INTRODUCTION

Preliminary

The Eduskunta's Grand Committee received on 26 November 2010 a report from the Council of State1onthe European Commission's communication "Towards a Single Market Act For a highly competitivesocial market economy 50 proposals for improving our work, business and exchanges with one another"(E 107/2010). The Government submitted a supplementary report on 25 February 2011.On 11 February 2011 the Grand Committee received a Government report on the EuropeanCommission's communication "Annual Growth Survey: advancing the EU's comprehensive response tothe crisis" (E 145/2010).The Grand Committee received on 11 February 2011 a Government report on the proposedGrowth Pact of the Euro states (E 146/2010). The report was supplemented on 1 March 2011, and on 7March 2011 the Government provided a revised version of the draft Pact, dated 4 March 2011.

THE GOVERNMENT’S REPORTS

The Proposals

The Single Market Package (E 107/2010).The European Commission published a Communication ondeveloping the Single Market on 27 October 2010. The Communication enumerates 50 proposals thatconstitute an action package to promote employment, entrepreneurship and trade in the Single Market.The Commission asked for comments on these proposals by 28 February 2011, after which theCommission will present its actual proposals. The Communication is closely linked to Mario Monti'sreport on a new Single Market strategy (E 41/2010).The Growth Survey (E 145/2010).The European Commission published its Annual GrowthSurvey on 12 January 2011. This communication starts the European Semester. The Commissionproposes ten measures linked to the Europe 2020 strategy that the Union and its member states shouldcarry out during 2011 and 2012.The Euro Competitiveness Pact (E 146/2010).The Chairpersons of the European Counciland the European Commission transmitted the draft document "Enhanced Economic Policy Coordinationin the Euro Area; Main Features and Concepts" to the member states on 25 February 2011. A revisedversion, dated 4 March 2011 is titled "A Pact for the Euro – Stronger Economic Policy Coordination forCompetitiveness and Convergence". At the request of the Government, the Grand Committee issued asecrecy order in respect of the two draft documents. The document outlines a pact between the eurocountries on economic policy that would be compatible with but more ambitious than the arrangementsagreed or being agreed by the EU member states (EU 2020; European Semester; Growth and Stability

Pact, etc.). A meeting of heads of state and government of the euro countries, convened by the EuropeanCouncil's chairperson for 11 March 2011, is meant to approve conclusions on the document.The draft document proposes that the euro countries commit themselves to fostercompetitiveness particularly by coordinating wage and productivity developments; to foster employmentparticularly by making employment more attractive; to enhance the sustainability of public finances,particularly in respect of public debt and pension and benefit systems; and to promote financial stability.Each state will choose the measures needed to reach these goals.The document further puts forward the following concrete measures:-To promote competitiveness, a monitoring system for wage and productivity developments will beimplemented. Particular attention will be paid to adjusting wage setting arrangements towardsmore decentralised bargaining and to indexation mechanisms and ensuring moderate wagesettlements in the public sector.-To promote productivity, attention will be paid to opening sheltered sectors. This includes retailsector working hours. Attention will also be paid to education, research and development, and tothe legal and regulatory framework of business.-To promote employment, the document proposes labour market reforms to support flexicurity,reduce undeclared work and to link benefits to accepting training or jobs. Taxes are to be shiftedfrom labour to consumption. Measures are also proposed to facilitate the participation of secondearners in the work force.-To enhance the sustainability of public finances, particular attention is paid to the sustainability ofpensions and social benefits,int. al,by aligning the effective retirement age with life expectancy,limiting early retirement schemes and using targeted incentives to employ older workers. Thedocument also commits the euro countries to be more ambitious than other EU member states inimplementing EU fiscal rules by translating these into binding national legislation,e.g.,as a "debtbrake" or an expenditure rule.-The document suggests that a common corporate tax base could be a way forward to ensureconsistency in national tax systems without harmonising tax rates. The Commission intends topresent a legislative proposal shortly.-To ensure financial stability euro countries will commit themselves to EU norms.3

The Government's Opinion

The Single Market Package (E 107/2010).The Government's supplementary letter of 25 February 2011contains Finland's comments to the Commissions' proposals. The Government remarks that the SingleMarket strategy should pay more attention to long-term development, in addition to short-term priorities.The Commission's proposals correspond reasonably well with Finland's most important objectives. TheGovernment's letter makes the Digital strategy a prime objective and contains comments on each of theCommission's 50 proposals.The Growth Survey (E 145/2010).The Government sees, for reasons given in its report, thegrowth survey as a good basis for further development of the European semester and considers that themember states should commit themselves to the survey's proposals at the European Council on 25 – 25March 2011.The Euro Competitiveness Pact (E 146/2010).The Government considers that the objectivesof the proposed pact are important and is favourably disposed to the proposed cooperation. TheGovernment sees Finland as a forerunner in many of the proposed courses of action. The Government hasduring the preparations of the Euro summit strongly emphasised the role and importance of socialpartners and is satisfied that its views have been taken into account.OPINIONS OF THE GRAND COMMITTEE

