EU set for tax and working time conflicts, warns Kok

Boosting Europe’s economic growth is set to be a source of conflict between national capitals, governments and their citizens, EU leaders will hear next week.

A spring EU summit this year asked Wim Kok to review a four-year old “Lisbon” pledge to make Europe the world’s most competitive economy.

But key, as yet unpublished, strategy proposals from the former Dutch prime ministers highlight the potential for political divisions and conflict over reforms to boost economic growth.

Kok is seeking “a radical policy and cultural shift away from early retirement” and towards longer working hours – moves that are deeply unpopular and opposed by trade unions.

Echoing dire European Commission predictions, Kok warns governments and citizens that Europe’s ageing population can not carry European welfare institutions.

“If Europe cannot adapt, its ageing working population will be unable to sustain the cost of maintaining pensions to Europe's growing army of pensioners, economic growth will stagnate and institutions will be faced with contraction and decline,” his report states.

Longer hours

Displaying pessimism over the EU’s ability to provide more jobs and to boost productivity, Kok argues that the output burden should fall on the existing workforce.

Moves to scrap the French 35-hour week and to drive up working hours across Europe are unlikely to appeal to voters and will trigger battles with trade unions.

“To provide a positive contribution to the growth of output per head, the total number of hours worked in the economy has to increase,” Kok concludes.

The former Dutch leader recognises that a period of low growth has put governments in a “catch 22” situation when pushing through unpopular economic or welfare reform.

“It has been harder in this low growth environment for governments to launch politically controversial reform measures,” the report states.

But Kok sees an economic upturn as a window of opportunity as expanding employment takes the strain of labour shake-ups.

And he cautions EU leaders that a failure to act could jeopardise Europe’s social fabric and fuel extremism.

“Europe has lost ground to both the US and Asia, its societies are under strain; and some ugly political forces are beginning to manifest themselves,” the report states.

Taxing time

Kok also takes up concerns expressed by Germany and France that lower levels of corporate taxation in new EU countries are a source of “tension”.

“Their low tax and wage rates attracting inward investment from the rest of the EU are likely to be a source of growing friction,” says the report.

“Unless there is some prospect of convergence so that the EU becomes a genuine single economy with broadly similar levels of wages and productivity, these tensions will mount.”

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