require giving more impetus to the efforts being made in the least developed countries to meet basic needs such as water, energy, health care, food security, and basic education and training.

Moreover, as part of the Union’s economic partnership agreements with the ACP States and other regions of the world (EUROMED, MERCOSUR), the EU has agreed to provide aid for the populations affected by the consequences of liberalisation.

No really ambitious development policy can be implemented outside of a multiannual framework that protects it from economic hazards. The share of the budget allocated to development assistance must therefore be made secure and the EDF must be integrated into the budget.

The ETUC welcomes the Commission’s proposal for a thematic programme in support of non-State actors in the development process, while stressing the importance of recognising the specific role of the social partners.

II OWN RESOURCES AND POTENTIAL ADDITIONAL RESOURCES

The ETUC maintains that there is a need for a general increase in the EU budget and that over and above the need to increase the level of investments, their quality, real impact and sustainability need to be guaranteed.

It is wrong to claim to want more Europe while reducing the resources available to it. The Commission has pointed out that, given the asymmetrical effect enlargement will have on the Community budget, the preservation of the acquis alone requires a stepped-up financial effort.

When all is said and done, an excessive limitation of own resources would require the Union to make cuts in all existing policies and to abandon commitments it has already made. If, on the contrary, the EU decides to respect the financing framework of the Common Agricultural Policy decided up to 2013, all subsequent cuts imposed by the decrease in the Community budget will have harmful repercussions, mainly in the structural and cohesion policies and especially for phasing-out regions.

With regard to the needs resulting from EU enlargement, the level of development of most of the 10 new Member States, which will rise to 12 in the financial framework under consideration, lags behind that of the Europe of Fifteen. Accordingly, effective financial support to ensure their expansion will require new resources, which will represent amounts increasing over time.

It is impossible to assume and finance new priorities (e.g. development of citizenship, justice and security, new neighbourhood policies, and international commitments) while maintaining the same budgetary revenues that until now have financed fewer priorities.

In view of these observations, the ETUC believes there is a need to surpass the reservations of the countries that have called for limiting the Community budget to 1% of GNI, as well as those of the Commission and European Parliament, and to increase the own resources of the Community budget for the new programming period 2007-2013, bringing them beyond the budgetary framework in force that puts a ceiling of 1.24% of GNI. To this respect the ETUC recalls the proposal submitted by the European Economic and Social Committee (ECOSOC) to bring them up to a maximum amount of 1.30% of GNI.

Since the Commission has not proposed any new own resources for the immediate future, the system will retain its current structure. The current system is criticised for its lack of transparency and its complexity, so the ETUC welcomes the proposal for a debate on how to correct its imperfections. Such a debate cannot be limited to any particular aspect, but must reassess the structure of both resources and expenditure.

Enlargement and the solidarity it requires, as well as the focusing of European policies on the Lisbon Strategy objectives, constitute an opportunity to give thought to a new system of own resources and a European income tax. We have to decide whether the EU wishes to attain its objectives and whether the Member States are ready to contribute to common policies whose effectiveness and necessity they recognise, based on solidarity and in a more democratic way.

The EU financial perspectives are the expression of the Union’s political aspirations. They are based on the idea that the economic benefit each country draws from membership of the Union exceeds the strictly budgetary cost of its participation. Europe constitutes the relevant level for certain expenditure and investments. It is that European added value, and not efforts to ensure a ’juste retour’ based on the calculation of national net budget balances, that must guide reflection.

On the question of indirect resources, the ETUC also recalls the proposal submitted by the ECOSOC, namely the possible creation of a European transport infrastructure fund that would be financed by a levy of one cent per litre of fuel consumed by all vehicles.

On public-private partnerships (PPP), the ETUC takes note of the Commission’s proposal to try to find additional financial resources to complete public sector funding. Public-private partnerships make it possible to involve the private sector in projects of general interest. It is nonetheless important to learn the lessons of negative experiences and to take account of the risks that can stem from PPP agreements. We also believe that private-public partnerships (PPP) will not contribute to the major networks. There is a need for clear criteria, particularly for the use of funds in support of PPPs. The ETUC remains critical of PPPs as long as citizens are not involved in the choice of infrastructures and services they finance and use every day.

Finally, it is our view that there is a need to mobilise European and national funds, along with the European banks (EIB, BERD and EIF), and to ensure access to European loan capital.