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Pension issues in the social EU policies: cross-sectoral approach

By Eugene Eteris, LLD, professor in European Studies , Denmark , 15.05.2013.Print version
Pension issues in the EU member states are regulated by the so-called supplementary division of competences and are subject to different means from numerous policies. Several Commissioners are responsible for integration process concerning persons under retirement age, i.e. mostly those on pensions. At the same time, these issues are, generally, within the member states competence. Hence, most of them need both political and socio-economic solution.

The article was prepared for the roundtable-seminar “Retirement economy: can it sustain full employment?” held in the Baltic International Academy on 15 May 2013. Its organisers: Baltic International Academy (BIA), Employers’ Confederation of Latvia (LDDK), Diplomatic Economic Club (DEC) and online magazine


Retired people suffer most during the crisis periods. Thus, e.g. in Portugal retirement age was raised from 65 to 66; in return, the pension “sustainable” fund was created in 2013.


Unemployment phenomena has become a part of member states’ social-economic models: the number of people out of occupation reached 12,2 per cent in the eurozone area (more than 10 per cent in the EU-27) in the 2nd quarter of 2013 and totaled 19 million persons. Being an integral component of the EU-2020 strategy, growth and jobs issues occupy a crucial role in getting out of the crisis and forming European future. 


In this article pension issues are viewed from the “EU side”, in close connections with the employment strategies and age issues (2012 was the European Age Year) leaving aside purely national strategies, policies and approaches.    

Cross-sectoral approach

So-called “seniors” (generally, those after 60-65) represent a social-political issue that goes through several policy lines, both in the EU and in the member states. Among the former there are Commissioners dealing with e.g. social issues (László Andor, Employment, Social Affairs and Inclusion ), jobs and growth in the internal market (Michel Barnier, Internal Market and Services ), industrial policy (Antonio Tajani, Vice-President, Industry and Entrepreneurship, fundamental rights (Viviane Reding, Vice-President, Justice, Fundamental Rights and Citizenship), health (Tonio Borg, Health and Consumer Policy),  as well as a number of sectoral policy Commissioners; among them are also two Commission’s vice-presidents.  


Among the EU policies, there is a “section” called “Employment and social rights”; within this section there is a sub-section called “pensions” (1).

General rules

Thus, pensions are within the EU social security coordination. In each country, personal insurance records are preserved until a person reached the pensionable age. General “European rules” are such that every EU member state (incl. Iceland, Liechtenstein, Norway and Switzerland) where a person has been insured for at least one year will pay such person an old-age pension, when one reaches national pensionable age.


For example, if a person has worked in three countries, he/she would get three separate old-age pensions.


The pension remuneration is calculated according to a person’s insurance record in each country: the sum one will receive from each of these countries will correspond to the length of social security coverage in the countries.  


A kind of summary note will be received by a person, which will provide an overview of the decisions made by each country on a person’s claim.


The application for pension shall be filled in each country one has been working in. Even if one has worked in several countries, application for pension should be filled in the country of permanent residence. Otherwise one should apply in the country where the last working place occurred.  

EU’s employment scenario: common strategy for growth and jobs

Most of the issues from the EU side are within the shared and supplementary competences; that means that generally “seniors” are subject to the member states’ regulatory regimes. In the latter, as well as in the EU, these issues are concentrated on almost the same cross-sectoral agenda. 

However, the pension’s issues are mainly connected to the member states and the EU approaches to employment programs and policies, as well as towards rebalancing the European economy.


According to the European Commission, the EU employment scenario looks grim, e.g. in the beginning of 2013, unemployment rates further rose to 10,9% among the EU member states (totaling 26,3 million people) and 12% in 17 states in the euro area (about 19 million people).

Dramatic differentials in economic and employment conditions within the euro-zone area is of particular concern for the EU institutions, as Southern European countries seems to be trapped in a never-ending spiral of recession and unemployment.


This “harsh reality” has encouraged the EU to react with even more determination. Thus, the present crisis has become a catalyst for profound change in the EU. Latest developments have shown that the EU policy is actually heading towards a more balanced architecture for the European Monetary Union, EMU.


The Commission and the member states are developing a strategy that combines fiscal consolidation efforts with an integrated strategy for economic and employment growth, as well as the social cohesion.


There are three key elements of this strategy which are deemed to get Europe back on track for sustainable and inclusive growth:


  • a social dimension for a genuine EMU;
  • fostering demand for jobs, investing in skills and providing opportunities for youth; and
  • a reorientation of social policy towards social investment.

