1. Europe2020 , The European Semester, follow-up to the Green Paper on Pensions
MISSOC 19 May – Budapest

2. Contents A year of changes in the EU context of SP Europe2020
Sovereign Debt Crisis & 9-10 May FM meeting
Reinforced Economic Policy Coordination
Green Paper on Pensions
Europe2020, Employment GL10 & Poverty Platform
Annual Growth Survey & European Semester
Pact for the Euro Plus 2
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3. Europe 2020 Strategy for structural reform & growth replacing LIsbon
Europe 2020 puts forward 3 mutually reinforcing priorities:
Smart growth: developing an economy based on knowledge and innovation.
Sustainable growth: promoting a more resource efficient, greener and more competitive economy.
Inclusive growth: fostering a high-employment economy delivering social and territorial cohesion..

4. 5 EU headline targets
75 % pop should be employed
3% of the EU's GDP invested in R&D.
The "20/20/20" climate/energy targets met
Early school leavers under 10% and at least 40% of young have a tertiary degree.
20 million less people at risk of poverty.
Targets interrelated and critical to overall success. Delivery: goals translated into national targets.
Europe 2020 far more committing than Lissabon

5. 7 flagship initiatives to catalyse progress
"Innovation Union“
"Youth on the move”
”Digital agenda for Europe"
"Resource efficient Europe"
“Industrial policy for globalisation era"
”Agenda for New Skills and Jobs"
"European platform against poverty"

6. A year of changes in the European context of Social Protection
Events More than Debates affected expected drivers: Lisbon Treaty, Monti, Europe2020, GP & EPC-SPC…..
The Crisis metamorphosed once more: Financial – Economic – Public Budget/ Sovereign Debt…
Sudden shift in crisis handling: from Stimulus to Austerity - at European and National level
From periphery towards heartlands: IMF at the door
Politics: Regime change and/or political crisis + National electoral cycles in European Politics
Who needs treaty changes when we have events?
THE ECONOMIC CRISIS AND PENSIONS IN THE EU
·         Ongoing reform process of pensions systems
·         Assessing the impact of reforms to pensions systems
·         Long-term adequacy and sustainability of pension systems
·         What lessons can we draw from the crisis on current pension systems in Europe?
·         The European Commission's present Green Paper consultation with all stakeholders on adequate, sustainable and safe pensions

7. National Events of European Significance
Brave ideas – High Stakes
Finland, Netherlands, Denmark …..overcoming taboos
Seminal Pension Reforms (raising pensionable ages)
Greece – only at the insistence of guarantors
France & Spain – breaking the political impasse
Roll back of Mandatory Private:
On hold: Latvia, Lithuania & Estonia - Romania
Radical Reduction: Poland ..
Abolition: Hungary
Accounting rules in the SGP & the double payment problem: Is Europe or poor designs to blame - How much funding did actually take place?
Europe Never before so present in national Pension Debates
What the others do – what the EU suggests – wants - demands
THE ECONOMIC CRISIS AND PENSIONS IN THE EU
·         Ongoing reform process of pensions systems
·         Assessing the impact of reforms to pensions systems
·         Long-term adequacy and sustainability of pension systems
·         What lessons can we draw from the crisis on current pension systems in Europe?
·         The European Commission's present Green Paper consultation with all stakeholders on adequate, sustainable and safe pensions

8. Sovereign Debt Crisis & 9-10 May FM meeting
By March clear EL needs help or else March loan package agreed
Debt and deficit much larger than expected … SGP controls failed
Necessary solutions do not sit well with DE electoral cycle...
9-10 May BXL meeting of Finance Ministers:
Flying in on the wings of stimulus packages.
Flying out to the tune of austerity measures.
An unexplained sudden turn around in Economic fads
Caution and fears of second dip recessions evaporated …
Prize for agreeing the European Financial Stabilization Mechanism?
12 May principles of reinforced economic policy coordination in SGP
Excessive deficit procedure widened to excessive debt (incl. ageing liabilities)
Excessive macro-economic imbalance procedure added
30 June Toolbox for strengthening SGP
European semester aligning structural reform, fiscal coordination, macro-economic imbalances
Preventive & corrective arms greatly strengthened
Minimum standards for budgetary frameworks in MS
By 29 September
The entire package of legislative proposals presented
Paving the way for a permanent European Stability Mechanism …
THE ECONOMIC CRISIS AND PENSIONS IN THE EU
·         Ongoing reform process of pensions systems
·         Assessing the impact of reforms to pensions systems
·         Long-term adequacy and sustainability of pension systems
·         What lessons can we draw from the crisis on current pension systems in Europe?
·         The European Commission's present Green Paper consultation with all stakeholders on adequate, sustainable and safe pensions

