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BackThat is the title of an article by the American economist and Nobel Prize winner Paul Krugman. The plans of an European economic government also seem to be hooked on the idée fixe of competitiveness, associated with wage and government cuts. Austerity measures and the European economic government were the key topics of a conference, which had been organised by the European Trade Union Institute (ETUI) and the European Federal of Public Service Unions (EPSU) this week.
Heavily criticised among other was the first Annual Growth Report of the EU Commission. The Annual Growth Report would set central priorities, such as drastic state austerity measures, combating macroeconomic imbalances, flexicurity or the reform of pension systems. Poul Nyrup Rasmussen, President of the European Social Democrats, quoted Jacques Delors’ reaction to the Commission’s Annual Growth Report: “This is the most reactionary document ever produced by the EU Commission.”
Fair savings
“Fiscal consolidation”, says Karl Pichelmann, Senior Advisor of the Directorate-General for Economic and Financial Affairs of the European Commission, “is a fundamental condition for stability and growth.” Reducing public debt would be central to restoring the confidence of the financial markets. However, “growth friendly” expenditure should not be reduced, because the current savings should not undermine the long-term goal of full employment, underlined the Hungarian EU Commissioner for Employment, László Andor. EU Commissioner Maria Damanaki replied that too much emphasis was placed on the problem of national debt. New ways had to be found to finance growth and employment, for example the introduction of a Financial Transaction Tax, bank taxes or green taxes. A window to discuss these taxes had now been opened.
Debt reduction and growth
On the one hand, the radical austerity programmes in the Member States affect those who did not cause the crisis and the high national debt; on the other hand, there is the danger that the austerity measures will strongly curb economic growth. Jacques le Cacheux of the Economic Research Department OFCE/Sciences-Po Paris pointed out that the negative effect of public savings in a common economic area such as the EU would be far stronger. The savings, which would be necessary to achieve the target of the Commission, i.e. a 60% debt rate, would have a very negative impact on economic growth and employment. Experience had shown that debt sustainability cannot be achieved by reducing debt but by increasing growth.
The focus on competitiveness and the reduction of macroeconomic imbalances due to low wages was also discussed. There were clear signals towards lower wages, for example in the Franco-German 'Pact for Competitiveness' or the measures, which were demanded from Ireland and Greece, commented the General Secretary of the European Trade Union Confederation John Monks. “We cannot accept the situation, where people with the lowest wages have to pay for debts, which are the responsibility of the banking sector”, emphasised Bernadette Ségol, Regional Secretary of UNI.
Creating an economic government
Andrew Watt, Senior Researcher at ETUI regarded the will to create a European economic government as something positive. However, the proposals so far would give cause for concern. The trade unions should provide clear counterproposals, such as a Financial Transaction Tax, the fight against tax competition, a minimum income or investments in sustainable projects, demanded Bernadette Ségol. Conclusion: an alternative model for a European economic government would be necessary.
Further information:
ETUC: European 2020 Strategy - Facing the crisis: Is European employment policy up to the challenge?
Programme of the conference (Word Document)
Petition Financial Transaction Tax
Fair savings
“Fiscal consolidation”, says Karl Pichelmann, Senior Advisor of the Directorate-General for Economic and Financial Affairs of the European Commission, “is a fundamental condition for stability and growth.” Reducing public debt would be central to restoring the confidence of the financial markets. However, “growth friendly” expenditure should not be reduced, because the current savings should not undermine the long-term goal of full employment, underlined the Hungarian EU Commissioner for Employment, László Andor. EU Commissioner Maria Damanaki replied that too much emphasis was placed on the problem of national debt. New ways had to be found to finance growth and employment, for example the introduction of a Financial Transaction Tax, bank taxes or green taxes. A window to discuss these taxes had now been opened.
Debt reduction and growth
On the one hand, the radical austerity programmes in the Member States affect those who did not cause the crisis and the high national debt; on the other hand, there is the danger that the austerity measures will strongly curb economic growth. Jacques le Cacheux of the Economic Research Department OFCE/Sciences-Po Paris pointed out that the negative effect of public savings in a common economic area such as the EU would be far stronger. The savings, which would be necessary to achieve the target of the Commission, i.e. a 60% debt rate, would have a very negative impact on economic growth and employment. Experience had shown that debt sustainability cannot be achieved by reducing debt but by increasing growth.
The focus on competitiveness and the reduction of macroeconomic imbalances due to low wages was also discussed. There were clear signals towards lower wages, for example in the Franco-German 'Pact for Competitiveness' or the measures, which were demanded from Ireland and Greece, commented the General Secretary of the European Trade Union Confederation John Monks. “We cannot accept the situation, where people with the lowest wages have to pay for debts, which are the responsibility of the banking sector”, emphasised Bernadette Ségol, Regional Secretary of UNI.
Creating an economic government
Andrew Watt, Senior Researcher at ETUI regarded the will to create a European economic government as something positive. However, the proposals so far would give cause for concern. The trade unions should provide clear counterproposals, such as a Financial Transaction Tax, the fight against tax competition, a minimum income or investments in sustainable projects, demanded Bernadette Ségol. Conclusion: an alternative model for a European economic government would be necessary.
Further information:
ETUC: European 2020 Strategy - Facing the crisis: Is European employment policy up to the challenge?
Programme of the conference (Word Document)
Petition Financial Transaction Tax