Archive for June 8th, 2011

More on the Euro-plus Pact

This is a rush translation of another piece from ATTAC España, by Alberto Garzón Espinosa, titled “The new neo-liberal threat: “The Euro Pact“. As mentioned in the previous post, this is what people are mobilising against across Europe on the 19th of June. The writer identifies the pact as a means of intensifying neo-liberal policies. Remember that whenever you hear speculation in news media about whether an agreement has been reached. Assuming you’re not a member of a wealthy elite, the agreement reached will involve taking you to the cleaners.

La nueva amenaza neoliberal: “El pacto del euro” | ATTAC España

As many of you will know, I am of those who consider that the economic crisis that afflicts us is neither a temporary accident nor part of an economic cycle that supposes that recovery will necessarily come along sooner or later. In my view we are living through a structural crisis, which furthermore is not just economic, and the resolution of which will depend on the relation between political forces.

I believe that of all the possible scenarios unfortunately the most probable in the short term is the one that involves an intensification of neoliberalism, and as such, the maintenance of a permanent crisis. And it is this way because neo-liberal measures that attempt to recover private profitability -affected by the crisis- will not be successful precisely because they consist of depressing even further the consumption capacity of families and State.

The structural adjustment reforms that are being applied across all of Europe are bringing us into a new situation of social regression which, by the way, will also be what continues to feed the unrest that is bringing people out onto the streets these days. Throughout this process, applied by national governments but directed at the end of the day by the large economic powers (banks and big business), we are going to lose rights and of course living standards as well.

The next phase of the neoliberal adjustment plan is the Euro Pact. A pact against which society must position itself clearly, and no union should cede an inch on this. To lose in this trench would be to enter a new Middle Ages. However, what are the basic points of this pact. Here follow the most prominent:

Evolution of wages in parallel with productivity. It is a matter of freezing the present relationship between wages and productivity, without taking into account, by the way, that during the last decades productivity has risen much quicker than salaries. The final objective is to improve the competitiveness of the economy as a whole, and the demand will be “to guarantee that the fixing of wages in the public sector contributes to competitiveness efforts in the private sector. This involves, as Toledano notes in a highly recommended article, that public sector wages fall in real terms so that private sector wages fall afterward.

Job stimulus via fiscal reforms while maintaining total tax revenues. This means that direct taxation will fall and indirect taxes will rise. We will probably see an increase in VAT and a decrease in social contributions. Given that social contributions are part of wages, we are faced with yet another cut to wages.

Public finances. Reforms in the pension system, which as we already know has been partially applied in Spain but which will continue in the years to come. Furthermore we will enter a period of more intense questioning of health and public education, and we will see measures such as Copago [Co-payment in English – HG] (which should be called Re-payment), cuts in social provisions and many more privatizations (let us remember that those of RENFE, AENA and the Lotteries have already begun).

Financial Stability. Struggle against fraud, which is an appropriate measure but one of which we must be suspicious (will fiscal paradises be included), and co-ordination of fiscal policies but without establishing a Fiscal Union as would be most appropriate. Moreover, we will probably see this co-ordination as downward convergence.

Control of the deficit. This is one of the greatest aberrations of the pact at a legal level. States will commit themselves to establish by law, or even constitutionally, measures that limit the fiscal deficit. That is, they try to armour-plate, via legislation, against a certain range of economic policies. This is something which, while not unfamiliar (the Stability and Growth Pact contained it), is no less acceptable for that.

In short, we are facing one more step in the intensification of neoliberalism and towards the ravine of extreme social regression. Very difficult times are approaching for lower and middle classes, and we will witness a stagnation of the crisis which will be at least as long and deep as these neoliberal policies last themselves.

In my opinion the first thing the left must do is resist. And resist means recognising that there is no social pact that is valid and that only the immediate withdrawal from all these measures and pacts is acceptable. Secondly the left has to build. And this means aiming for a new model of Europe radically different from the one that dominates today, and this involves leaving behind the antidemocratic character of current institutions and recovering the democracy that has been kidnapped by the economic powers. The resistance movements across Europe must co-ordinate themselves to build an alternative model of society based on left principles. And to do all this we must concentrate in reversing the present relation of forces, dedicating our energies to finding points in common among the “multiple lefts” and abandoning the always horrible sensation that we like having enemies more than having friends.



Pacts Against Europe

This last number of weeks I’ve been deliberately avoiding broadcast media because of the feeling of utter repulsion it provokes, but last night I was driving back from the city centre and, in a moment of weakness, turned on the Late Debate on the public broadcaster.

If I recall correctly, the panelists were: a Fine Gael TD, a Fianna Fáil TD, a political correspondent of the Irish Independent, and a Sunday Times columnist. Under discussion, for the part of the show that I caught anyway, was the upcoming Presidential election. I doubt I have ever heard such an egregious example of sterile drooling posing as informed political debate. The degree of ideological uniformity of the panelists, combined with the utter irrelevance of the subject matter to urgent political reality, made me long to chew down hard on the steering wheel.

