🟡 The Economy Brief – EU's work ‘dignity’ goal might be soon over

The European Commission may try to downplay the recent opinion of the European Court of Justice’s advocate-general, which could see the EU's minimum wage directive scrapped, but it should be concerned instead.

The minimum wage directive, adopted in 2022, was one of the flagship initiatives of the last Commission, particularly popular among centre-left and employee-minded politicians.

After decades in which the EU was mostly known for liberalising markets and removing what it considered restrictions on the freedom of movement for goods and services – including some labour rights – the first von der Leyen Commission wanted to show that these times are finally over.

When the proposal was presented in 2020, von der Leyen even said the directive was about the “dignity of work" given “for too many people, work no longer pays.”

But wages are difficult to regulate at the European level, given the great differences in member states' traditions around collective bargaining and minimum wages.

The directive did try to account for that by differentiating rules to fit EU countries' existing systems and leaving much of the implementation up to national governments – to the extent that the directive became non-binding in large parts.

Still, concerns over its legality never fully disappeared.
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The European Commission endorses Hungary's plan to comply with the Union's budget rules on Thursday. The EU executive’s assessment of Hungary's 'medium-term' (i.e. four-year) fiscal plan had stalled amid disagreements between Budapest and Brussels over growth projections – with Hungary arguing that a stellar economic performance this year would boost its tax intake and cause its budget deficit to shrink. However, multiple "technical discussions" between Hungarian and EU officials led both sides to agree on a plan to reduce Budapest's deficit from 4.9% of annual GDP last year to 2.5% in 2026. Read more.

As German politicians hit the campaign trail ahead of a 23 February national election, they are ignoring the elephant in the room – the head of the country's leading economic institute said. Politicians look to be “afraid of the voter,” Clemens Fuest, president of the Munich-based Ifo Institute for Economic Research, told reporters in Berlin on Thursday. “It is not the challenges that are discussed, but the handing out of gifts,” he said, referring to the country's generous welfare state. Read more.

German Greens slammed over social security reform proposal. Critics say that the German Green's chancellor candidate, Robert Habeck's proposal to pay social security contributions on capital gains could reduce Germans' already low appetite for investing in capital markets. Christian Lindner, head of liberal FDP (Renew), spoke of an "attack" on millions of savers. In Germany, more than 40% of gross salaries now have to be paid in social contributions, which are shared between employers and employees. Read more.

German chancellor hopeful under fire for controversial take on steel industry’s future. Germany’s Chancellor candidate Friedrich Merz (CDU) casting doubts on climate-friendly steel production has sparked strong reactions from trade unions and political opponents, but his team says the conservative politician was “misquoted." Speaking at a conference of works councils in Bochum on Monday, Merz, whose centre-right CDU is leading the polls for Germany’s snap election, called into question the country’s efforts to reach climate neutrality in its large industrial sector. Read more.

Union chief slams Elon Musk’s influence in the EU. Esther Lynch, secretary-general of the European Trade Union Confederation, told reporters on Wednesday that the “extreme” political and economic views of the world's richest man must be “actively challenged” to prevent them from becoming normalised in Europe. “The fear is that unless his ideas are actively challenged, they will be seen as normal and commonplace,” she said. “They're not. They're extreme, and they will undermine European competitiveness.” Read more.

Frictions between the EU and China show no sign of abating amid persistent European concerns about state-subsidised Chinese exports and Beijing's growing economic and political ties with Russia. Relations between Brussels and its second-largest trading could also rapidly deteriorate when Donald Trump returns to the White House on Monday, according to analysts. “Without a doubt, EU-China relations are getting worse,” said Tobias Gehrke, senior policy analyst at the European Council on Foreign Relations. “And I think this is recognised by both sides.” Read more.

Underscoring these tensions, the Commission accused China on Tuesday of “systematically discriminating” against EU medical device manufacturers' bids for public contracts. Brussels said that Beijing’s introduction of a “comprehensive ‘Buy China’ policy” had disadvantaged EU producers of all medical device categories. “Openness needs to be reciprocal,” said Maroš Šefčovič, commissioner for trade and economic security. “Government contracts in the EU are open to non-EU countries, and we expect other countries to treat our companies with similar fairness.” Read more.