Documentation: What future for the European Union – Stagnation and Polarisation or New Foundations? – BEIGEWUM

Documentation: What future for the European Union – Stagnation and Polarisation or New Foundations?

am 14. August 2015 um 10:39h

Pre­sen­ta­ti­on of the Euro­me­mo­ran­dum 2015


Mari­ca Franga­kis (Nicos Pou­lant­z­as Insti­tu­te, Athens)

Iván H. Aya­la (ICEI, eco­no­Nues­tra and Pode­mos, Madrid)

Eli­sa­beth Spring­ler (Uni­ver­si­ty of App­lied Sci­en­ces bfi Vienna)

Wer­ner Raza (ÖFSE)

Orga­ni­zers: ÖFSE, BEIGEWUM in coope­ra­ti­on with Wirt­schafts­po­li­ti­sche Akademie

Pho­to credit: Peter Reitmayr

Wer­ner Raza gave the gene­ral intro­duc­tion on the con­tents of the Euro­me­mo­ran­dum 2015.

The Euro­Me­mo is the annu­al report on the sta­te of the Euro­pean eco­no­my, issued and writ­ten by a net­work of hete­ro­dox and pro­gres­si­ve eco­no­mists and social sci­en­tists. The aim of the Euro­Me­mo Group is to con­tri­bu­te to a model of Euro­pean inte­gra­ti­on that is pro­mo­ting full employ­ment with good work, social jus­ti­ce with an era­di­ca­ti­on of pover­ty and social exclu­si­on, eco­lo­gi­cal sus­taina­bi­li­ty, and inter­na­tio­nal solidarity.

The main Are­as of this year’s report are: Macroeco­no­mic poli­ci­es and the alter­na­ti­ves to sta­gna­ti­on, finan­ce and the euro cri­sis, indus­tri­al poli­cy and the resha­ping of eco­no­my, social poli­cy and com­ba­ting ine­qua­li­ty, inter­na­tio­nal tra­de and invest­ment poli­cy – TTIP and the EU neigh­bour­hood policies.

Wer­ner Raza went in his pre­sen­ta­ti­on more into detail on the major con­clu­si­ons and recom­men­da­ti­ons rela­ted with the area of macroeco­no­mic poli­ci­es and the alter­na­ti­ves on sta­gna­ti­on. The ana­ly­sis is that aus­teri­ty poli­ci­es are still per­sis­ting at Euro­pean Uni­on level and have cer­tain­ly rein­for­ced eco­no­mic sta­gna­ti­on and par­ti­cu­lar in the cri­sis coun­tries of the Euro­pean peri­phe­ry also decli­ne. Most import­ant­ly they also have exac­ted a hea­vy social toll from the EU citi­zens. The reco­very amongst the Euro­pean coun­tries is descri­bed as weak, fra­gi­le and uneven. EU poli­ci­es are trap­ped in the wrong theo­ries (sup­ply-side eco­no­mics, struc­tu­ral reforms, and com­pe­ti­ti­ve­ness) and bad insti­tu­ti­ons that make it very dif­fi­cult to escape this poli­cy stra­te­gy (SDG, Fis­cal com­pact). Alter­na­ti­ve poli­ci­es pro­po­sed by the Euro­Me­mo Group are:

-        Sub­sti­tu­ti­on of fis­cal com­pact for a fis­cal poli­cy agree­ment focu­sed upon the agree­ment focu­sed upon the pur­su­it of high and sus­tainab­le levels of employment

-        Effec­ti­ve federal level fis­cal poli­cy with redis­tri­bu­ti­on bet­ween rich and poor regi­ons, incre­a­se size of EU bud­get from 1% cur­r­ent­ly to 10% long-term

-        Euro­pean wide sys­tem of unem­ploy­ment insurance

-        Crea­ti­on of new EU Public Invest­ment Bank, annu­al invest­ment pro­gram­me of 2% of EU GDP over 10 year peri­od for fun­ding social-eco­lo­gi­cal transformation

-        Tax on all finan­cial tran­sac­tions, uni­form EU cor­po­ra­te tax rate, clo­sing of off­shore finan­cial cen­tres and ECB fun­ding for public investment

Mari­ca Franga­kis addres­sed the cur­rent eco­no­mic situa­ti­on in Greece and the poli­ti­cal agen­da of the new government, cal­led in her pre­sen­ta­ti­on “A crack in the poli­tics of aus­teri­ty”. This is seen as a his­to­ri­cal­ly important moment in the deve­lo­p­ment of the crisis.