9. Reinforced Economic Policy Coordination
Stronger economic governance:
Reinforcing Stability and Growth Pact
Addressing imbalances in macro-economic & competitiveness
Towards permanent & robust framework for crisis management
Aligned ex ante coordination
Bugets & structural reform programmes assessed together
Implementing Europe 2020 / European semester recommendations in national budgets for the autumn
Main budget elements for ex ante BXL assessment
BXL surveillance for transparency and mutual trust
Obligatory reduction of excessive Debt incl ageing liabilities
“Rule based” enforcement for all– less discretion more teeth
Early direct sanctions if recommendations not followed
Reverse voting mechanism: Commission proposal adopted unless met by qualified council majority against
Stability and Growth Pact: Procedures and Content
The European fiscal framework was designed in 1991 and then included in the Maastricht Treaty, which entered into force two years later. It was then revised in 1997 with the creation of the Stability and Growth Pact (SGP) (in force since 1999), and eventually reformed in 2005 and 2010.
To safeguard the sustainability of public finances following the introduction of the euro, the European Council of Amsterdam of 1997 adopted the Stability and Growth Pact (SGP)
As well as the Maastricht criteria, the coordination of fiscal policy thus consisted of two components. The preventive part consisted of requirements for a balanced budget or one that was in surplus in the medium term (Table 1). While the Pact agreed on at Amsterdam did not concern pensions policy, the Ecofin Council and related technical committees have explicitly monitored the long-term sustainability of retirement programmes (Pochet and Natali, 2005). In 1997 the Council of Ministers of Economic and Financial Policy (Ecofin) and its technical bodies (the Economic Policy Committee, EPC) addressed pension reforms by a communication (EPC, 1997). Its guiding philosophy was that pension reform needed to be adapted to the circumstances of an ageing population while at the same time ensuring durable fiscal consolidation and improving the condition of European labour markets. The principal recommendation was to contain benefits, as the main instrument for guaranteeing the solvency of PAYGO schemes. The EPC first recommended delaying the age of retirement. A second recommendation was to move away from a solidarity-based system to a pension system based on individual contributions. A third recommendation was to gradually increase the role of funded schemes (Natali, 2008). The first version of the SGP was widely criticised The focus on public debt did not allow for “implicit” expenditure, such as future pension payments to be considered. For others, the convergence criteria risked ruling out structural reforms that entailed upfront costs but were desirable for the functioning of the system (Razin and Sadka, 2002). That is the case for pension privatization, when the government may start to increase both deficit and debt in order to finance the transition (through tax incentives and reduced mandatory contributions) while the consequent fall in implicit liabilities is not recognised in the national accounts

