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Alternative Economists Against European Minimalism

Euromemorandum proposes new integration strategy

On the eve of the European Summit of Heads of State and Government next week in Brussels more than 270 economists from 21 EU member countries have published proposals for an "Integrated Development Strategy in Europe" (see reference). Against a new kind of European minimalism of the official EU institutions after the failed referendums in France and the Netherlands, the "European Economists for an Alternative Economic Policy" call for a considerable rise of the European budget, while at the same time to establish "a real - opposed to rhetoric - balance between the economic, social, and ecological dimensions of the European integration". World Economy & Development in brief documents the summary of the Memorandum.

1. The year 2005 has added to the long experience of economic weakness and social downsizing in the EU the clear perception of the obvious crisis of legitimacy and political acceptance by large parts of the public in the Union. The European institutions have responded by declaring a ‘period of reflection’. Such reflection could be helpful if it addressed in a critical analysis the basis of the failed economic and social policies and the powers and interests behind it, and if it embarked on the search for thorough policy changes. But it would be wasted time and counterproductive if it envisaged to better ‘explain’ and convey to the people the current policies and thus to make these more acceptable. It is to be feared that this is the Commission’s agenda for the coming debate.

2. The economic and social development in the EU is marked by the end of the weak recovery and by falling growth rates with rising unemployment and again lower wage shares which indicate a further deepening of inequality in Europe. The negative macroeconomic picture is to a large degree influenced by the weak performance of Germany and Italy while other countries fare much better. The particularly strong redistribution from wages to profits had the effect that real domestic demand in Germany in 2005 was lower than in the year 2000. Poverty, and particularly child poverty in the EU, is on average still at unacceptably high levels, with on the one hand the exception of the Scandinavian countries and, on the other hand, particularly scandalous figures for the United Kingdom.

3. The Commission has explained the failure of the Lisbon Strategy of 2000 by pointing to over-ambitious objectives and an over-complex programme structure. It has also interpreted the wave of critique and rejection of the draft constitution in France and the Netherlands as an opposition of the ordinary citizens to a supra-national state with a grip on traditional national welfare systems. In a move of apparent modesty the European institutions are now about to adopt a new kind of European minimalism:

- Firstly, they launched a second version of the Lisbon agenda, the “new partnership for growth and jobs” which is considerably less ambitious, has less objectives and benchmarks, and concentrates almost exclusively on growth and jobs. The social quality of jobs and the ecological sustainability of growth in this agenda are pushed even more to the background than before.

- Secondly, they declare the intention to cut back on red tape and reduce the number of European rules and provisions in the interest of citizens. Welcome as such removal of bureaucracy may be in theory, in practice it includes attacks on standards for health or environmental protection.

- Thirdly, another important aspect of European minimalism is reflected in the determination to further reduce the already much too small European budget, allegedly to ease the tax burden for the citizens.

What remains after such correction of “over-ambitious visions” for Europe is the trust in open markets, deregulation, competition, and flexibility. In reality the new modesty in the current minimalist policy reflects and reinforces the core programme of neo-liberalism.

4. Against this narrowing of the perspective for European development we propose to broaden the perspective and enhance the ambitions towards a comprehensive European development strategy. This includes on the one hand a widening of the strategic scope to include with equal weight economic, social and ecological perspectives, and to establish a real – as opposed to rhetoric – balance between the economic, social, and ecological dimensions of social live and European integration. For economic policy on the other hand it means a broadening and enhancement of the range of measures and tools, which should include more intensive macroeconomic and structural intervention, stricter rules for capital, and a broader use of the public sector.

5. The objective of full employment should be maintained and instruments to achieve it should be:
- a large public investment programme, of the size of 1% of EU GDP, primarily in the areas of ecological restructuring,
- an extension of public employment in social services, education, utilities, and network services, and
- a new effort for working time reductions.

6. The EU should reinforce its social policy and to this purpose:
- enhance its tools and financial resources to fight poverty and social exclusion in the Union,
- promote the adoption of – differentiated – minimum standards for social welfare throughout the Union, with strict barriers against the reduction of existing standards, and
- use the open method of coordination to promote a public Pay-as-you-go system for pensions which ensures a decent standard of living for the elderly.

7. To respond to the increasing costs for traditional energy and to contain global warming the EU should act much more pro-actively to promote a new energy regime which is primarily based on renewable (solar) energy sources.

8. To enable the EU to launch relevant initiatives for the above objectives it is necessary to considerably raise the size of the European budget, while at the same time ensuring democratic procedures and transparency. We propose to increase the European budget from its present level of a little more than 1% of European GDP by 0,5 percentage point every year until it reaches about 5% of GDP. At the same time the revenue basis should be reformed to the effect that the main source of the EU budget would be a progressive GDP-related European income tax.

9. The EU should prepare the coming ministerial meeting of the WTO in Hong Kong with the primary aim to change the scope of the GATS negotiations so as to include full respect of national rules for services, to end the decisive role of the Dispute Settlement Body and to exclude the public sector from the GATS framework.

* Find the complete Memorandum "Democratic Policy against the Dominance of Markets. Proposals for an Integrated Development Strategy in Europe" (November 2005) and the list of signatories >>> here.

More on the European crisis:
* Europe: After the Debacle and Before the Storm >>> here.

(Posted: 6 December 2005)

Access to the articles is free of charge during the pilot phase. But as of April 2006, the beginning of the regular subscription period, a special authorization will be required. Subscribers will receive a username and a password with their subscription.

* SUBSCRIBE to World Economy & Development in brief >>> here.

The Electronic Reader for Hong Kong / World Bank: Leap Backwards for Sustainable Energy


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