Justifications

The Single Market PackageThe Government's report on the Single Market Package describes the Commission's prolongedpreparations for a new Single Market Act. The name chosen by the Commission for its action plan refersto the Single European Act that was adopted at the Luxemburg summit in 1985 and provided for thecreation of the Single Market by 1992. The Grand Committee notes that the present action plan falls shortof the level of ambition of the 1985 Act.The single market created in 1985 revolutionised the economic system of the EuropeanUnion by creating free movement of goods, services, capital and people. The Single Market was not fullyimplemented, however: it is still cumbersome to buy goods from another country on-line and it is stilldifficult for small and medium sized businesses to get access to new markets. The Grand Committeeconsiders that implementing the Single Market and its four freedoms is of prime importance for economicgrowth and competitiveness in the European Union and its member states. The Committee hopes that the4

Commission will soon put forward concrete proposals for the scrutiny of the member states. Theconsultation period having ended, the Committee limits itself to a few general remarks.A large part of the Commission's 50 proposals concern implementing measures that havealready been decided or propose future proposals or studies. The Committee will expect theCommission's actual proposal to be more concrete. The Committee also feels justified in hoping that theCommission will demonstrate leadership in putting forward proposals that it is willing to defend evenwithout advance certainty of success. The European Union urgently needs answers to the challenges ofclimate change and financing long-term investments.The Committee agrees with the Government's priorities for developing the Single Market.The Committee agrees in particular that the Digital Single Market is of primary importance.Concerning the management of intellectual property, the Culture Committee and theCommerce Committee have raised issues within their respective fields that concern balancing the specialcultural needs of a small linguistic and cultural area with the - also nationally important - economicgrowth potential created by rapidly emerging technologies. The Grand Committee considers it importantthat the sector committees' justified but divergent views of the national interest can be reconciled beforethe Commission's preliminary and general proposals become concrete. The Grand Committee hopes thatthe Government gives priority to examining this question with a view to submitting to the new Eduskuntato be elected in April a comprehensive proposal, in line with the views of the sector committees, for anational policy on intellectual property management in the European Single Market.The Growth SurveyThe Grand Committee agrees with the Government that the Commission's growth survey is a good basisfor further preparations. The Committee notes that the intention is for the member states to receive laterthis Spring recommendations concerning measures to implement the EU 2020 strategy that are mainlywithin national competence. Before this, the member states need to put forward their concrete plans andthe European level needs to make progress on identifying flagship projects and key policies.The Grand Committee agrees with the Government's opinion that it would be important fornew measures to be agreed on early. The Committee remarks in this context also that active and even boldinitiatives are expected of the Commission. The Committee further remarks that even if financial stabilityis acutely important now and for the near future, stability alone does not create growth andcompetitiveness. Both the EU 2020 strategy and the Internal Market Strategy will require majorinvestments. One of the pivotal questions for the Commission's forthcoming proposal will be how to5

reconcile the growth strategies' requirements for capital investment with fiscal balance in the memberstates.The Competitiveness PactThe Grand Committee finds the proposed euro competitiveness pact difficult to assess with the usualpolitical terminology. It may aid understanding to note what the document at any rate is not. Thedocument is not a legally binding agreement already because such agreements cannot be made by ameeting of euro country heads of state and government. The document does not meet the Lisbon Treaty'sor the Vienna Convention's requirements for a valid international agreement. As far as could beascertained, the document has also not been presented to any member state parliament other than theEduskunta. The content of the document would seem to require parliamentary input in several memberstates. The English word "Pact" used for the document allows for very different interpretations of howbinding an arrangement is intended. A meeting of heads of state and government of the euro countriesalso has no recognised institutional status. The role of the chairman of the European Council in conveningand chairing the meeting should be understood as a practical and incidental arrangement subject to thesufferance of the participants.The Grand Committee considers that the document should be understood above all as thedraft conclusions of anad hocmeeting that have been given a particularly grand appearance. As thedocument has a clear link to the agenda of the European Council of 24 – 25 March 2011, it would seemnatural to understand the document and the euro summit as a normal attempt by a group of member statesto influence the official European Council.The document commits the euro countries to promote competitiveness, employment, fiscalsustainability and financial stability. The pact limits itself to measures that are mainly within memberstates' competence. However, the euro countries will agree yearly common and individual targets.Member states will retain the competence to decide how to reach these targets but will submit tomonitoring by the other euro countries.The headline objectives of the pact document are of themselves coincidental with EUobjectives for growth, competitiveness and macroeconomic stability. The pact document does, however,commit the heads of state and government to certain concrete measures and indicators that have not beendecided at the EU level and are controversial, to say the least, in several member states. These measuresinclude a shift from centralised to more localised wage bargaining, a shift from wage taxation toconsumption taxes and raising the effective retirement age. Special mention must be made of the proposalthat member states introduce binding national legislation to ensure commitment to European fiscal6