I am guessing that the presidential election –which is of no real import to people’s lives, beyond coating the State in a Hello! Magazine-style lacquer,- will seize the imagination of news outlets from here to October, affording a cornucopia of experts in vacuous commentary to crowd out, once again, other far more pressing matters of popular agency.

I am also guessing, since I have not been paying attention, that there has been scant coverage devoted to the massive protests taking place in Greece at present, and in so far as such coverage exists, it is only in indirect terms, or rather, in terms that identify with power: of problems and challenges faced by the government in going up against the Greek population.

There was something of a fad a little while ago for spry discussion of the passivity of the Irish population in the face of overwhelming austerity measures. But that was before the concentrated popular resistance now on display in Spain, Greece and elsewhere, and the process of re-politicization underway in those countries. It hasn’t happened yet in Ireland, not by any stretch of the imagination.

But we may never see that sort of complacent gloating again when the spectre of popular resistance looms so close. Not even a political space as sterile as Ireland can be inoculated against what has happened in Tahrir Square, the Puerta del Sol, Syntagma Square, and now, it seems, Taksim Square in Istanbul. The striking ideological uniformity of Ireland’s political media apparatus will not keep this under wraps much longer. Ní féidir leo.

There will come a point when substantial numbers of people, jarred by the effects of disciplinary austerity, will begin to ask themselves more basic questions than the likely permutations of interest rate cuts and corporate taxation policies or whether Our Lobbyist In Brussels of the bogus civil society campaigns carries the right amount of gravitas to plant shrubbery alongside visiting dignitaries.

Questions like “What the fuck am I doing?” and “Who the fuck are these people deciding my life for me?” There will be a moment when the wheedling speechifying in favour of destructive measures ‘for the good of the country’ will be recognized for what it is: a mask for ‘dictatorial leadership’.

What starts off as a slow drip will end up as a river bursting its banks. I am convinced of this. Precisely how it will happen –what will be the inciting event and what form the public reaction will take- I don’t know.

People are planning mass protests for the 19th of June against the Euro Pact. In Ireland, hardly anyone knows what the Euro Pact, or the Euro-Plus Pact is. Lots of people may have only the vaguest notion of political leaders getting together to sort things out. If this is indeed a true reflection of people’s perception, it is precisely how political leaders and ruling elites want it. There will be protests in Ireland too, most likely. Maybe they will capture public imagination, maybe not. But these, and other demonstrations and campaigns, will keep chipping away at the brittle edifice that keeps people contained in passivity and disorientation. And once it cracks, it will crumble to bits.

Below is a translation of a piece on the forthcoming Euro Pact, from Juan Torres López, an economist and scientific adviser to of ATTAC España. In it he sets forth precisely what the agenda is for this project, the interests it serves, the effects it will have, and how it all boils down to European political elites collaborating with banks and big business against the population. Everyone know whose side Ireland’s political class is on: they campaigned for it –and lied for it– in two referenda. That may come back to haunt them yet.

The Euro Pact

The leaders of the 17 member states of the Eurozone have agreed a series of measures which they claim will allow them to tackle the problems of the crisis and the debt but in reality these are based on a false premise and on decisions that have nothing to do with the real problems that are producing unemployment and stagnation in Europe. But yet again they serve as justification for adopting policies that are in the interests of the banking sector and large European businesses.

The starting point of the Pact is that to tackle the debt that grips Europe it is necessary to raise the competitiveness of national economies and that this can only be managed by reducing labour costs.

The idea is false because, as everyone knows, the debt that is causing grave problems for many European governments, businesses and families did not originate in European economies being very competitive or not at all, but as a consequence of other factors. Public debt because governments have had to confront the financial crisis caused by the international banking sector and large hedge funds. And private debt as a consequence of the loss of earnings produced through the application of measures, such as those that are being proposed once again, supposedly directed to achieving greater competitiveness by lowering wages. And both by the system of free movement of capital that takes resources out of productive activity and moves them into the unproductive financial economy, by the privileges held by the international banking sector in being able to create money by providing credit based on the deposits they receive from their clients, and by the complicit passivity of the authorities, when the financiers were swindling the world using financial products as sophisticated as they were risky and fraudulent.

The proof of this is that the crisis and indebtedness has affected countries and economies with a very different levels of competitiveness and the evident conclusion is that in order to confront the problems that are being created what one really has to do is put an end to the real factors that have caused it, which have nothing to do with excessive wages.

To agree simply, as they have done, that direct and indirect labour costs are to be lowered, can only achieve an impoverishing competitiveness, because by doing so neither productivity can be increased nor can greater value added activity be developed.  Its effect can be no other than to lower effective demand, and as such, lower production and employment because the strategy of lowering wages only favours those firms with a privileged position in the global marketplace or captive markets, but not small and medium businesses that usually operate in internal markets and depend on demand closer to spaces where they carry out their activity.