Employment strategy and the EMU

With its blueprint for a deep and genuine EMU, the Commission has kicked off a European debate over the necessary redesign of the EU common strategy for growth and jobs (e.g. in mid-2013 the unemployment rate has reached 12,2%, which equals to about 20 mln people). Recent developments show that there is agreement for strengthening the social dimension of the EMU, alongside closer surveillance of macroeconomic policies.


Severe employment and social problems in one country of the currency union have negative economic spill-overs and politically destabilising effects for the EMU as a whole.

Moreover, socio-economic divergences are a bigger problem for the stability of the currency union than they are for the stability of the Union as a whole. When unilateral currency devaluation is not possible, individual member states have fewer economic adjustment tools available.


The economic governance of a genuine EMU envisages the need to allow collective measures on employment and social problems before they develop, so-called “disproportionally” at member state and the EU level. A scoreboard of employment and social indicators prepared by Eurostat can help the EU institutions on better approach to mounting employment and social changes.


The social dimension of EMU is also about reinforcing the role of the social partners. Adequate involvement and participation of social partners in policy debates and decision-making is critical.

The road to a genuine EMU will be still long and winding, but it is highly encouraging that the path towards a more social European model.

Stimulating job demand and re-launching employment

The above mentioned measures may still take time to be completed, but the Commission has already taken action to stimulate job demand and re-launch employment.


In spring 2012, the Commission launched the Employment Package, an ambitious plan to support member states' effort to foster new hiring and invest in workers' skills for new and quality jobs.


One year later, according to the European Commission, there are some tangible results of that plan. The main features are the following: 


  • the reform of the EURES network for stronger cooperation of public employment services in the EU;
  • the EU Skills Panorama – an advanced monitoring system of the actual skills needs in given sectors across EU countries;
  • the Grand Coalition for Digital Jobs bringing together companies and organisations to develop digital skills and workers' mobility;
  • The Youth Guarantee, a commitment by the member states to offer young unemployed quality opportunities for jobs, education or training, which the EU will financially support with at least € 6 billion.


These actions, among others, integrate member states efforts to proceed with structural labour market reforms with a concrete support. Besides, the Employment Package shows that the Commission strongly believes in proactive government policies to overcome the employment crisis.

Social Investment Package: three main pillars

The social consequences of the crisis, growing divergences between the member states, and an ageing population have made it clear that the EU needs efforts to modernise its welfare system.


The recently adopted Social Investment Package provides guidance to Member States on reforming their social protection systems with a focus on their social investment component.


The Social Investment Package is based on three pillars:


  • increasing the sustainability and adequacy of social systems through simplification and better targeting at emerging social needs;
  • pursuing activating and enabling policies through targeted, conditional and more effective support;
  • ensuring that social policies cover the most crucial risks throughout the individual's life, from childcare for the new born to long-term care for the elderly.


The EU funds will be increasingly targeted to support member states in the implementation of these priorities. The Social Investment Package will lend a new impetus in combating poverty and social exclusion while representing an essential pillar of a more inclusive Europe.

Social dialogue

Concrete results of the EU’s employment policy will –probably- be seen in the medium to long term, and will highly depend on country-specific conditions. However, the EU needs reforms that will have a stronger legitimacy and will be better implemented if they are the outcome of a genuine social dialogue.


Constructive social dialogue has been a key factor in the successful management of economic crises and structural change at the EU as well as at the member states’ level.


The highest priority here is to safeguard the European industrial base. A proper social dialogue on policies to enhance the competitiveness of European industry and its capacity to create jobs is fundamental to respect the key tenets of the European social model as a social market economy.

Another burning issue is unemployment, in particular for young people, is both a global challenge and a European issue. (2)

EU integration and policies for growth and jobs

Working closely with the social partners in the member states, the Commission has an idea that it is closely connected to international efforts. Thus, European integration (in its functionalist mode) takes its origin in the International Labour Organisation that served as the prototype of neo-functionalist integration in its classic form (e.g. the classic work of Professor Ernst Haas, “Beyond the Nation State”, which essentially described the J. Monnet method of making Europe in action. Therefore, the ILO and the European Union stem very much from the same kind of roots. (3)


Through the history of European integration, the social partners have played a central role in the construction of its social and economic model; this will proceed in the future too. Social partners have an essential contribution to make to Europe’s joint efforts to overcome the current crisis and to return to sustained recovery.


