The economic and social consequences of lopsided policies focussed on lowering expenditure are fatal. Europe is threatening to fall apart as a result. Instead of the European crisis easing, it has worsened over the past two years and the credit risks which Germany is
shouldering have not shrunk, but have grown significantly.
The crisis from which Europe is suffering at the moment is very much a direct result of the financial market crisis. Since 2008, unemployment in Spain has increased from 11.3 % to its current level of 24.3 %, in Greece from 7.7 % to 21.5 %, in Portugal from 8.5 % to 15.4 % and in Ireland from 6.3 % to 15 %. 17.4 million people in the eurozone are currently jobless. Youth unemployment has risen to as much as 50 % in some member states. At the same time, the eurozone has continued to slide more deeply into recession. One of the main reasons for the rise in public debt in Europe is that states have been forced to rescue banks and assume liability for bad debts in the private sector. At a national level, Germany still achieved a balanced budget in 2008. Soon after, German debt rose rapidly to between 73.5 % and 83.2 % of GDP, notably due to the government taking over the newly-founded deconsolidated environments for banks. In Ireland, debt increases were much more dramatic – from less than 50 % to more than 100 % of GDP. Now the time has come to reduce this debt. In Germany, however, this must be achieved without putting further burdens on the individual Länder exceeding the agreed measures to reach the debt brake in 2020. On the contrary, we must give the Länder assistance, including improved refinancing offers, to cope with this task. Furthermore we must get those who have caused and benefited from the crisis to bear some of the costs. In Ireland and Spain, particularly, the banking sector was and still is the core of the problem. If we are to succeed in regaining stability in Europe, we are going to have to learn our lessons from the financial market crisis.
Excessive debt makes individual states dangerously dependent on financial markets and is antisocial in the long term, as more and more of the taxpayers’ hard-earned money is passed on to investors in the form of rising interest payments. Therefore, debt rules in line with the present economic situation and which aim to support sustainable budgets would seem to make sense on a pan-European scale. It will only be possible to reduce debts permanently, however, by bringing dynamism to the economy and achieving growth in new innovative and viable sectors.
What we need is to set our future course towards the real economy: less speculative and short-term skimming of investment earnings, more innovative added value in production and production-related services, more investment in education, research and development, and greater investment in those infrastructures which promote structural change, for example the urgently needed new electricity grids. This course requires determined regulation and suitable taxation of the financial markets. Investments in growth should not be allowed to lead to new government debt. Financing for such measures can be secured in the form of financial transaction tax.
I. ACT NOW – TO CREATE GROWTH, EMPLOYMENT AND NEW FINANCIAL MARKET MANAGEMENT
1. A pan-European emergency programme to combat youth unemployment: Combating the alarmingly high unemployment rate among young people in many European states must be given strategic priority in European Union policies and the policies of its member states. The fact that more than five million young people in Europe, many of them well qualified and educated, are without jobs not only endangers the social cohesion of our societies, but also threatens European unity, if the same young people who are expected to carry the European idea into the future come to associate Europe mainly with unemployment and social service cuts. For this reason, binding targets and measures to combat youth unemployment must be agreed upon quickly and on a Europe-wide basis. Our aim must be to reduce youth unemployment by half within the next five years. A European emergency programme to combat youth unemployment can be financed at short notice by utilizing unallocated resources, especially from the European Social Fund (ESF). Parallel to this, the member states must also make a firm commitment to address the issue. First and foremost, political priority must be agreed upon and applied to the following:
- facilitation of mobility within Europe, especially for young people seeking employment, among other things by improving recognition of qualifications and establishing a mobility fund which might offer language courses, for example;
- a “youth guarantee”, which ensures the right to obtain training or further training within four months of obtaining a school-leaving certificate, with the aim of providing vocational or company-oriented training leading to a qualification; incentives for companies to train young people or give them jobs, among other things by offering short-term subsidies from the ESF;
- a European “Alliance for training and jobs” geared specially towards young job seekers and in which the EU Commission gets trade unions and European companies together at round-table negotiations with the aim of finding jobs for young people through cross-border training and employment programmes;
- supporting young people to set up their own business;
- a quality charter for work placements and internships and
- expansion of the European voluntary service and the ERASMUS and LEONARDO programmes.
