Time for structural reforms 2.0
When the economic crisis hit, the European Commission's response included a strong emphasis on structural reforms that meant Member States had to take on deep reforms and a comprehensive policy approach. Now that Europe is beginning to emerge from years of acute economic troubles, it is time to reflect.
At the Brussels Economic Forum, leading policymakers and experts gathered to discuss the future direction of structural reforms and how they could better stimulate inclusive growth.
Upgrade to version 2.0
To create the next generation structural reforms, Commissioner Pierre Moscovici emphasised the need for experimentation, evaluation and simplification. “Structural reforms 2.0” should be “more forward-looking” and ”people-centric,” he said.
“Structural reforms are too often perceived as pain, not progress,” the Commissioner explained. “I want reform to mean progress, and I want people in Europe to take ownership of [them].”
Greek Finance Minister, Euclid Tsakalotos was in total agreement on the need to refocus on people. He argued that there will inevitably be winners and losers, but we can’t just leave the losers behind.
“Greece had too many pharmacies and I supported the structural reforms that closed many of them down. But we had no way to deal with all the pharmacists that got fired.” He urged Commissioner Moscovici to conceive of a 2.0 version that can address these gaps and “give people new hope for the future.”
Timing is everything
Getting the timing right for reform is crucial, argued both the Deputy Prime Minister of Belgium, Alexander De Croo and the Latvian Minister of Finance, Dana Reizniece-Ozola. They called on leaders to be brave and forward-looking enough to implement reforms early to prevent rather than respond to crises.
Minister De Croo explained: “It’s deadly to communicate about an ambitious reform agenda overnight. Promises must be broken, expectations can’t be met…peoples’ lives will change, and governments need to help them transition and adapt early.”
Taking early action is not enough, according to Minister Tsakalotos. He called on leaders to “sequence” reforms with positive measures to balance out the negative ones.
Integrate digital
From her bird’s eye view as the head of the European Political Strategy Centre, Anne Mettler finds that reforms are not delivering enough digital innovation at the organisational level. “We have labour markets that simply aren’t fit for how people work in the 21st century.”
Minister De Croo believes this reflects the view of many European policymakers who are threatened by the disruptive nature of technology. He encouraged his fellow policymakers: “instead of regulating Internet platforms, we should be talking about how to create them here.”
Competiveness and social mobility
For Ms. Mettler, investing in innovation and our human potential is central to Europe’s competitiveness. In the United States, the government and firms are “investing heavily in training and development of their people” to adapt to digital change. If Europe does not keep up, it risks falling further behind.
Failure to address this challenge will only exacerbate the disturbing decline in social mobility in Europe. And for Minister De Croo, this is the real issue. Europeans are starting to lose faith that “their children can climb up the social ladder higher than them.”
Leadership matters
When it comes to implementing tough structural reforms, Minister Reizniece-Ozola emphasised the importance of leadership. “You need to find the right messenger. Unpopular politicians have a much harder time selling unpopular policies.”
Leaders also need to plan for the long term, no easy feat she admitted for politicians constantly focused on the next election. Minister De Croo credited the European Commission for pushing his government to take tough decisions that are domestically unpopular, but good for the country and Europe.