Juncker must adopt a pro-growth, social reform agenda

The arrival of autumn marks a significant period of renewal in Brussels, with new European Commission President-elect Claude Juncker finally appointing the new Commissioners responsible for driving the EU’s agenda through to 2019. The departing incumbents may come to be known collectively as the ‘crisis’ Commission, their legacy defined by the fallout from the 2008 financial crisis. The severity of the threat this posed to the EU inevitably meant tighter regulation of Europe’s financial institutions. The result was a wave of landmark directives including Solvency II and the Alternative Investment Fund Managers Directive (AIFMD), following the introduction of the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA), writes Jeff Rupp.

While the importance of regaining financial stability in Europe cannot be understated, the previous Commission’s focus on reform of the financial sector may have come at a cost. A whole range of important social issues, that could significantly impact the EU’s future prosperity, received insufficient attention in the wake of the crisis. Now that the financial reforms are beginning to bed down, the Commission should take the opportunity to tackle these pressing issues head on by adopting a pro-growth and social reform agenda.

Top of Mr Juncker’s ‘to-do list’ should be youth employment. While the average unemployment rate across the EU has fallen over the last year, youth unemployment remains stubbornly high. This poses one of the greatest threats to sustained economic recovery in Europe. Apprenticeships, education and training programmes can all play a role, but they must be supported by economic growth and job creation.

The fact we are all living longer makes the need to ensure that the next generations of EU citizens are prosperous all the more acute. Europe’s ageing population presents a number of significant challenges in areas such as healthcare, public services and jobs markets. However, the issue of pension provision is perhaps the most pressing. At the moment around half of member states lack any kind of public pension scheme. With some experts estimating that by 2050 there will be one retired person for every two in work in most European countries, it is clear that the status quo cannot be allowed to continue. The Commission must take urgent steps towards ensuring adequate pension provision for the millions of EU citizens with inadequate post-retirement security.

The Commission should also look at ways to mitigate some of the other building pressures on the EU. One of these is migration – the free movement of people within the EU, combined with demographic and economic development is having, and will continue to have, knock-on effects for infrastructure, housing and services. Further external pressure is coming from geopolitical events outside the Union. The Russia-Ukraine conflict, in particular, should focus minds on the issue of Europe’s energy security. The Commission presented a security of supply strategy earlier this year, calling for greater diversification of supply and more indigenous production – two key steps member states need to take to reduce their reliance on imported energy.

There is no ‘quick fix’ for any of these issues. However, tackling the social challenges Europe will face in the years to come will rely on the EU and its member states encouraging the sustainable, long-term investment that will be required as part of any solution.

This is where the European real estate industry, along with other key sectors, can make an important contribution. A study commissioned by two leading European real estate organisations – the European Association for Investors in Non-listed Real Estate Vehicles (INREV) and the European Public Real Estate Association (EPRA) – found that commercial property contributed €302 billion to the EU economy in 2013 and directly employs 3.8 million people. This investment creates jobs, and builds new housing to accommodate Europe’s growing population and new space for business growth (over 40% of all European commercial property is rented office space). Property development also stimulates the creation of new and improved infrastructure including better transport links, and new fixed and mobile telecoms connectivity. Even greater benefits can be realised if regulators focus on creating the conditions to unlock further economic growth and encourage additional private sector investment.

As we move from crisis to recovery, Mr Juncker’s new Commission must shift its focus accordingly. The private sector, both in real estate and beyond, is willing to do its part, but requires regulatory certainty in order to invest for the long term. This means that the institutional reform that defined the EU’s reaction to the 2008 crisis should now give way to a quality of life agenda. In announcing the 27 ‘players’ on his team, the new President-elect has given encouraging signals that he will do just that. His challenge now is to lead a pro-growth Commission and empower his Commissioners to take bold steps to tackle the social and economic challenges they now face.