2. Effective measures to combat the financial market and banking crisis: The mistake made by conservative governments throughout Europe is that they have supported the banks instead of assisting the people affected by the crisis in states such as Greece, Ireland, Portugal and Spain. The indecisiveness of the conservative-liberal coalition in Berlin has resulted in the ECB being forced to buy state bonds worth more than 220 billion euro and give a trillion euro to the banks at an interest rate of 1 percent, with which they, in turn, can buy state bonds at a considerably higher interest rate. Banks are being restructured at the expense of the states and their taxpayers without introducing effective regulation and making provisions for future crises. This has to stop. We need:
- The introduction of a European financial transactions tax to contain speculation and provide growth impulses to Europe using the funds obtained from this tax – an estimated approx. 57 billion euro in Europe alone, according to the EU Commission.
- Liability on the part of the banks: bailing out of undercapitalised banks by providing state guarantees must stop. Banks which take high risks must be held liable for their actions and go broke if need be! It is not acceptable that the state pays the bill and relieves the banks of their liability for the results of gambling. We demand the separation of commercial banks from investment banks.
- Supervision of banks on a European scale to ensure that they are serving the real economy.
- Effective regulation of conduit banks.
- A European rating agency which evaluates the creditworthiness of states to counterbalance private rating agencies which currently pass judgement over the future of entire countries.
3. Swift implementation of a European growth and employment programme: Instead of placing all its cards on deregulation and cuts in social spending, the European growth and employment programme must be geared towards innovation, ecological renewal and investment in the real economy, especially in member countries in the south of Europe which have been most strongly hit by the crisis. The following core areas are central to this demand:
- Growth and employment by promoting technical innovation and higher public and private investment in the fields of education, research and development.
- Growth and employment by ecological industrial policies which promote the development of renewable energies, create modern energy networks, increase energy efficiency and support more local generation of energy, such as solar energy in southern Europe.
- Growth and employment by expanding modern trans-european infrastructure networks, especially in the fields of energy, transport and information technology. Some specific examples here are the development of renewable energy sources in southern Europe, including the DC lines required to transport electricity to central and northern Europe; the creation of a “North Sea grid”, i.e. central connections between the wind farms; modernisation of port systems of numerous European maritime traffic interfaces; introduction and expansion of programmes for energy-efficient building renovation
4. Creating a European investment and reconstruction fund: Investments in growth and jobs must take effect immediately, be well-targeted and must be able to mobilise a sufficient volume of funds. We demand an investment and reconstruction fund which is not financed by increasing national debt, but by redirecting existing funds, strengthening the EIB, by project bonds and, last but not least, by a tax on financial transactions.
- More effective use of the EU structural funds: In order to finance a fast and effective growth and employment programme, unused EU structural funds must be reallocated at short notice and the co-financing rules must be made more flexible. To achieve this, the EU Commission should reduce the co-financing quotas for a period of at least two years, where appropriate – as has already been done in Greece. Apart from this, it is important to ensure that the projects achieve much higher efficiency and that the countries are not burdened by ensuing costs at the expense of the public purse due to oversized projects.The EU structural funds which still have to be paid out by the end of 2013 amount to 232 billion euro. The amount paid to Greece alone is more than 13 billion euro, of which 4 billion have not yet been allocated to any specific projects and are still openly available. The available funds could be bundled in an investment and reconstruction fund. Similarly, money from structural funds which has not yet been used by the end of 2015 should not flow back into national budgets, but should be transferred to the common fund instead.
- Strengthening the European Investment Bank (EIB): The value of the EIB within the European institutional framework must be enhanced and, along with the ESM rescue package which provides loan assistance to individual states, this institute must mobilise more investments in the economy. By increasing its share capital by at least 10 billion euro, it must be empowered to participate more strongly in financing growth and employment than it has done up to now. In addition, consideration should be given to the idea of increasing capital by means of a special contribution which is not provided by all 27 EU members, but by an alliance of like-minded states in order to finance a growth programme.
- Insisting on taxation of the financial markets: Actors on the financial markets must contribute to the costs of the crisis by paying tax on financial transactions. If it is not possible to introduce a tax on financial transactions in all EU countries, it must be implemented within the eurozone as part of wider cooperation between like-minded states. The tax should be based on as broad an assessment as possible. It should be applied to gains from transactions with stocks and shares, bonds, foreign exchange and derivatives.
- Introduction of European project bonds: European “project bonds” are a suitable instrument for unlocking further financial resources to fund targeted European growth and innovation policies of this kind and to trigger the flow of private capital into investive uses.
5. Supporting public administration: In order to call up additional funds and put these to efficient use, the distressed member states must be given assistance in improving their absorption capacity. Here, the European Union’s “Phare Programmes“, which provided specific assistance prior to eastern enlargement can play a role. Modernisation partnerships between European municipalities (“twinning”) should be encouraged. The most important aspect will be to establish twinning programmes on the basis of jointly determined priorities.
