The EuroMemorandum 2018 report titled “Can the EU still be saved? The implications of a multi-speed Europe” draws on discussions and papers presented at the 23rd Workshop on Alternative Economic Policy in Europe, organized by the EuroMemo Group in cooperation with the Department of Geography at Harokopio University and the Nicos Poulantzas Institute, from 28-30 September 2017 in Athens.
According to the report, nearly ten years into the crisis, after the EU opted for austerity and deregulation, the member states are still looking for the way out. The repercussions include the rise of ultra-right wing political forces across Europe which feeds into the anti-European popular sentiment they cultivate. Can the EU still be saved? The White Paper on the Future of Europe produced by the European Commission details five scenarios. However, these tend to overlook inherent tensions in Europe, e.g. heightened insecurity relating to labour markets, the role of finance in the post-crisis era, and the rise of a subaltern class across Europe.
The EuroMemorandum 2018 report critically analyses recent developments in Europe and emphasises the strong need for alternative policies. Below you can find a summary of the EuroMemo Group’s recommendations on marcoeconomic policies, monetary and financial policies, inequality and social crisis, the EU in a fragmenting intenational order and finally on environmental policies.
Marcoeconomic policies: debt overhang and sustainable growth and development
The Franco-German axis in European politics would appear to be re-emerging, although their leaderships do not share a common vision. President Macron’s idea to take a big leap towards a euro area fiscal union, enabling permanent fiscal transfers to countries disadvantaged by the Economic and Monetary Union (EMU) is opposed by the German leadership. From the analysts’ perspective, a likely compromise solution that enshrines the Fiscal Compact (fiscal chapter of the Treaty on Stability, Coordination and Governance) in EU law and does not at the same time provide a euro area Treasury with real fiscal resources, must be definitely avoided.
Also, such discussion needs to take into account the fact that in the EU, especially after the current crisis, the Community method -that emphasized the role of the supranational bodies- has given way to increased inter-governmentalism.
What is more, German interests have been shifting away from Southern Europe and towards Eastern Europe and the emerging markets. This poses severe obstacles for strategies aimed at progressive Europe-wide productive development. The rise of the far right across Europe and especially in Germany will have a negative influence on European developments, as governments will be under pressure to take nationalistic positions, while relations with Southern European countries recovering from the crisis will become more difficult.
As far as macroeconomic policies are concerned, while the economic situation in the euro area and the EU is undoubtedly improving, the failure to reregulate the global financial system in combination with bubbles fed by expansionary monetary policies has increased the risk of new financial crises. In the long-run a substantial EU-level budget is required in order to finance EU-wide investment as well as public goods and services and establish a counter-cyclical European-level fiscal policy which is able to support national fiscal policies. Furthermoe Instead of focussing only on overall growth, a successful strategy should also give priority to overcoming disparities between different regions and sectors.
Monetary and financial policies
On the monetary and financial front, problems are mounting as the use of quantitative easing in particular may be reaching its limits, while the failure to build a strong, stable financial system in the euro area, based more on public and less on private-sector financing, has led to a process of creeping dollarization in the euro area which will tend to limit the autonomy of EU economic policies.
Inequality and social crisis
After almost four decades of deregulation and privatization, the rise in inequality in Europe has been undeniable and dramatic. Both the personal and functional distribution of income have seen marked shifts away from the majority of citizens dependent on wages and salaries towards those who derive their income from capital. While the EU has sought to embed a social dimension into its policy-mix, it imposes no sanctions on the non-fulfilment of policy targets. What is more the potential to improve social welfare is affected by weak fiscal systems in several member states, notably in the member-states in central and eastern Europe with flat tax regimes.
The EuroMemo Group recommends therefore that social protection should be ensured by agreed benchmarks of fiscal viability and social needs; accordingly that flat tax regimes should be abolished in favour of harmonised levels of progressive taxation; that the disparities of economic and social performance among the EU28 should be addressed through financial transfers from richer to poorer member states, on condition, however, that the states concerned commit themselves to minimum standards of taxation and social protection.
The EU in a fragmenting international order
On the international front, during the past few months, several events have had a major impact on the European political and geopolitical stage, including the legislative elections in France, Germany and the Netherlands, the beginning of the Brexit negotiations and the Catalan referendum. However, the statements of the new US president have arguably struck the most. Donald Trump advocates the break-up of the European Union, calling it a vehicle for Germany. He rejects the US commitment to open trade and favours a return to protectionism. If confirmed, this new protectionism advocated by Trump would mark a profound fracture in the liberal order and this could weaken the EU’s position in the world. It could also force the EU – and this is particularly true for Germany, the second largest world export economy – into some painful reconsiderations.
In today’s emerging multipolar world, Europe should maintain its distance from US foreign policy which it demonstrated during the recent Iran nuclear deal crisis, particularly regarding relations with Russia. Moreover, instead of taking the dangerous path of the arms race, the EU member states should use their resources to contribute to the economic development of the Eastern and Southern neighbours.
Alternative visions for socio-ecological transformation
The planet’s boundaries are being pushed to their limits at speed on numerous fronts, due especially to emissions of greenhouse gases and the depletion of natural resources. EU policy generally takes the green growth approach, but with limited investment stimulation. The
very low climate and energy ambitions for 2030 agreed by the member states in November and December 2017 will, if carried through, put way off track the trajectory for achieving even the EU’s own limited decarbonisation objective for 2050.
Alternative policies include much sharper cuts in emissions with longer-term commitments by the member states, accompaniedby concrete plans to achieve these; transformation of the economy to much lower use of energy andmaterials; support for local economies; taking advantage of the potential of public services topromote sustainability and transition; major reform of transport and mobility policies; and reorientation of the Juncker plan and European Investment Bank (EIB) funding generally towards much more investment inclimate change mitigation and adaptation.
To read the full EuroMemorandum 2018 report send an e-mail to info@euromemo.eu
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