First Franga­kis gave an over­view on the hege­mo­nic nar­ra­ti­ve of the aus­teri­ty poli­tics. It’s basi­cal­ly the idea that a sta­te has to be run a fami­ly house­hold, which is against eco­no­mic logic and the­re­fo­re wrong. This nar­ra­ti­ve ser­ved the pur­po­se of jus­ti­fy­ing the flow of funds to the finan­cial mar­ket, the sup­port pro­vi­ded to the banks, via governments of indeb­ted coun­tries and at the same time to deflect pres­su­re for finan­cial poli­cy reform. In imple­men­ting this nar­ra­ti­ve into eco­no­mic poli­ci­es, it was a “use­ful” cri­sis in Greece. Befo­re the cri­sis the­re was a fast rate of expan­si­on, a com­bi­na­ti­on of domestic, Euro­pean and glo­bal fac­tors then led to the unsus­taina­bi­li­ty of Greece’s public finan­ces. The nar­ra­ti­ve of “Pro­f­li­ga­te government – Lazy workers” came in and aus­teri­ty poli­tics were deploy­ed. The loans of 2010 and 2012 were con­di­tio­nal on imple­men­ta­ti­on of seve­re fis­cal aus­teri­ty, dere­gu­la­ti­on and pri­va­tiz­a­ti­on. Addi­tio­nal­ly more than 80% of this 237 bil­li­on Euros were chan­nel­led to Euro­pean and Greek banks. The data on the GDP and its com­pon­ents shows clear­ly that the Greek eco­no­my is shrin­king. The Aus­teri­ty poli­cy fai­led even in its main aim, to put the public finan­ces back to order. The public defi­cit as well as the debt of Greece is rising the last years. The debt as per­cen­ta­ge of the GDP has risen from 103,4 in 2006 to 174,9 in 2013, the defi­cit from 6,1 to 12,2 in the same period.

This goes tog­e­ther with unpre­ce­den­ted social hardship: Unem­ploy­ment, pover­ty and ine­qua­li­ty has risen. Unem­ploy­ment went up from 8% of the labour for­ce in 2007 to 18% in 2011 and 28% in 2013; two-thirds of the unem­ploy­ed have been without a job for over one year. Cer­tain groups are hit the har­dest: In 2013, the unem­ploy­ment rate for Women was equal to 31% and to 58% for the under 25s, from 16% and 23% respec­tively in 2007. The incre­a­sed fle­xi­bi­li­ty of the labour mar­ket has resul­ted in a steep incre­a­se in indi­vi­du­al and firm-level work con­tracts and in a decli­ne in pri­va­te sec­tor wages by more than 30%. Also Pen­si­ons are redu­ced by more than 30%. The­re were huge cuts in public health and edu­ca­ti­on expen­dit­u­re. More than one-third (36%, 2013) of the popu­la­ti­on is below the pover­ty line and/​or severely mate­ri­al­ly deprived.

Accord­ing to the­se huge eco­no­mic and social chal­len­ges the Poli­ti­cal sys­tem has chan­ged too, in a way that is uni­que to Greece. The two estab­lish­ment par­ties PASOK and New Demo­cra­cy went down from 77,4% of the votes to 32,5% com­pa­ring the natio­nal elec­tions 2009 and 2015. SYRIZA went up from 4,6% to 36,3% in the same peri­od. The­re was a gre­at shift to the left becau­se the peop­le wan­ted an alter­na­ti­ve way out of the cri­sis. What has also hap­pen­ed (like in many other coun­tries) is an upri­sing of the fascist move­ment, named Gol­den Dawn.

The poli­ti­cal agen­da from SYRIZA con­sists of a Natio­nal Recon­struc­tion Plan, growth initia­ti­ves and the aim to have a huge part of the public debts writ­ten-off. On the Euro­pean level they demand a quan­ti­ta­ti­ve easing and bond buy­ing by the ECB, as well as exclu­si­on of public invest­ment pro­gram­mes from the Sta­bi­li­ty and Growth Pact. One main working field of the SYRI­ZA-led government are of cour­se the nego­tia­ti­ons with its credi­tors. They are basi­cal­ly chal­len­ging alo­ne the aus­teri­ty hege­mo­ny of the Euro­pean lea­ders and eli­tes. The time­ta­ble of debt repay­ments in 2015 is qui­te tight and repres­ents also the sche­du­le for the negotiations.

In the end of her pre­sen­ta­ti­on, Franga­kis points out major evi­den­ces on the crack in the aus­teri­ty poli­tics. The short­co­mings of the sin­gle cur­ren­cy regime and the ine­qui­ties of the EU’s cri­sis respon­se have been much dis­cus­sed. The new, SYRI­ZA-led government pro­vi­des the poli­ti­cal link inter­me­dia­ting bet­ween the public dis­cour­se and the decisi­on-making pro­cess. Major steps for­ward are made: reco­gnis­ing that the pri­ma­ry sur­plus is sub­ject to the “eco­no­mic cir­cum­s­tan­ces” (EG State­ment 20/​2/​2015) and respec­ting Greece’s poli­ti­cal sov­er­eig­n­ty. Aus­teri­ty is being chal­len­ged in the minds and hearts of peop­le. Final­ly the public dis­cour­se is ope­ning up to new pos­si­bi­li­ties and to radi­cal ideas.