II. RE-ORIENT EUROPE – BY AN ECONOMIC, FINANCIAL AND SOCIAL UNION
1. Establishing an economic and financial union: The EU’s economic and financial policies must be coordinated more closely and EU decisions must be more binding. This includes, in particular preventing a tax reduction competition which lacks solidarity and is destructive to all in the long run. What needs to be done is to establish the foundations for a common taxation evaluation system and minimum taxation rates. Tax evasion und tax avoidance must be combated at European level. Community legislation passed up to now in favour of strengthening the stability and growth pact and monitoring economic imbalances must be implemented and enforced. All EU member states must make their contribution if economic imbalances within the eurozone are to be eliminated. Binding common, democratically-determined economic, financial and social policies must bring sustainable, innovation-based growth to Europe and supplement intensification of fiscal monitoring. The major flaw of the monetary union, namely the lack of a common economic and financial policy, cannot be corrected until these aims are achieved.
2. Introduction of a European debt repayment fund: We should no longer exclude the possibility of introducing joint European liability for part of national debts. We need a European debt repayment fund with joint liability for outstanding national debts exceeding 60% of GDP, coupled with a debt-cut plan which is binding for the individual countries. Solidarity is important in order to secure the stability of our currency, however it should not be a one-way street and must be linked to efforts by the crisis-ridden states to achieve sustainable budgets.
3. Insisting on structural changes in the EU budget: Fundamental structural changes are needed in EU budget negotiations on the new financial framework and these must focus more on employment, growth, innovation, technology, education and research. At the same time, agricultural subsidies, which still account for more than 40% of the EU budget, must be reduced. The EU targets for R&D investment must be achieved throughout Europe. In addition, the EU budget for research and innovation must be raised to 10 % of the total EU budget. These aims must be supplemented by common European aims to increase national and European spending on education (at least 6% of the national GDP and 6% of the EU budget should be spent on education). The EU budget should mirror European growth strategy statistically, making it an important planning instrument for growth-oriented policymaking.
4. Industrial renewal – a strong common industrial policy: One of the lessons learned from the financial market and debt crisis is: countries with a stronger real-economy basis, with modern industries and production-related services have survived the collapse in growth better. We need to set the course towards a real economy. In Europe we need reindustrialisation which seeks to achieve new growth potential in future-oriented sectors and creates new value chains in leading markets such as mobility, infrastructure and efficient use of energy and resources.
5. Structural reforms allowing more rule of law and competitiveness: The EU member states must commit themselves to modernising their public administrations, especially to creating a functioning system of tax collection by national authorities, and achieving considerably higher tax collection quotas. In addition, public procurement must become more transparent and it must be ensured that public procurement contributes to realising social and ecological goals while supporting political goals in the field of growth. High market entry barriers which are not objectively justified and which block development of the single market must be eliminated.
6. Creation of a European social union: The European economic and financial union must be accompanied by a social union. This social union must be embedded in a set of social values which strongly uphold basic social rights, as already set down in the EU Charter of Fundamental Rights. These may not be subordinated to market freedom in a single European market, but must always have priority. This principle should be laid down in primary EU legislation by way of a social progress clause. Throughout Europe: the same wages shall be paid and the same working conditions shall apply for the same work at the same place. There shall be no wage or social dumping. In order to achieve this, the scope for employee participation in European companies has to be extended, the rights of European works councils must be strengthened and social dialogue between trade unions and employers at a European level must be expanded. It should not be possible to pit workers from different EU states against each other; on the contrary these should have the opportunity to represent their interests jointly.
7. A social stability pact for Europe: Above all, the European social union must be politically modelled in such a way that it achieves social aims and minimum standards that are binding throughout Europe. In a social stability pact, goals and principles for social and educational spending, measured in terms of GDP, must be set out, and minimum wages which are also living wages, measured in terms of the respective domestic average income, should be agreed upon in all EU member states.
Europe is capable of becoming the global pioneer of a sustainable model of prosperity which avoids the division of society on social issues and gains greater economic stability for more people thanks to better participation opportunities. This requires, however, that Europe has the strength and solidarity to act as one and take the correct course in face of the crisis. If it does not succeed in doing this, it threatens to disintegrate and fall back into a Europe of national interests. Europe only has a chance of prevailing in the global competition of ideas and values, politics and economy if it remains unified within the firm alliance of the European Union. We should all be aware that we can only carve out a bright future if we do this together – in a unified, democratic and social Europe.