However, social effects of the intertwined financial and debt crisis continue the negative impact on the member states, especially by the most vulnerable. Unemployment has reached an unacceptable level in many countries, especially youth unemployment. (Laszlo Andor’s speech is also published in the BC, outlining the EU actions to tackle unemployment and to help young people to move from education into work).

Dualistic picture

Presently, the European economy reflects a dualistic picture: while the real economy is still in stagnation, the worst market tensions have eased and confidence has been returning. The Commission expects Europe to return to growth gradually in the course of 2013, and the recovery should become more robust in 2014.


However, there is no room for complacency and Europe still faces profound challenges. The current crisis is not merely a cyclical downswing –it has its origins in the excessive accumulation of both private and public debt over the last decade.


The economic stimulus the Commission pursued with the European Economic Recovery Plan helped to cushion the initial shock after the bubble burst four years ago; but the plan’s efforts could not fundamentally remedy the situation.


The crisis exposed EU’s past policy failures and laid bare long-standing structural weaknesses. The Commissioner acknowledged that the EU was not able to detect the worst excesses in time; the EU financial regulation and economic governance did not keep pace with economic developments and financial innovation.


Belatedly but decisively, those shortcomings have in the past few years been addressed. Tougher capital requirements are close to being enacted. The single supervisory mechanism for euro area banks should be definitively agreed soon; important steps have been taken to strengthen policy coordination among the members of the euro area.


The Commission is determined to build on these steps, and to create the deeper and genuine Economic and Monetary Union that is needed to deliver greater economic and social welfare for the future.

Rebalancing the European economy

These are essential conditions for sustainable growth and job creation; at the same time, the EU needs to address the worrying losses in competitiveness seen in many countries, as reflected in growing structural unemployment and falling global market shares.


Thus the rebalancing of the European economy after the credit-fuelled boom experienced in many countries is currently underway. Significant rebalancing has already been made, but the large adjustment needs will still take time to be concluded. They are reflected in the real economy, especially in highly-indebted countries. The relief of the stress in financial markets has not yet fed through to credit growth or to the real economy, and major internal and external growth obstacles are still in place.


As to public finances, fiscal consolidation has reduced the average deficit in the euro area from around 6% of GDP in 2010 to 3.5% in 2012; and a further reduction to below 3% of GDP this year is predicted.


Yet, public debt in Europe is expected to stabilise only by 2014, i.e. at the level above 90% of GDP. Serious empirical research has shown that at such high levels, public debt acts as a permanent drag on growth. If it is not reduced, it will become an ever-heavier burden on European economies, eating resources that could otherwise be channeled into productive investment needed to support job creation.

Restoring competitiveness: a path towards growth

It is now essential for Europe to restore its competitiveness. This is not limited to its external dimension: it means a sustained rise in welfare, for which productivity growth is the main driver.

The EU can succeed in restoring competitiveness only if it stays on the course of reform: not reform for its own sake, but reform for the sake of sustainable growth and job creation; reform to reinforce the competitiveness of European industry.


To drive job creation and productivity growth, the EU has to support research and innovation, education and training; it needs to stimulate entrepreneurship and private investment.

For this to achieve, the EU needs to complete the financial and banking reform to boost the flow of credit to households and SMEs. The task to support public investment follows the line taken by the EU in increasing the lending capacity of the European Investment Bank, especially for regions and sectors where financial constraints are the most severe. 


For example, the Commission has reaffirmed support to the Italian government's plan to accelerate the liquidation of the large stock of trade debt accumulated by the public administration. This will ease firms' currently excessive liquidity constraints and thus assist economic recovery. Given Italy's considerably improved budgetary situation over the past years, there is scope for a phased liquidation without endangering the sustainable correction of the excessive budget deficit.

Labour market reforms

The member states need to continue reforms in their labour markets: balanced but ambitious reforms that remove obstacles to job creation, and ensure that those who lose their jobs in a downturn get support to help them back into work or retraining. The reforms are needed that respect the principles of collective bargaining, in line with the EU Charter of Fundamental Rights.


This is supported by the Employment Package that sets out ways for member states to encourage hiring, by supporting business start-ups and reducing taxes on labour. It also tries to identify the areas with the biggest job potential, notably in the green economy, health care and long-term care services and ICT, and puts forward ideas on how to promote labour force mobility, including across borders.


The social consequences of the crisis have made it also clear that the member states need to modernise their welfare systems. The recently adopted Social Investment Package provides guidance to the states on reforming their social protection systems to make social protection more efficient, effective and adequate. The EU Funds will play a key role to support the states in the implementation of these priorities.