Iván H. Aya­la addres­sed the eco­no­mic situa­ti­on in Spain and the pro­spects of an alter­na­ti­ve poli­ti­cal agen­da. An alter­na­ti­ve eco­no­mic nar­ra­ti­ve is brought into the poli­ti­cal sphe­re by SYRIZA as well as the Pode­mos. During the ongo­ing cri­sis it brings the pos­si­bi­li­ty of crea­ting a new eco­no­mic theo­ry that is poli­ti­cal­ly use­ful for the majo­ri­ty of the peop­le. He poin­ted out out how important the con­ver­sa­ti­on bet­ween peri­pheral and cen­tral coun­tries wit­hin the EU on this mat­ter is, becau­se the gene­ral pro­blems can just be tack­led through com­mon actions. Orga­ni­zed strugg­le for Eman­ci­pa­ti­on is nee­ded to resist the neo­li­be­ral trans­for­ma­ti­on of sta­tes. His main the­sis in the pre­sen­ta­ti­on was that the con­fi­gu­ra­ti­on of the eco­no­mic sys­tem in the Euro­zo­ne has a defla­ti­on bias that needs to be rever­sed. The main eco­no­mic argu­ment for that is impor­t­ance for the eco­no­mic per­for­mance: The cur­rent sys­tem trans­forms a power­ful eco­no­mic zone into a vul­nerable, finan­cial­ly fra­gi­le regi­on. It doesn’t allow the coun­tries to use their full eco­no­mic poten­ti­al with major con­se­quen­ces. Poli­ti­cal­ly spo­ken Euro­pe has a long Histo­ry in the fights for eman­ci­pa­ti­on of human bein­gs. The pro­gres­si­ve government in Greece and may­be soon also in Spain, nego­tia­te eco­no­mic mat­ters on behalf of the peop­le not the elites. 

He was con­cen­tra­ting on one major issue: The alrea­dy men­tio­ned defla­tio­na­ry bias of the Euro­pean mone­ta­ry sys­tem. The Euro­pean mone­ta­ry uni­on is as a who­le unsus­tainab­le on the long run. The Euro­pean Uni­on has a com­mon cur­ren­cy, but it has not the func­tions and mecha­nisms to that cur­ren­cy. The mone­ta­ry poli­ci­es have gone so far from the cent­re to the peri­phe­ry that pro­cess needs to be rever­sed. Now poli­tics in this area are main­ly focu­sed on the needs of the indus­tri­al groups, lob­bies and eli­tes. Also the libe­ral ideo­lo­gi­cal pre­fe­rence for com­pe­ti­ve­ness plays a huge role. As a hint he refers to the use of deva­lua­ti­on as an adjus­t­ment tool for not so com­pe­ti­ti­ve eco­no­mies like in Spain befo­re they ent­e­red the Euro­zo­ne. The­se eco­no­mies have as opti­ons just a chan­ge the infla­ti­on rate or the mini­mum wages and that is also what hap­pen­ed during the cri­sis when the wages went down dra­ma­ti­cal­ly. Ano­t­her issue are the cen­tral banks, which are inde­pen­dent from demo­cra­tic con­trol but not from lob­bies and the finan­cial indus­try inte­rests. This has crea­ted a huge fra­gi­li­ty and also depen­dence of the Euro­pean mone­ta­ry sys­tem upon the deve­lo­p­ment of the finan­cial sec­tor. Aya­la made clear this cur­rent mone­ta­ry poli­cy that con­forms to the first part of the defla­tio­na­ry sys­tem of the Euro­pean mone­ta­ry uni­on is use­ful and effec­ti­ve in main­tai­ning low infla­ti­on, but com­ple­te­ly useless in any other task of a cen­tral bank. The gene­ral pro­blem of defla­ti­on in Euro­pe comes from a lack of demand crea­ted by rising ine­qua­li­ties and the aus­teri­ty poli­ci­es. When it comes to the fis­cal part, based on the macroeco­no­mic data, the so-cal­led expan­sio­na­ry aus­teri­ty made the situa­ti­on much worse for gre­at parts of the popu­la­ti­on. This matches with the explana­ti­ons alrea­dy given in the pre­sen­ta­ti­on of Mari­ca Franga­kis when it comes to unem­ploy­ment and defi­cit rates. Aya­la sum­ma­ri­zes that the defla­tio­na­ry bias cau­sed indus­tria­liz­a­ti­on, finan­cial fra­gi­li­ty and rai­sing ine­qua­li­ty in Spain.

