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Alternative Economists for Another Europe

Euro Memorandum 2007 published

Later this week the European Union reform treaty is to be signed in Lisbon. According to official statements, this will be the highlight in a year of economic and political progress. A just published memorandum by more than 350 progressive European economists gives a fundamentally different view. World Economy & Development In Brief documents the summary of the Memorandum titled ‘Full Employment with Good Work, Strong Public Services, and International Cooperation: Democratic Alternatives to Poverty and Precariousness in Europe’.


The adoption of the new „Reform Treaty“ for the EU comes at a time of financial crisis, enhanced economic uncertainty and rising social inequality. Additional risks arise from the precarious situation in the areas of energy use and climate change and from mounting imbalances in the world economy. The new Treaty will not enable the EU to master these problems and challenges. On the contrary it will strengthen the neo-liberal policy framework which has contributed to the critical situation.

* Current problems. The current economic upswing will certainly be affected by the fall-out from the financial crisis. But it will also be impeded by insufficient wage developments and the weakness of consumption and public expenditure. Redistribution of income and wealth from the poor to the rich occurred in the years of economic slow-down and recession, and it continues in the years of recovery and upswing. Poverty has not decreased but in many cases increased in the last years of overall growth and exploding profits. The alarming problems in the prevailing pattern of energy provision and consumption and their harmful consequences on climate change have been demonstrated in different ways by the monopolistic price policies on liberalised energy markets and by a number of environmental catastrophes.

* Critique of EU policies. The EU does not respond in any convincing way to these uncertainties and increasing social and ecological problems. Strong declarations are not followed by corresponding concrete measures, and policies go often in the opposite direction:

- With regard to the financial crisis current efforts aim not at limiting but at opening further the door for financial speculation. It is alarming that the EU regards member states’ rules to protect pension funds against the entry and strategies of financial investors as an obstacle to the free movement of capital which must be removed – thereby delivering the incomes of pensioners to the risks of financial losses.

- A macro-economic policy perspective responding to the current problems is simply absent from the EU conception, and efforts to control the exchange rate are not undertaken.

- The declared respect and high regard for services of general interest as an essential pillar of the European Social Model is accompanied by initiatives to undermine the core of these services – health care and social services - by integrating them into the framework of internal market and competition rules. This is an obvious attempt to re-conquer areas which were lost in the discussions about the services directive in that they were – after strong public critique exempted from this directive. Also in the recent initiative for “flexicurity” on the labour market the deregulatory obsession is dominant, while on the other hand migration policy is too restrictive.

- In an attempt to offset the economic problems created by the disregard for internal demand the EU has – under the title of “Global Europe” - started a more aggressive external strategy to open markets and conquer market shares in the world. Main instruments for this purpose are bilateral free trade and investment agreements and the neo-liberal shaping of Economic Partnership Agreements with developing countries. Instead of concentrating on the building of an attractive alternative to the aggressive US model the Union is trying to underline its enhanced ambitions in the world through the build-up of military power.

- In energy and climate policy the contradiction between words and actions is particularly evident. Neither the strong rhetoric attacks against the price policy of energy monopolies nor the declared commitments to change the pattern of energy consumption in the EU have been followed by concrete measures. Energy policy is still dominated by the theory of free markets and the practice of monopolistic behaviour. To replace the current unsustainable regime of fossil energy provision the EU continues to consider the nuclear option which is another unsustainable regime.

Proposals for alternatives

To overcome the financial crisis and achieve financial stability in the EU immediate measures against financial speculation should be combined with steps to stabilise the financial systems in Europe and to re-embed them into coherent European development strategies.

- Against financial speculation transparency requirements should be raised, leverage limited and securitisation and trading of loan packages only be permitted when explicitly approved by supervisory authorities. Also higher taxation of short-term capital gains and taxes on stock exchanges and currency transactions serve this purpose. Investments of pension funds and life insurance in hedge funds or other risky financial instruments must be prohibited.

- To protect firms and employees against harmful activities of financial investors voting rights of such investors should be linked to a minimum duration of equity holdings and the rights of employees to veto decisions against their interests should be strengthened. In a still longer-term perspective the trend to redistribute income from bottom to top and to base pension systems on capital markets must be stopped and reversed, because these trends are at the roots of an increasingly finance-led and unstable development.

- A more active macro-economic policy of the EU should promote more and better employment and sustainable development in the EU. Measures in this direction are public investment programmes on the national and on the EU level – for the restructuring of transport systems, energy provision, social housing, urban refurbishment et al. – as well as initiatives for the reduction of individual working time in different forms. Initiatives should also be taken to control the Euro exchange rate vis à vis the US dollar and the Chinese Renminbi and for this purpose to seek for more international monetary cooperation.

- Public services – or “services of general interest” – must be recognised not only rhetorically but also through corresponding policies as a central element of a European Social Model based on solidarity and fairness. Public service provisions in the liberalised sectors must be strengthened and implemented and where this becomes increasingly difficult, a tighter direct public control should be envisaged, including new forms of public ownership and administration. The exemption from the internal market and competition rules should apply to all public services – even if they are of an economic character. The European dimension of these services can best be served by the definition of minimum standards with upward convergence, co-operation in border regions and joint research and educational projects.

- Special emphasis should be put on anti-poverty policies. The abolition of poverty should be made a top priority in the Reform Treaty. In the pursuit of this objective the EU should urge the member states to adopt action plans (minimum wages, child benefits etc.). At the same time the EU should support such national anti-poverty measures through European transfers.

- Climate and energy policy should more actively and concretely take measures to effectuate the shift from the prevailing fossil system to a sustainable regime based on energy saving and development and use of renewable energy sources.

- In its external policies the EU should adopt the principal aim to promote a fundamental transition towards a model of balanced and equitable global development. In particular it should embark on a fair trade agenda for cooperation and development. In the relationships with developing countries this includes trading relations based on non-reciprocity, specific assistance to fulfil human rights and environmental and social sustainability standards. In its relation to developed countries the EU should contribute to the reduction of the large imbalances and in a longer perspective aim at balanced current accounts and a jointly managed exchange rate which supports such balance. In such a policy framework there is no room for the threat or use of military force.

Please find the full text of the Euro-Memorandum >>> here.

Posted: 11 Dec 2007

Recommended citation: WDEV Document (2007) ‘Alternative Economists for Another Europe’, World Economy & Development In Brief, Luxembourg, 11 Dec (www.wdev.eu)

* Find more on the subject: >>> Europe Global

Climate Change: More Action after Bali Talks / The Greenhouse Development Rights Framework


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