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EuroMemorandum Group*
European
Economists for an Alternative Economic Policy
in Europe
June 2005 After the
French and Dutch No to the Constitution: The EU needs a
new economic and social development strategy. The French and Dutch No to the Constitution opens the window for a thorough reflection and public discussion about the way in which the people want to live in Europe. The majority of voters have rejected the elitist project of a European construction, which subordinates the democratic lives and material well-being of the people to the rules of markets and competition. They perceived European policies in their real lives as a threat to their economic and social welfare, as source of increasing insecurity for their work and incomes, as mounting inequality and injustice and as an obstacle to relevant democratic participation possibilities in the process of shaping a society which allows them to lead a free and independent life. This perception is not based on a lack of understanding by the people or on insufficient communication from the side of the European institutions. It is fully justified because the increasingly neo-liberal economic and social policies of the EU and most member states have indeed contributed to high unemployment, economic weakness, growing social insecurity and rising inequalities in most member states across the EU. It is therefore quite reasonable to reject the undemocratic intention to elevate this increasingly contested pattern of failed and harmful policies into a constitutional imperative and thus stigmatise every attempt for changes as anti-constitutional. A Constitution should create the space for democratic discussion of and decisions on the policies most conducive to the welfare of the people and it should be open for changes of policies and institutional arrangements, if new knowledge and new political majorities emerge. The present draft has gone the opposite way and therefore it was good that it was rejected. The public debate which the French and Dutch No to the Constitution should stimulate throughout the Union will be comprehensive and include all areas of economic, political, social and cultural life. One central aspect will undoubtedly be the economic and social policies in the EU. As European professional economists who have since many years been criticizing the increasingly neo-liberal course of the EU and most member states we want to make the following remarks. We see three major groups of mistakes in the official and majority approach to European economic policies: Firstly the lack of a determined and effective
employment policy on the European and most member states levels. Monetary policy
is exclusively concerned with price stability, fiscal policies were constrained by the
imperative to pursue balanced budgets, the EU budget is too small to give an effective
stimulus for growth and employment and labour market policies continue in many cases
– with the remarkably successful exception of Scandinavian countries - to exert pressure on the unemployed instead of
creating good employment opportunities. The result of this is lasting and rising
unemployment – with all its very harmful consequences on public finances, social
cohesion and political stability and mounting aggressiveness against further enlargements
of the EU. Secondly the overarching
and all-encompassing framework of competition which is imposed upon almost every
area of economic and social activity and gives private profit priority over individual and
public welfare. Central areas of social security as pensions and health care are
increasingly shifted to the risks of financial markets. Financial liberalisation makes
enterprises and their employees increasingly vulnerable against the short-termism of
financial investors. Comprehensive liberalisation of services without harmonised social
minimum standards opens the door for social and wage dumping. All this creates the
environment of threat, fear and insecurity. Thirdly the minimalist
approach to structural and social policies which should promote strategic areas of
development, facilitate a rapid catch-up process of the new members and weaker regions in
the EU, and strengthen social security and cohesion across the EU. This minimalism leads
to social polarisation and transforms in the view of many the historically progressive
enlargement of the EU into a threat for employment and welfare. The correction of
these mistakes requires a thorough change of the economic and social development strategy
in the EU. The key issues are employment, income, social security and equity. Immediate
measures to improve the situation are possible. But in the medium term Europe needs
far-reaching institutional changes. As immediate
measures we propose: 1. To stimulate sustainable economic growth and employment
member states should start a coordinated public investment programme of 1% of EU GDP. The resources
should primarily be used for improvement of the public transport and telecommunication
infrastructure, for ecological clean-ups and restructuring and for technological research
and development. It should be complemented by projects on the EU level. Such a programme can be financed by bond issues and
on-lending of the European Investment Bank (EIB), which are not counted against national
debt in most member states. 2. In a coordinated action member states should agree on a
considerable contribution to higher employment through the creation of 5% more regular jobs in public
services within the next two years. 3. The budget of the EU should immediately
be increased to 1,5% of EU25 GDP and the additional resources be spent to support
employment policies and the fight against poverty in weaker countries and regions. 4. Monetary policy should be relaxed through
a reduction of the central interest rate in the Eurozone by 50 basis points to 1,5%.
