To A Pact Audience

Latest piece on Euro Pact Plus. This one comes from Público, via ATTAC Spain. The authors are Daniel Albarracín, Bibiana Medialdea, Bruno Estrada, Manuel Garí and Nacho Álvarez. Incidentally, as the standard bearer for a liberal class that crows about how European it is by contrast with the muck savages who voted no to Lisbon twice, the last mention in the Irish Times of the Euro Pact Plus was on the 17th of May in a European Diary article by Arthur Beesley.

Of Kidnappers and Rescues

The Euro Pact Plus is the path chosen by EU government leaders for executing their Plan for Economic Governance. This involves, among other things, cutting back on wages and social spending, eroding systems of social protection and introducing greater precarity for labour. By consecrating constitutionally the corset of the Stability Pact, the Euro Pact Plus imposes a limit on the budget deficit (3% of GDP), on public debt (60%), and, along with this, a procyclical character to economic policy. It will mean the application of more regressive fiscal policies and a shrinking of the public sector. As a result the member states will see popular sovereignty reduced, along with room for movement in economic, social and labour policies, since they will have to adapt these to institutionalized criteria which, unless there is strong political and social mobilization, will be practically irreversible.

With the Euro Pact Plus, the financial bailouts of Greece, Ireland and now Portugal bring with them a wider process, if possible, of socializing debts. Especially private debt, which in Spain, using Bank of Spain figures for 2010, represented 87% of the total. This indebtedness, which depresses the economy with tax cuts and bailouts for the banking system, has increased public debt. It also carries with it a transfer of wealth: the creditors –especially the big central European banks- will have their loans paid back –their solvency given a blast of oxygen-; meanwhile, the new debts built up by the states bailed out by the European Union will be paid by the citizenry as a whole –at a cost of fewer public services and social entitlements- and by the wage-earning population –in the form of more unemployment, labour counter-reforms, and weakened incomes and labour rights.

These prescriptions open the way to economic depression, and submit us to the dictatorship of the creditors; and those who are responsible for the crisis will be its beneficiaries. There will be no correction –on the contrary- to the same policies that have exacerbated divergence and uneven development. And public debt will go up. Who, then, is saving whom? The chickens end up locked in with the fox.

There is no easy alternative. They present us with two options: bailout and adjustment measures, or market attack on public debt. How do we break this tragic dilemma? Tiny Iceland disobeyed: it rejected the social adjustment measures, it has not paid back the debt to the creditors, it has prosecuted those responsible for the crisis, it has nationalized the banking system, it has rejected the “bailouts” set out by their creditors, and it’s exiting the recession! Besides, whilst interest rates on public debt issued by Greece and Ireland have risen after their respective bailouts, those of Iceland have experienced a significant drop.

The European Trade Union Confederation, against the Euro Pact Plus, proposes the issue of Eurobonds to alleviate the abusive differentials in risk premiums. It also sets forth that the European Central Bank undertake a monetary policy that emphasises job creation, and for the development of a greater co-operation among member states.

The trade unions in the south of Europe go further, demanding a greater regulation of financial markets, a tax on financial transactions, the creation of a European debt agency – a European public treasury in embryo- and a greater public spending budget for the European Union. These measures would be effective in putting a stop to the recessionary bloodbath, since they would unblock the existing financial short-circuit, and moreover would allow the laying down of foundations for a more ambitious progressive reform.

But bringing a halt to the crisis in a way that benefits the majority would demand measures of even greater weight and audacity: a rejection of adjustment measures and of the socialisation of private debt, a public audit of expenditure items financed with public debt and of the conditions in which the latter was issued and acquired; restructuring and write-off of debt acquired through odious means –so that the creditors bear the main burden of the crisis-; recovery of public banking; renewed taxation of capital income, investing the new tax receipts in programmes of social utility and transition to sustainable energy, with the effect of economic reactivation and job creation.

What is needed is a profound change in European politics, which drives, not only a firm regulation of financial markets, but also international fiscal harmonization based in direct and progressive taxation, as well as an upward convergence in social and salary entitlements. The management of the deficit and the debt should be prefigured with a criterion that guarantees countercyclical investment policies for the recession we are living through, something that the Euro Pact prevents.

We must find a path toward a supranational alliance to rein in the European Union, to oppose and disobey the Euro Pact Plus to support and co-ordinate politically so as to begin to build another Europe. It is a matter, in sum, of applying pressure with firm basis and criteria in favour of the majority of society that the working class represents, in a direction diametrically opposed to what is, ever increasingly, a Europe at the service of big financial oligarchies.

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