stability rules – in practice this may be understood as a more advanced version of the requirement forconstitutional balanced budget rules.The Grand Committee notes, like the Government, that the objectives of the pact documentare important, and unproblematic for Finland in as far as they coincide with practices already in place inFinland. The Committee further notes, however, that the concrete measures proposed for reaching theseobjectives are not easily reconciled with the goal of a social Europe that was only recently confirmed inthe Lisbon Treaty. In joining the European Union, Finland and the other member states have committedthemselves to detailed rules for preparing and deciding on legal obligations; these rules are there to ensurethe transparency and democratic legitimacy of the Union's policies. The proposal now under scrutiny doesnot, in the view of the Committee, meet the standards of transparent and democratic decision-making thatapply to all EU member states.Conversely, the document presented to the euro countries could be understood as an attemptto create the impression of political resolve in a situation where the conditions are lacking for realdecisions to promote growth and competitiveness. If so, the document would not be binding of itself, butit would be invoked within individual member states as evidence of an alleged European political will.The Grand Committee is of the opinion that, at the meeting of euro countryheads of state and government, Finland should underline our country'scommitment to the community method of European decision-making.Economic policy formulation in the European UnionMacroeconomic policy has been unusually strongly visible on the Grand Committee's agenda since thestart of the second Barroso Commission, and coincidentally, the Lisbon Treaty. The numerous individualCommission documents form three separate but related entities: (1) financial market stabilisation; (2) EUbudget reform, including agriculture and cohesion policy reform; and (3) a new growth andcompetitiveness initiative to replace the ill-starred Lisbon strategy.The Committee considers it a fair general observation on the Barroso II Commission's timein office that the Commission has produced a relative abundance of draft sketches for future initiativesbut rather few concrete legislative proposals. The exception is financial stability, where the crisis hascompelled fast decision-making. The Grand Committee considers that, after somewhat more than a year,one could have expected the Commission to deliver a larger number of more concrete proposals. This isbecause the EU's poor economic growth and competiveness and deteriorating employment ratios call forurgent decisions – and making these decisions will need considerable time even after they have been7

proposed by the Commission. The Committee recalls that the original 1985 Single European Act wascreated after a process of many years, largely because the Commission of the time was prepared to putforward even radical proposals. It is difficult to avoid the impression that the current Commission'scautious policy of ascertaining in advance the ultimate approval of its proposals does not demonstrate thekind of leadership-by-initiative that is one of the Commission's most important treaty-based duties.One may also observe in European economic policymaking a worrying tendency to bypassthe methods for preparing and making decisions that have been put in the Treaties to ensure, on the onehand, the democratic legitimacy of the Union but, on the other hand, also the genuine commitment ofmember states to EU decisions. It is the job of the European Council to give political guidelines to theCouncil of Ministers and other Institutions. The outcome of the community procedure is decisions that aregenuinely effective in relation (and hopefully beneficial) to the member states and their citizens. Theprocedure also includes preparation of European Council meetings by the General Affairs Council –which is meant to ensure that member states are committed to the decisions of the European Council, buthas unfortunately become almost a mere formality. When the European Council acts in isolation from theLisbon Treaty's procedures, its conclusions are no more than declarations that do not lead to further actionand do not in reality affect the actions of the member states.

Statement

As its statement, the Grand Committee pronounces,that the Council of State should take the above intoconsideration.Helsinki, 10 March 2011The following members took part in the approval of this statement:chairvice-chairvice-chairmembers:Erkki Tuomioja /sd3Eero Akaan-Penttilä /kokAntti Kaikkonen /keskSirpa Asko-Seljavaara /kokTimo Juurikkala /vihrPietari Jääskeläinen /psKyösti Karjula /keskUlla Karvo /kokTimo Kaunisto /keskMatti Kauppila /vasKimmo Kiljunen /sdMiapetra Kumpula-Natri /sd

Markku Laukkanen /keskHåkan Nordman /rSari Palm /kdKari Rajamäki /sdKimmo Sasi /kokJouko Skinnari /sd (partly)Esko-Juhani Tennilä /vasTuulikki Ukkola /kokSubstitute members:Pekka Haavisto /vihrTimo Kalli /keskKrista Kiuru /sd (partly)Johannes Koskinen /sdSari Sarkomaa /kokSeppo Särkiniemi /keskCommittee counsel Peter Saramo and Anna Sorto served as clerks.DISSENTING OPINION I

Justifications

We do not accept the view of the majority of the Committee, because it supports the proposals by the EUleaders to shift wage bargaining to the local level, raise the retirement age and increase indirect taxes. Thestatement also allows a doubling of Finland’s share of the temporary stabilisation system, which we alsocannot support.

Proposal

On the basis of the above, we submitthat the Grand Committee should not accept the Government’s position.Helsinki, 10 March 2011Esko-Juhani Tennil /vasMatti Kauppila /vasDISSENTING OPINION II

Justifications

The Grand Committee cannot approve the competitiveness pact of the euro countries, which includes:Pietari Jääskeläinen /ps

To the Council of State

Preliminary

Preparation by sub-committee

Expert testimony

Reference data

The Proposals

The Government's Opinion

Justifications

Statement

Justifications

Proposal

Justifications

Opinion