Cooperation with other actors should be intensified, particularly in the Macroeconomic
Dialogue, in order to ensure an optimal policy mix to strengthen sustainable growth while
constraining inflation. The present public discussion about the future of Europe
reaches of course beyond these immediately possible and desirable economic policy
measures. It explores the contours and contents of a new economic and social development
strategy for a progressive European Social Model. In our view they must be based on far
reaching changes of orientation and institutions. 5. A more employment friendly macroeconomic
framework. Fiscal policy should be organised as to ensure full use of capacities.
Monetary policy should be embedded into a democratic process of discussion and decisions
of economic priorities. Coordination between monetary and fiscal policies must be
intensified. 6. A more balanced approach to the to the question
of public services. These should be regarded not as a rare and contested exception
from the general rule of market regulation through competition but as a legitimate
alternative to private competition. Therefore the draft directive on services should be
completely withdrawn and the discussion on “services of general interest” be
broadened and intensified with the aim to define the principles and establish a set of
European minimum standards for public services. 7. A more efficient and equitable tax policy.
Tax competition must be ended and the members should agree on a harmonised tax base and a
minimum rate of 40% for corporate profits (30 % for members with a GDP-per-capita of less
than 75% of EU average). The EU budget should in several steps be raised to reach 5% of EU
GDP which allows effective intervention. This should be financed mainly through a
GDP-per-capita related EU tax, which takes account of the different abilities to pay of
different member countries. 8. More proactive structural policies.
Regional policies must be reinforced to facilitate more rapid catch-up processes of weaker
regions. A necessary strengthening of industrial policies should ensure that interests of
regions and workers are taken into account in European corporate restructuring. A reform
of the Common Agricultural Policy should give developing countries more access to EU
markets while at the same time safeguarding the European basis for agricultural
production. On the basis of a broad debate about the main orientations innovation and
technological development policies should be considerably strengthened on a European
level. 9. A better framework for balanced external economic
relations. This includes a mechanism for exchange rate management to exclude
excessive instability of the Euro and other currencies of the EU. Trade policy should
insist that social and environmental standards in the EU are not destroyed through
excessive free trade agreements. Development aid should apart from a well regulated
opening of European markets concentrate on financial and technological aid to strengthen
the development of a balanced productive basis in the developing countries. * The
EuroMemorandum Group (www.memo-europe.uni-bremen.de)
is a network of European economists who have since 1995 regularly analysed and criticised
the increasingly counterproductive and harmful economic and social policies of the EU and
made proposals for an alternative policy course oriented towards full employment, social
welfare and equity, ecologically sustainable development and balanced international
economic relations. ------------------------------------------------- |
How to support this declaration: Dear colleague, The French and Dutch No have had the magnificent effect to broaden and intensify the discussion about the way in which we want to live in Europe not only in France and the Netherlands but in most other European countries, too. One central part, although certainly not the only part of this debate will be about the economic and social development strategy, i.e. the crisis of neo-liberal policy patterns and about alternative options towards a progressive economic and social European development model. The working group "European Economists for an Alternative Economic policy in Europe" (EuroMemorandum Group) wants to contribute to this new phase of public debate in various ways. The most immediate one is the attached declaration, which contains in a very brief way our assessment of the main mistakes in the current economic and social policy course and proposals for an alternative development strategy in the short and the medium term. (For further activities of the group see our web side: www.memo-europe.uni-bremen.de) We want to attract some public attention for this declaration in two ways: firstly by collecting as many supporting signatures for the declaration as possible and secondly by publishing the declaration together with the signatures just before the EU summit at the end of next week (16/17 June). Therefore we would like to ask you: 1. to support the attached declaration, and 2. to return this letter as soon as possible, at the latest until Saturday 11 June, so that we have one day time to prepare the complete list for the press. Thank you for your rapid cooperation. Best greetings, Jörg Huffschmid Declaration of support: I support the general thrust of the declaration of the EuroMemorandum group: "After the French and Dutch No to the Constitution: The EU needs a new economic and social development strategy". Name: Institution: City, Country: Send your declaration of support to Huffschmid@ewig.uni-bremen.de |