The Commission sees that the reforms Europe needs will be better designed and implemented if they are the outcome of a genuine social dialogue. Constructive social dialogue has been a key factor in the successful management of economic crises and structural change.


To help rebuild competitiveness of the European economy and boost recovery and jobs, the EU needs to maintain its social model and save European industrial base. There is, therefore, a need to adapt European economy to both long-term social and ecological challenges and a rapidly changing economic landscape. That calls for an inclusive dialogue between partners, for correcting the problems of the past and setting Europe on a path of sustainable growth as a shared responsibility of the member states, of the social partners and of the EU institutions. (4)

European Year of Aging: challenges and results

Aging policy, social affairs and employment are closely tight; hence was the European Year of Aging in 2012 (just to note, 2013 is the European Year of Citizens).    


László Andor, European Commissioner responsible for Employment, Social Affairs and Inclusion in his speech “Active ageing – a challenge for the individual and for society” summarized the achievements reached during the European Year of Aging and solidarity among Generations. That was done at a conference on "Ageing and Social Innovation" organised by the Gulbenkian Foundation in Lisbon in November 2012.

Active ageing as a challenge

The purpose of the European Year of Aging was to contribute to the well-being of both older and younger people, as well as to economic recovery.


Aging has a definite demographic background. Presently, Europe is at a demographic turning-point” as the baby-boom generation retires, the number of people aged 60 or older is rising in Europe by about two million a year — roughly twice as fast as before. Meanwhile, the number of younger people entering the labour market is falling; therefore, the working-age population will soon be declining fast.


An older population presents various challenges: to the job market, to European health systems and to living standards after retirement.


Many fear that providing pensions, healthcare and social services for the growing older population will become too heavy a burden on a dwindling younger population, argued the Commissioner. Some even foresee an out-and-out confrontation between the generations, with older people defending their social benefits to the detriment of younger people’s needs and interests.


The Commissioner sees no incompatibility between the interests of younger and older people: the latter depend on younger people for social protection and social services, so it is in their interest to invest in the future of young people. The former care about their elders and want to be treated with respect and dignity when they grow old too. (5)


So the idea is to avoid a confrontation between generations and develop a positive approach to tackling the challenge of ageing: an approach that focuses on creating better opportunities for people of all ages to lead active and fulfilling lives.


The Commission’s answer is “active ageing”, which means ensuring that, as people grow older, they can continue to contribute to the economy and society, and look after themselves for as long as possible.

The meaning of “active aging”

Active ageing, according to the EU Commission means that neither governments nor the people have to be afraid of aging in the future societies. This “lack of fear” for the future is the task of all national policies towards “society ages”, provided that the EU governments:


  • preserve high health quality treatment;
  • create more opportunities for older workers on the labour market; and that they remain active members of the community.


The European Year’s key message was creating an environment that is rich in opportunities, where growing old does not necessarily mean to become dependent on others.

The European Year of Aging: outcomes

The European Year was aimed at promoting active ageing in three areas: employment, participation in society, and living independently. In practice it means fostering an active-ageing culture that includes older people, rather than excluding them, i.e. a culture that develops their potential rather than focusing on their weaknesses, that empowers instead of patronising them.

The European Year has been seeking to change attitudes to ageing, and to challenge the understanding of what it means "to be old" and "to grow old".


The Year has shown how individuals and society can address the challenges related to ageing.

Among examples of activities started during “the Year” are those to overcome negative stereotypes and foster positive relations between generations. The Commission’ initiative (generations and schools) brought together older people and pupils in their schools to recount their experiences and share their understanding of what it means to be old or young. The participants learned a lot from each other and enjoyed the experience. Portugal was among the countries with the highest rates of school participation.


The Commission hopes that schools can repeat the experience in 2013 to make arrangements for working with the older generation on a more regular basis.


At the end of 2012, the Commission handed out the prizes to the winners of the European Awards Scheme. The Commission was looking for activities and examples of good practice in the EU that facilitate participation by older people and support intergenerational solidarity.

The Commission was looking:


  • for employers who create age-friendly workplaces;  
  • for social entrepreneurs with brilliant new ideas and a strong drive to create a better society;   
  • for local communities who provide facilities for people of all ages, and
  • for journalists who foster more informed debate on the challenging issues of ageing and relations between older and young people.