With this strategy of low wages the apparent aim is to guarantee that the exports of all European economies become more attractive but in truth there is an essential reality forgotten: the majority of external trade of countries in the Eurozone is between these countries themselves and it is impossible that all of them experience an improvement in their export position if across all of them there is a weakening of internal demand.

The only consequence of this strategy is that sooner or later there will be a rise, as has already occurred, in indebtedness, a result that is precisely what the banking sector wants and precisely what it has been seeking in recent years despite the fact that it is said that this is what needs to be avoided.

The Pact is based, moreover, on another idea that economic theory demonstrated to be false more than sixty years ago. I refer to the proposal to make labour cheaper and intervene in the labour market through flexibility measures in order to achieve the creation of more work, as I have referred to in other articles.

One can say, therefore, that the strategy agreed upon by European leaders is not going to favour job creation, as they deceive the citizenry by claiming, but will simply improve the conditions under which big capital, big European firms, intervene when it comes to hiring and using labour. And one can also say that this strategy will constitute, despite what is claimed and as can be seen in recent years, a powerful incentive to resort to a less productive use of labour, thereby generalising activities of lower value added and  turning Europe into a space of greater inequality, low wages and more precarious labour. With these measures the only advance is towards Europe’s specialization in the provision of unproductive services to the rest of the global economy, and not, as they cynically claim, as a space of productivity, excellence and knowledge, which are materially incompatible with generalized low wages and the shortage of social capital that they wish to impose.

Another package of measures approved in the Pact refer to the quest for financial and fiscal stability, an objective that they wish to reach through the control of waste, the prosecution of fraud and the constitutional limitation of public deficits, that is, also via a spurious procedure and which in the end will be inadequate and useless when the problems we are now experiencing manifest themselves once again.

The pact is unsuitable in this case for achieving what it proposes because it is false to say that in order to alleviate debt it is enough to limit spending, since this can turn out to produce a similar or significant drop in earnings (just as various empirical studies have shown) which ends up preventing the disappearance of imbalance and only manages to raise and stir up social shortcomings and even the lack of public resources that private capital needs to create activity and jobs.

The fight against debt on the part of European leaders is merely for show. The true cause of the brutal increase in debt has been the drop, in recent years, in the weight of wage incomes and of tax takings, which has been produced by the policies they have been advocating. What they call the struggle against debt is, in reality, a struggle against that part of public debt caused by State spending destined to the provision of public goods and services to the part of the population on lower incomes, not at all against public spending dedicated to subsidizing capital, the banking sector, or military industry. And, of course, it is not a struggle against debt based on the much more reasonable way of generating greater tax receipts through more efficient and just fiscal policies. The complete opposite.

But the Pact is not just useless and to be rejected on account of what it proposes, but, above all, on account of what it does not address.

The incompetence and incapacity of European leaders at such a difficult juncture can be seen mainly in their uselessness when it comes to addressing the four big problems that are really blocking European economies.

They are completely incapable of guaranteeing the functioning of the banking system and they have nothing to say about how to return the flow of credit to firms and consumers, which is what is immediately required so that economic activity recovers a pulse. Nor are they able to rein in the speculators who are those who really provoked the crisis and who, strengthened now by the silence and complicity of the authorities, are the ones who place the weakest economies in checkmate by making gigantic a debt problem that could have been resolved without too many problems through interventions and negotiations of the European Central Bank. Nor do leaders arrive at anything substantial when it comes to definitive, intelligent and disciplined regulation of the markets and financial relations, thereby becoming accomplices to the next crisis, which will undoubtedly be provoked by the maintenance of the status quo brought about by the present crisis we are suffering. And, finally, the leaders have nothing to say about the depressing effect their measures are going to have on demand at this practically recessionary moment.

In short, the Pact is another sign of European authorities’ deception of their peoples, and of their submission, whether by complicity or impotence, in the face of big financial and corporate powers that have taken ownership of Europe and are those that really dictate the policies that the leaders then make their own.

But it is a matter of a deception and a submission that manifests an even greater evil than those I have just pointed out. The Pact is an imposition on the peoples, a “diktat”, an irrefutable proof that the European citizenry has been robbed of having a say on its destiny, on the questions, such as economic ones, which most affect its life and its welfare.

The Euro Pact is not just a mistaken strategy for achieving what it proposes and a large concession to big capital. It is, moreover, an assault on democracy because once again very burdensome policies are being imposed on peoples without them having the possibility of indicating that this is what they wish. Once again, they have subjugated Europe to save financial powers and they have done it through the back door, preventing the peoples from having their say. The Euro Pact is, in reality, a pact against Europe because it is being agreed away from and against its citizens.

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June 2011