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The shadow of austerity—and authoritarianism

Esther Lynch 12th December 2023

European trade unions are mobilising today in Brussels against the austerity which would follow reimplanted fiscal rules.

austerity,authoritarianism,trade unions,fiscal rules
Marine Le Pen—a survey published last week by Le Monde revealed a France increasingly accustomed to her far-right discourse (Obatala-photography/shutterstock.com)

The shock victory of Geert Wilders in the recent Dutch elections has been spoken of in Brussels as if a natural disaster. Some politicians have been clutching their pearls, in complete detachment from its social determinants. But the rise of the far right across Europe is a direct consequence of political decisions taken at European Union level.

The austerity imposed following the financial crisis of 2008 created a ‘doom loop’ of enhanced mistrust in the political system and more extreme voting behaviour, according to recent research. It finds that the far right is the main beneficiary of ‘fiscal consolidation’—a trend whose impact is heightened by a fall in turnout.

Austerity 2.0

Leaders should keep that in mind as they consider new fiscal rules for the EU—the pre-existing version having been suspended during the pandemic. The current proposal would require member states with a deficit above 3 per cent of gross domestic product to reduce their budget deficit by a minimum of 0.5 per cent of GDP every year.

That would mean 14 member states having to cut spending or raise taxes to the tune of €45 billion next year alone. This is austerity 2.0 and the outcome can only be fewer jobs, lower wages and further underfunding of public services.

What a gift that would be to the far right, with the European elections due in June—especially Marine Le Pen and her Rassemblement National. France is among countries that would need to cut even harder and faster to meet the new—and still totally arbitrary—targets. In its case, around €30 billion would need to be raised annually, a study by the Bruegel think-tank found.

Real concerns

The Identity and Democracy group in the European Parliament, which includes RN and Alternative für Deutschland, is already set to win its highest ever seats tally and could become the third largest group. All democrats should concentrate on the real concerns of working people. In Eurobarometer surveys carried out since the last European election, the economy and climate change have consistently emerged as citizens’ priorities for the EU.

It is however precisely these two issues—central to delivering a fair deal for workers—which the EU will not be able to address effectively under the reformed fiscal rules as envisaged. They are incompatible with the European Green Deal: when all member states need to scale up investment, they would prevent half of them from making the investments needed to meet the EU’s own targets for reduction of greenhouse-gas emissions. Just four would have the ‘fiscal space’ to realise their climate commitments under the Paris Agreement.

At a time when private investment is already in freefall due to record interest rates, strangling public investment—with its multiplier effects—would ensure another recession, with devastating social consequences. Recessions driven by austerity lead to a ‘significantly larger increase in the vote share for extreme parties than other recessions’, according to the research on its political costs.

Taking to the streets

The reimplanted fiscal rules would be bad for the economy, bad for the environment and bad for democracy. That is why thousands of working people from across Europe are taking to the streets in Brussels today to oppose a return to austerity and demand macroeconomic rules which put people and planet first.

The EU’s response to the pandemic showed what was possible when the political will exists. The suspension of the fiscal rules ensured, through investments which saved jobs and companies, that a health crisis did not become a long-lasting economic malaise. We need to build on the NextGenerationEU programme, which was an economic and political success, by making the investments required to ensure European companies are at the cutting edge of the green and digital revolutions.

Public investment must be protected by a golden rule, which provides fiscal space for the spending necessary to meet the EU’s own targets under the Green Deal and the European Pillar of Social Rights. Where they are necessary, debt and deficit adjustments need to be made in a sustainable way that does not sacrifice all other economic, social and environmental aims.

Sustainable solution

This is a once-in-a-generation opportunity to ensure our economic governance is fit for purpose. A further one-year extension of the ‘general escape clause’ suspending the rules is needed to give proper time to achieve a sustainable solution.

With the stakes so high, it would be irresponsible to rush into a reform. Get it right and Europe can raise living standards and the competitiveness of our companies while lowering carbon emissions.

Get it wrong and hand an early Christmas gift to Wilders and the rest of the far right across Europe. I urge leaders to learn the lessons of the past and prevent a wave of electoral, economic, environmental and social disasters.

Esther Lynch
Esther Lynch

Esther Lynch was elected general secretary of the European Trade Union Confederation in December 2022. She has extensive trade union experience at Irish, European and international levels, starting with her election as a shop steward in the 1980s.

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