Through the Life Story Challenge, the Commission paid tribute to the most impressive active-agers, who shared their stories with the DG and announced three award-winners.


= First prize in the individual life-time achievement category went to Bruno Poder from Estonia. Bruno continued working as a surgeon until he was 80 and never lost his positive outlook or his desire to contribute to society.


= The award in the social entrepreneur category went to Typhaine de Penfentenyo from France. Her organization, Ensemble2générations (which means “two generations together”), is a success story involving different generations sharing housing. Students stay in an older person’s home for free or at a moderate rent in exchange for help and company.


This addresses three major issues: older people’s isolation, the shortage of affordable student housing, and the rift between the generations. Over 900 student-elderly partnerships have been set up, and over 15 regional branches have opened in France since 2006.


= The Danish municipality of Fredericia won the award in the age-friendly environment category. Their Life-Long Living project is an example of a new model for interaction between elderly citizens and social services. It focuses on empowering and rehabilitation rather than just delivering care to passive recipients. Fredericia does this by seeing how individuals' resources can be mobilised so they can cope by themselves. It has brought benefits to the care recipients and has reduced the cost of assistance by €70 000 a month.


The two projects: intergenerational housing and life-long living illustrate the power of social innovation. The EU needs new ideas to adapt to population ageing, as well as capable and highly committed individuals to turn them into reality.

“Senior force” as another example

Many committed individuals in Europe are older people who are ready to work for their communities as volunteers. The Commission thinks that it should pay tribute to them and get more of them involved. With this in mind, the Commission organized so-called Seniorforce Days across Europe.


These were events held around International Day of Older People to highlight the potential of older people engaged as volunteers in all sorts of cultural, political and social activities.

The Seniorforce Days drew over 11 000 participants and received widespread support from all over Europe.


In October 2012, around 800 people attended a Seniorforce Day in Portugal under the banner Generations in Movement; people of all ages took part in a wide-ranging sports, health promotion, and wellness program.

EU-2020 Strategy and European Social Fund

Active ageing is good for the individuals as they grow older, and it is crucial to the success of the Europe 2020 Strategy, the Union’s strategy for smart, sustainable and inclusive growth.

Europe 2020 has a small number of ambitious targets, including a 75% employment rate for people aged 20 to 64 and lifting 20 million people out of poverty and social exclusion by 2020.

Active ageing policy is critical to meeting those targets in the member states, and one of its essential points is pension reform.


Pension reform is a thorny issue in the European Union: many people feel that the reforms being implemented across Europe deprive them of rights they have worked very hard for.

The fact of the matter is that rising life expectancy and a shrinking working-age population demands some adjustment. It could involve slashing pensions, or raising the contribution rate significantly; it could involve adjusting the retirement age in line with the rise in life expectancy.


Only striking a sound balance between the years people spend working and those they spend in retirement can ensure that they would have decent pensions at a reasonable cost.

But that depends on good jobs being available, and people having the right skills and staying healthy enough to do jobs.


The Commission presented its thinking on pension reform in a White Paper in February 2012 with the general thrust to translate specific recommendations to many member states.

In most cases, these involve raising the retirement age in line with the rise in life expectancy, restricting access to early retirement schemes and increasing incentives to work longer.

Many countries have already implemented such reforms or are in the process of doing so.

Such reforms work: even before the current economic crisis took grip, the trend to early retirement in the European Union had had been reversed.


As a result, older workers have actually done rather well during the current recession, and their employment rates have improved slightly.


But problems are still there to solve: across the EU, the percentage of those employed in the 55-64 age group ranges from only around 30% in Malta and Slovenia to 70% in Sweden.

In the EU as a whole, fewer than 50% are employed in the 55-64 age group.


According to the EU- 2020 strategy, employment rate target means almost 18 million more people need to be in employment by 2020, and the employment rate — especially for women — in the 55-64 age bracket needs raising.


Extending people’s working lives is crucial to meeting the EU- 2020 employment rate target and balancing budgets in the long run. But it means encouraging people to stay on the labour market longer and — most of all — enabling them to do so by improving their employability.


The member states also need to combat youth unemployment and make it easier for young people to get into the labour market. The European Social Fund is a very useful instrument here, and life-long learning is critical. For example, during 2007-13, one third of the overall Social Fund budget for Portugal will be spend on measures relating to life-long learning.

To meet the demands of the knowledge-based economy, the EU-27 also needs to look again at the social protection systems to make sure they support investment in human capital, through lifelong learning and up-skilling.


