Euro Plus Pact

This area of the pact, is the same as several European countries had to address in the 1980s by abolishing Wage Indexation. The need for competitiveness improvements will be evaluated for each country upon analysis of its national Unit Labour Cost (ULC), a quantitative measure of wage costs per unit produced or serviced, and is to be addressed by measures that will reduce the cost of labour and/or measures that will increase productivity. Each country will be responsible for the selection of its own specific policy actions to improve competitiveness, but should mainly pick and choose between the following reform types:

Labour cost reducing measures

• Reforming the "wage setting arrangements", and where necessary adjust the "degree of centralisation in the bargaining process" and "wage indexation mechanisms".
• Ensure wages in the public sector only increase at a modest pace (equal to or below the inflation rate), as this has a strong signaling effect on the wage setting in the private sector.

Productivity increasing measures

• Deregulating industries by removing unjustified restrictions on professional services and the retail sector, so that competition and efficiency will increase.
• Improve infrastructure.
• Improve education systems.
• Promote and/or invest in Research & Development and innovation initiatives.
• Improve the business environment, notably by removing red tape and improving the regulatory framework (i.e. bankruptcy laws, commercial code).

This objective will be evaluated on basis of measured figures for the long-term unemployment rate, youth unemployment rate and labour participation rates. Beside of full employment being an objective by itself, a flexible all-inclusive labour market with security arrangements removing barriers for employees to conduct an increased amount of job shifts throughout their working career, also positively spill-over into improving the competitiveness. Each country will be responsible for the selection of its own specific policy actions to improve employment, but should mainly pick and choose between the following reform types:

• Labour market reforms to promote the "flexicurity" model, reduce undeclared work, and increase labour participation.
• Reforms to support lifelong learning of the already employed/educated working force.
• Tax reforms: "lowering taxes on labour" and "taking measures to facilitate the participation of second earners in the work force".

This objective will be assessed on basis of the sustainability gap indicators (S0 for the short-term, S1 for the medium-term and S2 for the long-term), which the Commission already publish every third year in their fiscal sustainability report (as part of their work to calculate appropriate minimum Medium-Term budgetary Objectives for each EU member state).[5] If the composite S0 indicator is above 0.43, it signals existence of too high risk for fiscal stress in the short-term, which call on implementation of immediate counter measures. If the fiscal gap indicators S1 and/or S2 indicators are positive, it means debt levels are forecast to become unsustainable in the medium-term and/or long-term under a no-policy-change assumption, because of increasing public expenditures caused by demographic factors.[6] If such S1 or S2 sustainability issues arise, they are to be addressed through implementation of fiscal consolidation leading to sufficient annual improvements for the structural budget balance and/or by increasing the sustainability of pensions, health care and social benefits systems through the following expenditure saving reforms:

• Aligning the effective retirement age with life expectancy, so that the pension system better can shoulder the demographic situation.
• Limiting early retirement schemes, and using targeted incentives for older workers in the age tranche above 55 still to be employed.
• Implement reforms to increase employment participation rates.
• Healthcare system reforms, focused either on reducing overall costs through implementing more cost efficient systems, or alternatively introducing certain level of privately paid healthcare contributions.

To further safeguard fiscal sustainability, one of the most stringent conditions of the pact is given with respect to also implementing national fiscal rules:

"Participating Member States commit to translating EU fiscal rules as set out in the Stability and Growth Pact into national legislation."

When implementing a balanced budget amendment, Member States are free to choose the type of legislation instrument (i.e. constitutional law or framework law), as long as it impose a "sufficiently strong binding" condition and a "durable nature". The law-enforced rule, needs to be fully compliant with the Stability and Growth Pact rules, but the exact formulation of the rule is up for each country to decide, as it could either be a "debt brake rule, or a rule related to the primary balance or an expenditure benchmark rule." Additionally, in case sub-national levels of the general government have autonomy to issue debt or other liabilities, the rule should ensure enforcement of fiscal discipline both at the national and sub-national levels.

The Financial stability will be measured quantitatively for each country with respect to its "level of private debt for banks, households and non-financial firms." With assistance from the President of the European Systemic Risk Board, the countries will be regularly informed on their present state of macro-financial stability, and will be expected to put into place "national legislation" to resolve potential problems. In addition, all participating Member States commit to adopt a fully community acquis compliant national legislation for banking resolution.

The Euro Plus Pact does not entail any specific commitments on tax policy initiatives, other than to briefly outline that member states commit to engage in discussions about it through a regular "structured dialogue". Tax policy coordination is expected to help strengthen the sharing of best practices and fight against tax fraud and evasion. Direct taxation remains a national competence for each Euro Plus Pact member to decide upon individually.[4] The European Commission had presented a proposal to introduce a Common Consolidated Corporate Tax Base (CCCTB) with appliance for all EU member states already back in March 2011,[7] which if agreed could be a revenue neutral way to ensure consistency among national tax systems,[4] while respecting national tax strategies - as it refrain to set a common tax rate.[8] The Euro Plus Pact explicit mentioned, that its featured "structured dialogue" for "tax policy coordination", should also be used for the purpose to try and reach a future CCCTB agreement.[4] The CCCTB proposal had still not reached any final agreement as of June 2015,[9] which prompted the commission to announce they will now submit a relaunched less ambitious CCCTB proposal in 2016 - leaving out the more difficult "consolidation part" for later agreement - so that the core CCTB can be adopted more rapidly in the short-term.[10]

In November 2011, the Finance ministers of all 23 participating states agreed on the content and format of the regular "structured dialogue" on tax policy coordination. The dialogue was decided to focus on: Avoidance of harmful practices, fight against fraud and tax evasion, exchange of best practices, prospects for International Coordination, and other potential issues (including taxation challenges related to digital economy, stronger alignment of national tax systems in specific areas like the recently proposed CCCTB, financial transaction tax, environmental and energy taxation, sustainability of tax systems, and empirical analysis of the impact of tax changes on growth). It was agreed, to set up a regular monitoring and reporting to the highest political level (European Council meetings) by the end of each future Council presidencies, on the following issues: "progress within the structured dialogue, concrete results in the field of tax coordination, avenues explored and specific issues on which agreement could be reached".[11] Status reports for the structured dialogue on tax policy coordination, were subsequently published in: June 2012,[12] November 2012,[13] June 2013,[14] December 2013,[15] June 2014,[16] December 2014,[17] and June 2015.[9] These regular specific reports which focus on Euro Plus related taxation dialogues, supplement those being simultaneously published by the ECOFIN council - which produce status on all relevant tax dialogues conducted between all EU member states. The ECOFIN tax dialogue reports were also published in June 2012,[18] November 2012,[19] June 2013,[20] December 2013,[21] June 2014,[22] December 2014,[23] and June 2015.[24]