Next week, France’s National Assembly, the lower house of parliament, will vote to ratify the European treaty on Stability, Coordination and Governance , otherwise known by critics as the Permanent Austerity Treaty. Below in a statement published in Le Monde this week, 120 economists say why they reject it.
Since 2008, the European Union (EU) has been facing an unprecedented economic crisis. Contrary to the claims of neo-liberal economists, the crisis is not because of public debt. Spain and Ireland are now under attack by financial markets even though these countries have always respected the Maastricht criteria. Rising deficits are a consequence of the fall in tax revenues due in part to tax give aways to the more affluent, state aid to commercial banks and the reliance on financial markets that are charging high interest rates to hold this debt.
The crisis is also due to the total lack of regulation of credit and capital flows at the expense of employment , public services and productive activities. It is perpetuated by the European Central Bank’s unconditional support for private banks and now the ECB’s demands for a ‘strict conditionality’ of austerity from member states in return for being the ‘lender of last resort’ . In addition, this crisis is compounded by intra-European tax dumping and the ban on the ECB lending directly to states for future expenditures, unlike other central banks around the world, such as the Federal Reserve U.S. . Finally, the crisis is reinforced by the tiny EU budget that is capped at a ridiculously low 1.24% of GDP.
After pledging during the [Presidential] campaign to renegotiate the European treaty, Francois Hollande did not made any changes to it, and now chooses to pursue the austerity policies begun by his predecessors. It is a tragic mistake. The addition of a pseudo-Growth Pact, with a paltry amount of funds, is accompanied by the acceptance of the budgetary ‘golden rule’ championed by Merkel and Sarkozy that condemns any future spending strategies and will lead to a drastic reduction of general government spending.
This Treaty limits the ability of countries to boost their economies even further and imposes budgetary balance in the public accounts. It has a recessive logic that will automatically exacerbate existing imbalances. Countries suffering from a collapse in domestic demand will have to further reduce public spending. With several Member States already in recession, the Treaty further threatens economic activity and employment, therefore government revenue, which [in turn] ultimately widens deficits.
Thus, the French Economic Observatory already expects 300,000 more unemployed in France in late 2013 as a direct result of austerity policies. In the medium and long term, this will mortgage future prospects of a social and ecological transformation of the economy that will require considerable investment.
In the name of so-called ‘European solidarity’, the treaty is in practice making governments guarantee the assets of large private financial interests. It engraves in stone automatic austerity measures, imposing them on the representatives of the people, forcing them to make budgetary decisions dictated by unelected bodies.
The European Stability Mechanism (ESM), undemocratic institution par excellence, could offer loans at slightly lower rates (5% on average). But these loans would be conditional on the implementation of drastic austerity measures imposed on the people! A public guarantee of private investors encourages speculation, while the burden of debt payments will break the back of the people. The conclusion is clear: austerity is unfair, inefficient and undemocratic.
It doesn’t have to be this way. The future of Europe deserves a democratic debate on solutions to the crisis. Coordinated action to boost growth, employment and public services is possible in Europe today.
For the EU to implement this policy, it is urgent to reform and democratize its institutions. A democratically controlled European social and ecological development fund could further underpin this. In addition, the EU could introduce controls on finance.
The social and ecological challenges are immense. It is possible to undo the dismal record of the neo-liberal policies pursued in France that include five million unemployed and 10 million poor. To have the means to do this, we must genuinely break the stranglehold of the financial markets, not just pay lip service to it. That is why we reject the ratification of the European treaty on Stability, Coordination and Governance.
Among the 120 economists signing this statement are Dominique Taddéi, Frédéric Lordon Jacques Genereux, Paul Jorion, André Orlean, Gadrey Jean, Jean-Marie Harribey Bernard Friot, Plihon Dominique Guillaume and Jacques Etievant Rigaudiat
Le Monde 02.10.2012
Translation: Revolting Europe