And member states’ social protection systems need to allow people to make the best possible use of their human capital, regardless of their age, gender or ethnic origin. This social investment approach recognises that social policy is a productive factor, and is necessary to economic development and employment growth.

Social innovation

Tackling challenges like population ageing calls for innovative policy and practice, argued the Commissioner. Social innovation needs to be promoted and tested at local level. But successful innovations must also find their way into the broader policy framework at national and European level too. Many social innovations promoting active ageing are already being tried and tested across the EU.


The Commission can help by identifying good practice and bringing it to the attention of policy-makers and stakeholders across Europe, so that they can improve their policies and systems.

The European Innovation Partnership on Active and Healthy Ageing is a good illustration. It brings key stakeholders together with a view to overcoming potential barriers to innovation and aims to increase the average individual’s healthy lifespan by two years by 2020.


Thanks to the EU's employment and social solidarity program (called Progress), the Commission can provide financial support for the testing of new ideas through social policy experiments.

These bridge the gap between grassroots projects and public policy, between improving existing knowledge and putting it into action.


The Commission has proposed increasing support for social innovation and social policy experimentation under the Multiannual Financial Framework for the post-2013 programming period. Once it has been adopted, the new regulation on the European Social Fund will promote social innovation in all areas within its scope "in particular with the aim of testing and scaling up innovative solutions to address social needs".

Following up on the European Year of aging

The Year has certainly mobilised a wide range of stakeholders and showcased many new initiatives to promote active ageing and strengthen solidarity between generations.


The Commission is keen to support the member states through various initiatives.


First, the Commission has finalised a set of guiding principles for active ageing: they will offer a general framework for improving the conditions and opportunities for active ageing.

Those guiding principles will be endorsed by the Social Affairs Ministers in December 2012 under the Cypriot Presidency’s final month.


Secondly, to measure progress in active ageing, the Commission is working with the UN Economic Commission for Europe and the European Centre for Social Welfare Policy and Research in Vienna on the development of an active ageing index. It should give us an indication of the untapped active-ageing potential of both women and men in each country.


Thirdly, the Commission plans to open call for proposals in 2013 to support the member states in developing comprehensive active-ageing strategies.

At the conference in June 2012 on "Good governance for active and healthy ageing", there was broad agreement on the need for public authorities at various levels and across different policy areas to work closely together on designing effective, comprehensive strategies for active and healthy ageing.


The Commission’s conclusion was that past European Years have allowed the EU to put the public spotlight on people and their needs. There was European Year against Poverty in 2010 and European Year of Volunteering in 2011; year 2012 was the Year of Aging and 2013- the European Year of Citizens. European Year for Active Ageing and Solidarity between Generations (2012) has encouraged the member states to step up their efforts to promote active ageing.


Social “investments” in the EU

The Commission approach is focusing on extensive use of “grey age” (i.e. retired people) in social and economic development in the member states.


Social investment is crucial to address the social emergency triggered by the crisis and ensuring Europe's social models are adequate and sustainable in the long-term.


Among the EU institutions and agencies the following showed the first reactions to social investments: the Social Protection Committee, the European Economic and Social Committee, the European Parliament, the Committee of the Regions, the social partners and other stakeholders on the Package, which have been positive altogether. (6)


Quality education and care services

It has been proved that adequate social benefits and services that focus on developing people's capabilities from cradle to grave bring a high social and economic return. Investing as early as possible to prevent hardship from arising later and 'preparing' people to cope with life's risks rather than simply 'repairing', is the most effective way forward.


For example, accessible quality early childhood education and care services can contribute to increasing female employment (on a full-time and part-time basis) and at the same time tackling childhood disadvantage at an early stage.


Housing-first approaches to homelessness can save people's lives from deteriorating further, and provide the best chances for reintegrating them into society; and they are more cost-effective.


Well-designed welfare systems can protect people from hardship, safeguard the economy from shocks, develop people's skills and improve their ability to participate in society and the labour market. This can help the individual, families and society to adapt to such risks as changing career patterns, new working conditions and population ageing, and it can reduce the need for policy to counter those risks. Conversely, the lack of a coherent social investment strategy may result in significant economic and social damage.


Implementing the Social Investment Package

Measures proposed in the Social Investment Package contain guidance on how to help the Member States carry out the structural reforms needed to make their social policy more effective and efficient, with a view to guaranteeing a suitable standard of living, improving people's development opportunities, and facilitating their participation in the society and the labour market.


