• Andor: calling for 'controversy' (Photo: ec.europa.eu)

Euro policy needs to be 'controversial,' EU commissioner says

16.12.13 @ 16:04

  1. By Honor Mahony
  2. Honor email
  3. Honor Twitter

BRUSSELS - The prevailing policy response to the eurozone crisis risks leading to a situation where membership of the single currency and democracy are no longer compatible in southern member states, the EU's employment commissioner has said.

In an opinion piece published on Vox website, Laszlo Andor says there are six damaging assumptions underpinning euro policy.

These include viewing wage-cutting as the only way to restore competitiveness; prioritising current account surpluses over employment and growth polices; and being more concerned about moral hazard (the fear that the pace of reforms will slack off once cash transfers start flowing) than enduring recession in periphery countries.

"The Eurozone must be reformed to avoid the risk at that the EU itself could be destroyed by political conflict among the winners and losers," writes Andor.

He argues that the way the single currency currently functions is "momentarily advantageous" for capital-owners in countries such as Germany, but "damaging" for workers and entrepreneurs, debtors and "most" people who need to use public services.

Referring to a "taboo" on fiscal transfers between euro countries, Andor says that while richer countries may find it difficult to justify to their domestic voters why they are bankrolling poorer governments, less well-off countries have to explain to their electorates why "they are not able, together with their European partners, to get the economy going and create jobs."

Sticking to this "orthodoxy" will lead to the "weakening of the pro-European mainsteam in Southern European countries … and some of these countries may not be far from a disastrous situation where Eurozone membership and democracy are no longer compatible."

Andor is one of the few left-wing commissioners in the EU commission, an institution which has promoted many of the policies that he is criticising.

However, he says it be wrong to think that response in Brussels has not evolved over the years since the crisis has begun - with the commission now allowing more time for countries to achieve fiscal consolidation and the European Central Bank pledging to do "whatever it takes" to save the euro.

But this is too modest, says Andor, particularly as there are increasing differences in house-hold income, at-risk-of-poverty rates, as well as unemployment percentages between ailing periphery countries and the eurozone core.

Andors' words come as euro countries are struggling to agree a true banking union - seen as essential for shoring up confidence in the eurozone - and are set to agree only modest "solidarity" mechanisms at a summit later this week.

With an eye on EU elections due in May, the Hungarian official said now is the time for a "paradigm shift" in the eurozone.

"Real controversy is needed if any progress is to be made," he added.

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