The European Trade Union Confederation (ETUC) has warned that Europe’s economic model is failing its workers and put forward proposals for urgent action to rebalance macroeconomic policy in favour of people and productive investment at the Macroeconomic Dialogue today.
The event, which brought together European Central Bank President Lagarde and Eurogroup President Donohoe and Commissioner Dombrovskis, as well as leaders from trade unions and employers organisations, is a key moment for shaping Europe’s macroeconomic policy.
The ETUC published its Macroeconomic Outlook, which exposes the structural imbalances holding Europe back and puts forward trade union solutions. The publication presents evidence that public investment, strong labour institutions and fair income distribution are not just social priorities but macroeconomic imperatives.
Yet, for decades, wages have been treated as a cost to contain rather than the foundation of shared prosperity. The labour share of GDP has fallen from around 66% in the 1990s to barely 63% today, while corporate profits have soared. Only one-third of capital income is reinvested in the real economy; the rest is diverted into financial markets, dividends and buybacks. This imbalance undermines growth, innovation and resilience.
A European Investment Pact
The ETUC is calling for a new pact to restore the labour share and channel profits back into productive activity. That means:
- Fair wage growth to boost domestic demand and ensure workers share in prosperity.
- Public and private investment in clean energy, digital infrastructure, housing and quality jobs.
- Monitoring corporate profits as closely as wages in inflation analysis.
- Reformed fiscal rules that prioritise investment over austerity.
- Fair taxation to fund social and environmental goals.
Speaking at the Macroeconomic Dialogue today, ETUC General Secretary Esther Lynch said:
“Europe’s economy is like a field harvested again and again without renewing the soil. Profits are taken out, but too little is put back in. If we want Europe to flourish, we must reinvest in fairness, productive capacity and shared prosperity.
“Two-thirds of capital income is not being reinvested in Europe’s productive capacity. Instead, it is being diverted into financial markets, share buy-backs, and speculative bubbles – including the current AI boom – rather than into the real economy. Too much is being taken out of the economy, and too little is being put back in.
“When profits are hoarded instead of reinvested, Europe loses its ability to grow on its own terms, to innovate, and to be resilient in the face of shocks. When the wage share falls, so does domestic demand.
“What we need now is a European Investment Pact that restores balance between capital and labour, underpins the real economy, and channels profits back into productive activity.”
Ludovic Voet, ETUC Confederal Secretary said:
“Housing costs rise faster than wages, while the share of value added going to labour keeps shrinking.
“At the same time, the labour share of GDP has fallen to 63%, down from 66% in the 1990s - a €3 trillion transfer from wages to profits since 2015 - roughly the size of Germany’s GDP. And at no time since the 1990s have wages outpaced productivity. Because of decades of wage restraint, weakened collective bargaining, and the financialisation of firms that reward shareholders instead of reinvesting in workers and production.
“Productivity gains must translate into fair pay. Rather than fixating on unit labour costs, the EU should ensure real wages keep pace with productivity to stabilise the labour share, shifting the focus from cost-competitiveness to equitable income distribution. Investment in workers, not just capital. Firms benefiting from productivity gains and rising profits must reinvest in decarbonisation, reskilling, and job quality, not simply reward shareholders.”
Isabelle Barthès, IndustriAll Europe Deputy General Secretary, said:
“Industrial workers are facing job loses, plant closures and restructuring. 90,000 jobs have already lost only in automotive alone. It is only a start.
“The only place where Europe is leading is profit maximization. Even sectors under pressure are making profit.
“Wage increases are key to drive demand for goods manufactured in Europe. To help protect jobs at home, Europe's macroeconomic policy must be geared towards increasing workers' purchasing power.”
