• banking,
  • crisis,
  • Democracy,
  • economics,
  • growth & stability pact,
  • inflation,
  • public services,
  • Tax justice,
  • Workers' rights

Recently, MEPs voted on the European Parliament’s position on EU economic governance rules. In the same week, EU finance ministers were meeting to agree on the future shape of the Stability and Growth Pact. It’s been an important few weeks for EU economic policy, and for those seeking to change it…

The Covid pandemic, the war in Ukraine, and inflation have all led to a rapid increase in social inequality in Europe. Over 20 million children are affected by poverty in the EU. Record queues form in front of food outlets, while big energy and food companies pay unprecedented dividends to major shareholders. According to Oxfam, these companies have earned €323 billion in excess profits in the last two years, shoving €238 billion directly into the already well-filled bank accounts of their big shareholders. Everywhere, households are losing the inflation battle. At the forefront of the victims of the cost-of-living crisis are, as always, the most vulnerable: children, women, the elderly, people with disabilities, minorities and migrants.

With the crisis, it has become obvious to everyone: The EU’s Stability and Growth Pact has long been recognised as a failure. It has resulted in a massive transfer of wealth to a rich minority, while dismantling employment rights, punishing working people and those who rely on public services. While there is a growing movement to radically alter the rules, spurred on by a pandemic-inspired mainstream awakening regarding of the nefarious impact of austerity on health systems in particular, and public services more broadly, at the most recent meeting of Eurozone finance ministers, the German government blocked any further decision on the Pact. The people of the EU have to swallow the unpalatable consequences of the German government’s ideological narrow-mindedness. Austerity is capitalists imposing their class interests. But, as co-President of the Left Manon Aubry (France, La France Insoumise) says, “people are not stupid. It is not enough for those in power to brush a layer of fresh paint on everything now, as long as the old debt rules and cutbacks continue to lurk underneath. We reject the obsession with reducing deficits by weakening social protection. The European Commission and the Council have made at least 139 recommendations to member states to reform their pension systems since 2011, including eight for France, where a vast social movement currently opposes such a reform. The European Commission and the Council must stop issuing recommendations that foster poverty, inequality and social insecurity while having no proven economic benefit.” In consequence, the Left group did not back Spanish MEP Estrella Durá Ferrandis’s report, voted through in Parliament’s March plenary session, that endorses the Commission’s approach on the “European Semester”, an annual cycle during which EU member states are to coordinate their economic and fiscal policies.

No return to austerity

Neoliberalism has failed to deliver on its – albeit bogus – promise of increased economic growth, equality, and social mobility. As economies and societies are forced to change radically due to growing inequality, climate change threats, and the impact of digitalisation, large-scale, coordinated and sustainable public investment is a must.

“During the European response to the Covid-19 crisis there was some hope that the EU institutions had learned from the disastrous response to the financial crisis. Unfortunately, it seems this was unfounded optimism”, MEP José Gusmão (Portugal, Bloco de Esquerda).
We need much more than just a lighter version of the austerity dictate. Europe needs massive and coordinated public investment that can bring about a systematic change in our economy. This is the only way we can meet the challenges of climate protection, digitalisation and increasing social inequality. However, “while some vague statements are being made without any consequences for the Commission’s obligations, the Commission is already putting pressure on the Member States and giving instructions to cut social spending”, Gusmão said in a recent European Parliament debate.

Also addressing the European Commission on the topic, MEP Kostas Arvanitis (Greece, Syriza) called for an EU economic policy that would “promote a new production model based on the needs of the many and on social, environmental and fiscal justice”.

History repeating

One of the most quoted remarks of Karl Marx is “History repeats itself, first as a tragedy, second as a farce”.
SVB, Signature, Credit Suisse, First Republic…once again, banks fail. Silicon Valley Bank collapsed on 10 March after a stunning 48 hours in which a bank run and a capital crisis led to the second-largest failure of a financial institution in US history. The weekend after, the major Swiss bank UBS agreed to take over its arch-rival Credit Suisse in a frantic rescue operation. The Swiss National Bank helped out with extensive liquidity aid.
Unlike 2008, Credit Suisse and SVB haven’t been saved by governments. However, the strained attempts by ECB officials to make us believe that there’s nothing to see are obviously driven by fear.
Let’s not beat around the bush: The crisis of capitalism merely served to restructure the system. Since 2008, governments have not properly regulated the financial markets. They did not oblige banks to split investment and retail banking. The capital adequacy ratios of banks in the EU are currently too low, meaning that when banks speculate with borrowed money on financial markets and gamble away, they do not have enough equity to cover the losses.

All in all, does that mean that the battle is over, and the capital has won? No.
Nevertheless, it requires massive social movements, a truly democratic voice that speaks out for people’s interests. This is already happening, people are taking to the streets to voice their anger, demanding system change across the board. Their power is in numbers. Let us stop believing that the ruling politicians were willing to change from protecting the wealthy to listening to the people. It is time to challenge the ruling class.

Related Meps

José Gusmão

Bloco de Esquerda

Manon Aubry

La France Insoumise