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The call by the Federation of European Trade-Unions to demonstrate on November 14th against austerity carries within it a message, the significance of which has been largely lost due to the pacific character of most of the protests.
One should nevertheless not lose sight of the fact that growing social unrest will constrain even further governments’ capacity to undertake the necessary structural reforms and integrate them within the framework of a cohesive European Union.
To demonstrate “at European level” against austerity is making the EU a convenient scapegoat despite trade unions being fully aware of the paltry resources at the Union’s disposal (1 per cent of GNP); the forthcoming budgetary negotiations will only aggravate this situation. Not a single trade union voice was raised in support of the Commission’s budgetary proposals, projecting a damaging “eurosceptic” image of the workforce at a time when it should be supportive of further European integration which alone can insure that its interests are well defended within a globalised world.
The poorly conceived accusation, blaming the Union for the current austerity, insinuates that it is the EU that has imposed the Treaty on Solidarity, Coordination and Governance which encompasses the (in)famous “golden rule”. This deliberately overlooks that the treaty was negotiated among 25 sovereign states and ratified by their respective parliaments (a process still incomplete). The Commission – as guardian of the treaties – limits its role to the implementation of decisions taken by participating Member States.
There is a growing consensus around the idea that austerity policies contain within themselves limits which, in the case of Greece and Spain may have already been reached, and which Italy, Portugal, Ireland or even the UK may be fast approaching. It is, nevertheless, obvious that the considerable sacrifices already accepted by their populations aim at fostering a stable base on which growth policies can be implemented, as was the case in Germany after 2002 and more recently in Latvia.
On the other hand, as detailed this week in an entire section of “The Economist” devoted to France, despite rising unemployment and falling competitiveness, the country has not yet engaged in fundamental reforms along the lines of its European partners. This does not prevent French trade unions, abetted by extremist parties and a significant part of the “presidential majority”, from waving the flag of solidarity among European workers and demanding alternative policies that would exonerate their members of any effort.
This “social” aspect of the crisis is fast becoming an additional impediment to the indispensable progress required in reforming the financial sector such as implementation of the Banking Union or the activation of the ESM, itself a precondition for triggering the new ECB intervention mechanisms that detractors of austerity are nevertheless unanimously calling for. It is becoming crystal clear that the proliferation of treaties, among alternative groupings of participants, in a continuous quest – in the name of pragmatism – of dubious compromises has lead to increased institutional deadlocks and current rumours proposing an EU budget approved by 26 Members is certainly not about to reverse the process.
Concomitantly, in a recent analysis of the budgetary costs of “federalising” the EU, Professor André Sapir (Bruegel/ULB) calculates that the amount of internal annual transfers would total some €220 billion (the main burden of which would fall on Germany representing at least 8 per cent of its GNP). He concludes that, regardless of the merits of the “federal” case, it is sheer utopia and does not warrant wasting time!, Unfortunately, his study fails to quantify the costs of an implosion of the euro and/or of the EU, which might well prove to be even greater, including for Germany.
If it is self evident that there can be no brutal transition to a fully-fledged Federal Europe, it seems preferable to explore first all the possibilities of a gradual evolution as envisaged in the roadmap outlined by President Van Rompuy. Confronted with a realistic, consensual and enforceable calendar built on the foundations of the significant reforms already achieved since the start of the crisis, financial markets might show less volatility insofar as the risks of extreme scenarios recede in favour of accepted rigour – undoubtedly painful – but nevertheless pregnant with hope of a sustainable recovery over time.
Time has come to stop hiding behind the technical and legal complexities – real but eminently solvable – that hinder the implementation of needed financial reforms. They serve mainly as convenient excuses to bury the fundamental social and political disagreements. When will François Hollande or David Cameron stake their supposedly strong personal pro-European convictions uncompromisingly on the leadership of their respective divided parliamentary majorities? To date, only Mario Monti has given a clear notice that he will withdraw the moment that the coalition, that called on him in the first place, were no longer to support his intensely reformist programme.
Alongside bankers, bosses and numerous other species of “haves”, no one seems to take notice that the political class in general, however generous their undisputed commitment to the public good may be, is one of the best protected constituencies and one least likely to suffer the effects of the crisis.
To paraphrase a campaign slogan of François Hollande: “The time for courage is now!”
Paul N Goldschmidt, Director, European Commission (ret); Member of the Advisory Board of the Thomas More Institute
Tel: +32 (02) 6475310 / +33 (04) 94732015
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E-mail: paul.goldschmidt@skynet.be / Web: www.paulngoldschmidt.eu