10. Governance of Europe 2020 Strategy.

11. Europe2020, Guideline10 & Poverty Platform
Poverty reduction & Social Dimension in but…
SPC inputs only through EMCO
Poverty delivery orientation
SP in GL 10 but supporting role
SP marginal or central in poverty platform?
SP as poverty PREVENTION + SP in key role
Platform = SISP (includes both)
Reporting next to or only as part of NRP??
Future role of Social OMC – an annual report?
Fate of the social OMC still to be clarified: in the context of the new strategy Europe 2020, the precise role of the OMC is to be defined (Pochet, 2010). It is not clear how the new governance arrangements under the Europe 2020 Strategy will connect with the broader EU coordination/ cooperation and monitoring capacities in the social field developed through the Social OMC over the past decade (Frazer et al, 2010). It thus remains unclear how the EU’s common social objectives – beyond combating poverty and social exclusion – will be monitored, reviewed, evaluated, and followed up within the governance architecture of Europe 2020, and what will happen to national reporting of performance against the common indicators developed within the Social OMC (Zeitlin, 2010).
And what will be the mutual interactions between policy fields and the social dimensions of other guidelines (notably Guideline 1 on the sustainability of the public finances, which emphasises the need for reform of Member State pension and health care systems; and Guideline 7 on increasing labour market participation and reducing structural unemployment, in which active inclusion policies play a crucial part) (see the Annex with the 10 integrated guidelines of the new Europe 2020 Strategy).
As for the past, the issue at the core of the OMC has not been limited to the adequacy and viability of the first pillar, but to that of the non-public pillars too. A new emphasis has been made on the potential for inter-generational conflict and the need to consider present and future spending in terms of social justice (and not just of financial sustainability).

12. Enhanced policy coordination under the European semester
Economic crisis raised governance & coordination issues
Commission proposals (May / June 2010) led to adoption of the new governance architecture (European Semester)
Main Features of European Semester
Integrated, ex ante, coordination of budgetary & economic policies, in line with the SGP (Stability & Convergence programmes) & the Europe 2020 strategy (National Reform programmes)
Starts with Annual Growth Survey – Commission analysis of progress regarding the Europe 2020 targets (incl. Macro + Employment Reports)
29 Sept package for adoption by June 2011 Summit
Surveillance to prevent & correct macro-economic imbalances
Wider & earlier sanctions & incentives for deficit, debt & imbalance
Standards for MS budgetary frameworks

13. The European Semester
Total population: millions in 2008, millions in 2060
Most numerous cohorts: age in 2008, age in 2060
Population aged 65+ nearly doubles: 85 millions in 2008, 151 millions in 2060
Old-age dependency ratio (65+/15-64) doubles from 25 to 53
Pop drives: 2008 and 2060
Fertility rates, slight rebound 1.5 to 1.6
Life expectanct, further advance, Men: 76 to 84
Women: 82 to 89
Migration, declingn by assumption

14. The European Semester 2
Total population: millions in 2008, millions in 2060
Most numerous cohorts: age in 2008, age in 2060
Population aged 65+ nearly doubles: 85 millions in 2008, 151 millions in 2060
Old-age dependency ratio (65+/15-64) doubles from 25 to 53
Pop drives: 2008 and 2060
Fertility rates, slight rebound 1.5 to 1.6
Life expectanct, further advance, Men: 76 to 84
Women: 82 to 89
Migration, declingn by assumption

15. Annual Growth Survey (1)
The Commission publishes an “Annual Growth Survey” in Dec/Jan incl. an assessment of the economic situation and policy orientations
Horizontal policy guidance by European Council in Feb/Mar
Follow up by Member States in April in their SCPs/NRPs
Com proposals for Council Opinions (SCP) and Recommendations under art 121/148 in June Adopted by the Council in June/July
Reflected by Member States in their subsequent policy plans (budget, structural reforms) 15

16. Annual Growth Survey (2)
12 Jan Annual Growth Survey (AGS): New economic governance cycle and first European semester of economic policy co-ordination.
AGS: high levels of SP cushioned worst impact of crisis.
10 priority actions to address most pressing ST challenges:
Implementing a rigorous fiscal consolidation;
Correcting macroeconomic imbalances
Ensuing stability of the financial sector
Making work more attractive
Reforming pensions systems
Getting the unemployed back to work
Balancing security and flexibility
Tapping the potential of the Single Market
Attracting private capital to finance growth
Creating cost-effective access to energy
THE ECONOMIC CRISIS AND PENSIONS IN THE EU
·         Ongoing reform process of pensions systems
·         Assessing the impact of reforms to pensions systems
·         Long-term adequacy and sustainability of pension systems
·         What lessons can we draw from the crisis on current pension systems in Europe?
·         The European Commission's present Green Paper consultation with all stakeholders on adequate, sustainable and safe pensions

17. Pensions in Annual Growth Survey (AGS)
5. Reforming pensions systems
Fiscal consolidation should be supported by reform of pension systems, making them more sustainable.
Member States should:
increase the retirement age and link it with life expectancy.
reduce early retirement schemes as a priority, and use targeted incentives to employ older workers and promote lifelong learning.
support the development of complementary private savings to enhance retirement incomes.
avoid adopting pension measures which undermine the long term sustainability and adequacy of their public finances.
The Commission will review the IORP Directive on pension funds and present follow up measures to the Green Paper on Pensions.