The Social Investment Package will feed into the European Semester framework for steering and monitoring Member States' economic and social reforms. Thus, the Social Open Method of Coordination, (Social OMC) will also help Member States to share experience and disseminate best practice and will also feed into the European Semester, while the Social Protection Committee will serve as a vehicle for cooperative exchange between Member States and monitoring the performance of social protection systems.


Besides policy guidance, the EU also provides the Member States with financial support to their social investments.


The Commission believes that, if the EU’s efforts to meet its quantified objective for reducing poverty are to be credible, a minimum percentage of Cohesion Policy funding ( amounting to at least 25%) must be devoted to investing in people and employment and social reform through the European Social Fund.


European Social Fund

This is why the Social Investment Package also offers the Member States guidance on how best to use EU financial support, in particular from the European Social Fund.

It shows how the European Social Fund can be used in different social policy areas to address structural challenges, as identified in the country-specific recommendations, through social investment.


For instance, this may involve improving pathways to work for people with altered working capacities or; combating early school-leaving and ; tackling the educational segregation of children from marginalised backgrounds, including Roma; and by providing access to affordable, quality early-childhood education and care.


The Commission is currently finalising operational guidance on how to use the European Social Fund, to support social investment, in all four of the Fund’s investment priority areas: promoting employment, investing in education, combatting poverty and enhancing institutional capacity.


The new European Fund for Aid to the Most Deprived will also be an important resource for those Member States which are feeling the effects of the crisis the most.


Later in May 2013, the Commission will be presenting draft country specific recommendations. These should already reflect the social investment approach to a larger extent than last year's exercise.


For example, to help ensure that minimum income support schemes are adequate, the Commission will develop, with the Member States, a common methodology for the design of reference budgets. In most Member States, minimum income benefits alone are not enough to lift people out of the risk of poverty. Reference budgets are a calculation of the cost of a basket of basic goods and services that a family of a specific size and composition needs to be able to live on.


By using reference budgets, policymakers can help ensure that income support reflects the real cost of living, and can help to raise people's standard of living so that they live in dignity.

Commission support will also include awareness-raising, capacity-building and training to help people design and deliver social investments.


Commission’s advisory services

Through the Progress program and the future Program for Social Change and Innovation, for instance, the Commission will set up tailor-made advisory services for those engaging in social policy experimentation as a tool to test social policy innovations and reforms before they are implemented. Support for capacity-building will also be offered through the European Social Fund to national and regional authorities to implement effective policy to promote social entrepreneurship.


The Commission is also preparing a policy-makers' manual for designing long-term care strategies, and will be providing support to public authorities for the development of comprehensive active and healthy ageing strategies.


The objective of all these actions is to provide the Member States with support by pooling and sharing knowledge and expertise in key areas where the Social Investment Package calls for social policy reform and share the lessons learned with a view to evidence-based reform.



Modernising EU social policy to meet current challenges calls for shared ownership and joint responsibility’ member states governments have a vital role to play — and great responsibility — in making the social investment necessary and encouraging others to invest too. The input, resources, experience and insight of the social partners and civil society are also needed.

Exchanging views and sharing best practice through networks among the social partners, NGOs, civil society, academic institutions, think-tanks, and regional and local representatives is important to ensuring that policy reform is grounded on evidence and the experience of the stakeholders.


The Commission has committed itself to strengthening existing partnerships and continuing the dialogue with all stakeholders via collective and coordinated input throughout the European Semester.


Poverty and Social Exclusion

The European Platform against Poverty and Social Exclusion, one of the flagship initiatives of the EU-2020 Strategy, is based on a joint commitment by the Member States, the European institutions and the key stakeholders to fight poverty and social exclusion.

The Platform will be a crucial partner in the implementation of social investment to address poverty and social exclusion.


The Platform’s Annual Convention will provide the venue for bolstering shared ownership and will secure collective commitment.


Regular EU Stakeholder Dialogue meetings should help to ensure collective ownership of the policy initiatives taken to combat poverty and social exclusion.


The partnership principle will also be strengthened in connection with the European Social Fund, bringing together all parties interested in the success of social investment in the preparation, design, implementation and monitoring of the programs.


Social dimension of EMU

The relevance of the Social Investment Package is important to the current debate on stepping up the EMU’s social dimension in line with the European Council’s mandate. In this context the key issue rotates around economic, social and political future of the people of EU-27 member states. Thus, the EU needs to restore some convergence in terms of the growth potential of the individual countries of the EMU area: at the same time, the EU needs decisive actions to reduce unemployment and exclusion in the 'periphery'.


