Jyrki Katainen: Populism threatens stability and risks increasing unemployment

Katainen is looking forward to higher employment figures and a recovering EU economy, which is being helped by positive factors like the low oil price, a relatively weak Euro and economic stimuli. The effect of recent years’ reforms are beginning to show with the recovery. 

Vice-President Jyrki Katainen visited Helsinki the day after the Italian referendum, which led to a change of government. 

Populism = instability = threat to employment

Populism makes decision-making difficult both nationally and within the European Union. And populism was also a factor in the American presidential election, Katainen said.

“All political situations which create more insecurity are poison both for entreprise and economic stability.”

Populism makes it harder to make decisions and it increases insecurity. This shows in member states in the form of falling employment figures, and it makes it difficult to maximise citizens’ wellbeing, said Katainen.

A seasoned politician, Katainen understands there is a need to create an outside enemy – for instance the EU.

Jyrki Katainen underlines that the will of the people should be respected, be it in the UK or Italy. It could for instance be about a resistance to globalisation.

“People’s fears must be taken seriously. However, we need to explain better what we do, and for example why rules-based trade are vital to us."

The sustainable economy – does it bring jobs?

Vice-President Katainen has become a messenger for the sustainable economy. The former prime minister from the Finnish centre-right National Coalition Party is now talking about “green values”. 

One year ago the EU Commission passed a raft of legislation in order to stimulate Europe’s transition to a circular economy. Global competitiveness is to be increased, sustainable economic growth should be encouraged and new jobs created. 

But the National Institute of Economic Research in Sweden pointed out in a recent opinion piece in the DN daily that going for a circular economy will not lead to increased employment, nor will it help economic growth. The circular economy should instead focus on the most important task facing environmental politics – fighting climate change.

Jyrki Katainen maintains that the circular economy has a big potential for creating jobs.

“The circular economy has a unique potential,” according to Jyrki Katainen. For Europe, the Nordic region and Finland it could mean an enormous opportunity for positive change, which the European economy most definitely needs. If it is executed correctly, the circular economy has several positive consequences, for the environment, jobs and growth.

“Dizzying opportunities”

According to the EU Commission, the circular economy could save EU businesses 600 billion euro. That is eight percent of their annual turnover, and it could create 580,000 new jobs. 

Just by renewing waste treatment you could create 170,000 jobs before 2025, says the Commission. The circular economy presents dizzying opportunities, in other words, for sustainable growth, productivity and employment.

The EU Commission supports research projects looking at the circular economy to the tune of 650 million euro with the the framework of the research and innovation programme Horizon 2020. There is also financing for a transition to a circular economy to be had through the European Fund for Strategic Investments (EFSI), which is currently being extended, as well as through the EU’s structural funds. 

“Work” becomes something entirely new

There are great challenges in Vice-President Katainen’s sector. The world is changing rapidly, with many challenges to employment. 

“The finance crisis’ social and economic consequences are still being felt in Europe, despite the fact that employment figures are up,” says Katainen. Employment figures have increased three years in a row. The number of people in work has not been higher since 2009. Unemployment is down, but still at an historically high level. The EU economy has made a moderate recovery, with a growth of 1.8 percent for the union as a whole. 

“It is very possible that the term ‘work’ will change a lot in the coming years. Parallel with traditional jobs we see the emergence of new business models and new types of employment, for instance within the sharing economy.”

Digitalisation influences how we work. Changes to the labour market will also probably mean changes to the terms and conditions for how jobs are being carried out. It is therefore very important that people’s rights and duties are being understood correctly by all parties. 

Social pillar gives better labour market and social system

The planned EU Pillar of Social Rights aims to create a new economic and social approach within the EU. There should also be improvements to European labour markets and social benefit systems.

The aim is not to standardise social systems. But while the history and traditions of member states will be respected, employment and social benefit policies in member states should be steered towards the EU’s common principles.

Another major challenge and key to Europe’s development is professional skills and competencies, according to Katainen. 

“We must make sure that we can meet the needs for knowledge and the needs of the labour market. To improve employment rates it is key to secure skills and refresh occupational know-how. Education and professional skills must be prioritised. Member states must be encouraged to improve the quality of their education.”

Tripartite dialogue should continue

“Of course we need a functioning dialogue between the social partners. A social dialogue is important for a social market economy to function,” according to Katainen. 

Active participation from the social partners is crucial both in the EU and on a national level. Through it, you can find a basis for planning and executing an economic and social policy which looks to the future.

The European Pillar of Social Rights does not interfere in the social partners’ national rights. On the contrary, the social pillar recognises the key roles played by the partners, underlines Katainen. 

Useful Nordic cooperation

The Finnish Commissioner Katainen highlights how useful the Nordic cooperation is. Despite their different starting points, the countries in the Nordic cooperation have a great potential within the European Union. The Nordic Council of Ministers is already cooperating on a range of issues, for instance on common standards and regulations, notes Katainen.

“If the Nordic region became a more cooperative player, the Nordic countries could have even greater influence within the EU, and get more out of the union. The Nordic countries benefit from working together to reduce border obstacles and promote the freedom of movement for goods, labour and services. This strengthens Nordic competitiveness and employment. The Nordic cooperation is also a guarantor for easing and developing the freedom of movement.”

Promising new proposals on the freedom of movement

The freedom of movement of labour is a basic principle for the EU, and a major part of the internal market. The Commission is trying to protect the freedom of movement for labour, and to get rid of obstacles. 

“At the same time the Commission is aware of the new challenges and tries to address them. To avoid misuse we must find a balanced solution which maximises the benefits and minimise the unwanted consequences. The Commission is looking into different alternatives, where social benefit issues play one part.”

The idea is to create a more solid, better functioning and more integrated European labour market, explains Katainen.

“The freedom of movement of labour must be built on understandable and clear-cut rules. We must clarify how the social advantages emerge, and how we can take them with us.”

Commissioner Katainen wants to guarantee that pensions, for instance, can follow pensioners without any fuss when they move across borders. He promises new proposals on the freedom of movement of labour, perhaps as early as before Christmas.

In mid December the Commission made proposals to facilitate labour mobility, ensure fairness, and provide better tools for cooperation between member states on social security coordination.

The balanced proposal facilitates free movement of workers and protects their rights, while reinforcing the tools for national authorities to fight risks of abuse or fraud. It creates a closer link between the place where contributions are paid and where benefits are claimed, ensuring a fair financial distribution of burden between member states.