18. Pact for the Euro Plus
March 2011: In wake of Europe2020 & AGS Pact creates new dimension of economic policy coordination to improve competitiveness & achieve higher convergence.
Pact embedded in current economic governance framework consistent with & building on existing instruments : European Semester, Integrated guidelines, the SGP & the new macro-economic surveillance framework.
Seeks to strengthen competitiveness to achieve "faster growth", increase "levels of income for citizens" and "preserve social models".
Four goals: Foster competitiveness; Foster employment; Sustainability of public finances; Reinforce financial stability.
Possible measures: reform "pension, health and social benefits" to ensure sustainability.
Establishes timeframe in which Member States will agree at the highest level on a set of concrete actions to be achieved within 12 months.
Commitments to be reflected in annual NRP and Stability Programmes and assessed by Commission, Council and Eurogroup in European Semester.
Spring European Council to confirm these orientations.
The Heads of State and Government of the Euro zone endorsed a Pact for the Euro on 11 March In the wake of the Europe 2020 strategy and the first Annual Growth Survey, the new Pact established a new dimension of economic policy coordination for the EU to improve competitiveness and achieve a higher degree of convergence. The Pact will be embedded in the current economic governance framework and will be consistent and build on existing instruments in the context of Europe 2020 such as the European Semester, the integrated guidelines, the Stability and Growth Pact and the new macro-economic surveillance framework. The Pact seeks to strengthen competitiveness to lay down the foundations of a "faster growth", to increase "levels of income for citizens" and to "preserve social models".
The Pact put forward four goals:
Foster competitiveness
Foster employment;
Contribute further to the sustainability of public finances;
Reinforce financial stability.
The Pact also lists some possible measures to reach these goals. Annex 1 present briefly the Pact's goals, measures and the relevance thereof for the SPC. As an example under the "sustainability of public finances" section, the Pact highlights the need to ensure the sustainability of "pension, health and social benefits" areas that are placed central in the SPC's mandate.
The Pact established a timeframe according to which Member States will agree at the highest level on a set of concrete actions to be achieved within 12 months. The commitments will be reflected in the annual NRP and Stability Programmes and these will be assessed by the Commission, the Council and the Eurogroup in the context of the European Semester. For 2011, the commitments should be included already in the April NRP(s). The Spring European Council is requested to confirm these orientations.

19. Pensions in Euro Pact Plus (25 Feb note)
Sustainability of pensions, health care and social benefits
will be assessed on the basis of the sustainability gap indicators.
These measure whether debt levels are sustainable based on current policies, notably pensions schemes, health care and benefit systems, and taking into account demographic factors.
Reforms necessary to ensure the sustainability and adequacy of pensions and social benefits could include:
aligning the pension system to the national demographic situation, for example by aligning the effective retirement age with life expectancy or by increasing participation rates;
limiting early retirement schemes and using targeted incentives to employ older workers (notably in the age tranche above 55).

20. Green Paper consultation
Consultation ran for over 4 months, receiving European Parliament in February.
1674 Responses, including around 350 from Member States and other major stakeholders.
All responses published in December online.
Summary published in March.

21. Broad lines emerging from consultation
Green paper’s contribution to the European pension debate welcomed and in particular the holistic approach.
Main messages:
Pension reforms need to underpin both adequacy and sustainability.
Higher effective retirement ages are key
Pension tracking service is welcomed
EU-level has an important role to play

22. Active ageing European year on active ageing and solidarity in 2012.
Participation of older workers in the labour market
Active contribution of older people to society as volunteers or family carers
Possibility to live independently