On a poli­ti­cal level, Pode­mos aims – also refe­ring to this ana­ly­sis – a rede­mo­cra­tiz­a­ti­on in the socie­ty and a recon­struc­tion of eco­no­my. It is nee­ded to recon­struct the pro­duc­ti­ve capa­ci­ty to pro­mo­te social jus­ti­ce and also the effec­ti­ve­ness of the Euro­pean mone­ta­ry sys­tem. This can only be done with a role of the sta­te, the public sec­tor: A fis­cal reform is nee­ded. Through this approach, a dif­fe­rent future for the peop­le in Spain can be achie­ved, fur­ther years or cen­tu­ries of aus­teri­ty can­not be the eco­no­mic and poli­ti­cal option.

Eli­sa­beth Spring­ler reflec­ted on the ques­ti­on whe­re Euro­pe stands right now. The­re is a coun­ter-dis­cour­se on alter­na­ti­ves to the hege­mo­nic aus­teri­ty poli­tics, but still the domi­nant poli­cy para­digms are wit­hin this line of argu­men­ta­ti­on. Spring­ler sums up the cur­rent situa­ti­on and the argu­men­ta­ti­ons given by the spea­kers befo­re in order to wrap it up into a more hete­ro­dox framework.

The Euro­pean dream seems to beco­me a night­ma­re: Uneven deve­lo­p­ment, incre­a­sing deploy­ment and a situa­ti­on whe­re we somehow dis­mant­le our wel­fa­re sys­tems. The­se issu­es are seen in all mem­ber sta­tes of the EU, just that some sta­tes in the peri­phe­ry seem to be worse off than the others. But this does not mean that coun­tries like Aus­tria and Ger­ma­ny are not suf­fe­ring from the same pro­blems. What was mana­ged to do on a Euro­pean level is to keep up the situa­ti­on and not have a com­ple­te break­down, but not at all the­re was shown an alter­na­ti­ve for the future. Bes­i­des the social and eco­no­mic dimen­si­on, she points again to the poli­ti­cal deter­mi­na­ti­on: By the EU insti­tu­ti­ons them­sel­ves, but most­ly through the poli­ti­cal pro­po­sals from poli­ti­cal par­ties towards the EU.

The three main ele­ments from the pre­sen­ta­ti­ons befo­re were fis­cal, mone­ta­ry and wage poli­ci­es. As a fur­ther important point she notes that in Euro­pe a way to com­bat the pro­cess of deindus­tria­liz­a­ti­on is nee­ded, this is not just a pro­blem of the peri­phe­ry. The Euro­Me­mo 2015 also points out that we some­thing that is stron­gly reflec­ting invest­ment in inno­va­ti­on. What is nee­ded is a theo­re­ti­cal shift, also in mone­ta­ry poli­ci­es, that is more deman­ding. She refers also to the spe­cu­la­ti­ve ele­ment of the cri­sis, the finan­cial insta­bi­li­ty. The­re have been pro­po­sals like joint regu­la­ti­on, but is in this sen­se a new mone­ta­ry para­digm enough and moving towards the right direc­tion? All the mea­su­res seem to boost the finan­cial mar­ket, not pro­mo­ting the real eco­no­my. At the same time, coun­tries like Greece and Spain are put into a kind of death trap, whe­re they stay being depen­dent from future money of the Euro­pean Cen­tral bank and finan­cial plans by the EU or the IMF. So the ques­ti­on is what can be done to incre­a­se the pro­spect and the posi­ti­ve ele­ments that are seen in real eco­no­my. Wage poli­ci­es were the only mecha­nism left for the peri­phe­ry to stay com­pe­ti­ti­ve, which was hea­vi­ly used. From a hete­ro­dox point of view, the demand is the inte­gra­ti­on of social insti­tu­ti­ons and tra­de uni­ons in this pro­cess to com­bat also the lowe­ring of the house­hold capa­ci­ty to consume.

Bes­i­des this eco­no­mic back­ground, the­re stands the state­ment of “some­thing has to be done”. The mem­ber sta­tes have to come up with a new plan, Greece and Spain were the coun­tries who came up with an alter­na­ti­ve that needs the sup­port from the other sta­tes as well. In Aus­tria for examp­le the­re is a huge dis­cus­sion about resha­ping the tax sys­tem and also a new sys­tem of bai­ling in the finan­cial mar­ket. That could be an oppor­tu­ni­ty to stay in line with the­se coun­tries and also focus in other are­as than aus­teri­ty to get tog­e­ther a who­le eco­no­mic packa­ge on the way. This leads to a new pic­tu­re of the EU, whe­re all mem­ber sta­tes have their task in figh­t­ing against the exis­ting regime.

Links to the video documentation:


Panel dis­cus­sion


Pre­sen­ta­ti­on Raza

Pre­sen­ta­ti­on Frangakis


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