In the Commission’s opinion, social dimension of the genuine Economic and Monetary Union, means that its rules, governance mechanisms, fiscal capacity and other policy instruments will work both for economic efficiency and for social fairness.


The June 2013European Council should bring more clarity; the Spring 2013European Council took stock of work under way, but did not comment on ideas for strengthening the social dimension.


Severe employment and social problems in one Member State of a currency union may have negative economic spillovers and politically destabilising effects for the whole euro area.

And action or inaction in one Member State can have a major impact at European level.

For instance, low investment in education or training in some Member States has implications in terms of a lower-skilled workforce, which can have a negative impact on overall economic competitiveness.


Conversely, greater participation in employment, better social spending and fairer taxation can help offset inequality and fight against poverty across Europe.


Socio-economic disparities are a bigger problem for the stability of the currency union than of the European Union. When unilateral currency devaluation is not an option, the individual Member States have fewer economic adjustment tools available.

Social imbalances need to be detected and recognised collectively at an early stage. This means that macro-economic coordination and surveillance within EMU should include social indicators and targets for assessing progress, and not only economic and financial ones.

The Commission has been looking at a social scoreboard of key employment and social indicators for detecting social imbalances and triggering collective preventive action before employment and social problems develop disproportionately.


Such a scoreboard would have two aims:


  • it would give the social-policy dimension greater visibility when macro-economic decisions are taken at euro-area and Member State level; and
  • it would strengthen monitoring and coordination in the field of employment and social policy with a view to identifying and alleviating major difficulties in good time.


The Commission is currently developing ideas on how to strengthen governance of employment and social policy in connection with EMU.

The reform of EMU needs to go hand in hand with further steps to foster its legitimacy and accountability in the eyes of our fellow Europeans. The Commission is preparing a position paper on the social dimension of EMU for adoption early June.


The member states must be ready to do everything possible to ensure that employment and social cohesion are given substance in EU policy, on a par with financial consolidation and economic growth. The Social Investment Package is one such endeavour in our on-going efforts to strengthen the social backbone of our common European project. (7)


Supplement: example of the EU efforts to support retired persons


Old-age benefits: Commission refers Slovakia to Court of Justice for refusing to pay an old-age benefit to pensioners abroad.

The Commission contacted the Slovak authorities after it received complaints from Slovak nationals living abroad. In November 2012, the Commission requested Slovakia to end the discrimination against pensioners living abroad, but the Slovak authorities have not notified the Commission of any measures taken to end the discrimination. On the contrary, the Slovak authorities confirmed in their official reply to the Commission that the Christmas supplement would not be paid to Slovak pensioners living in another Member State and that they would continue to dispute the classification of this benefit under EU law. (8)


The European Commission has referred Slovakia to the EU's Court of Justice for refusing to pay an old-age benefit, a so called Christmas allowance, to pensioners living in other EU Member States, Iceland, Liechtenstein, Norway or Switzerland in breach of its obligations under EU law on social security coordination.


Under EU law, entitlement to an old-age benefit cannot be conditional on a pensioner living in another EU state where he or she claims the benefit. This rule enables pensioners to move to another member state when they retire whilst retaining their pension.


Slovak legislation provides that all persons who receive a statutory pension, or pensions below 60 % of average wages in Slovakia, are entitled to a Christmas allowance ('vianočný príspevok'). However, this benefit is not provided to pensioners living outside Slovakia. As a consequence, pensioners receiving Slovak statutory pensions who live in another Member State are at a disadvantage compared to pensioners who have not left Slovakia.


As the purpose of the Christmas bonus is to compensate for increased living costs incurred by pensioners, the allowance qualifies as an old-age benefit under EU social security coordination rules as interpreted by the EU's Court of Justice. (9)


Overview of the roundtable in Russian language is available here.



1.        , and specifically on pension:;


3.                  Speech/13/294 “Recovery from the crisis – Coherent policies for growth and jobs”, 9 April 2013. 


5.                  Press Release, Speech/12/839; 19/11/2012.

6.                  Irish Presidency Conference on the Social Investment Package; László Andor, European Commissioner responsible for Employment, Social Affairs and Inclusion, Speech/13/382 “Investing in people is the best investment we can make”, Leuven, 3 May 2013

7.                  See:

8.                  Reference: IP/13/364, 25.04.2013; see also MEMO/12/876.

9.                  Further information on EU Social Security Coordination see:;   

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