Changing tack on austerity would be 'irresponsible', say EU presidents

He said that austerity should be implemented “without creating new poverty” and “with fair and just distribution of efforts.”

However, if such structural changes to European economies did not take place, the EU would lose out against more competitive regions in the world.

“But in any case, we have to adjust our policies and in some ways, austerity is needed to restore fundamental equilibriums in the economy,” he said.

“The concerns of young people are totally legitimate,” he continued. “But our responsibility is to go through this unpopular period to safeguard stability.”

On Saturday, dozens of protests across the continent inspired by the Arab Spring and Spain’s ‘indignados’, or ‘indignant ones’ movement filled the streets and public squares of the continent’s major cities.

Demonstrations ranged from four to five thousand in Berlin and Frankfurt to the hundreds of thousands in Barcelona and Rome, with riots breaking out in the Italian capital.

In an expression of the level of anger directed no longer just at national political and economic elites but at the European institutions, young people - the first generation to have always known a single market and who were still in elementary school when the euro was introduced: the 'Erasmus Generation' - in Italy, historically one of the most solidly pro-European states, were seen burning the EU flag.

The commission president was even more forthcoming with his sympathies for the protestors, but he too said there was no other way.

“I very much understand the frustration and indignation of many people in our society ... To a large extent this is a global movement,” he said, attacking the “criminal behaviour” in the financial sector.

In an effort to show that the EU executive’s emphasis extends beyond recommending cuts to social programmes and the lowering of wages, he stressed that Brussels will this week propose new pan-European legislation going after criminal “market abuse”.

“We have nothing against the financial sector. At the same time, it has to be understood that they have to reflect a minimum of ethical standards, which has not been seen recently,” he continued.

The proposal appears to be a direct reaction to citizens at Europe’s austerity doctrine and the banking sector, as he said it will “show our people that we’ve got the message.”

However, the former conservative Portuguese prime minister and one-time Maoist in his youth, said what the demonstrators are proposing is “irresponsible”.

“Indignation alone is not a solution,” he added. “It would be irresponsible not to go forward with fiscal consolidation in the member states.”

’Social fabric’ being torn apart

EU Council President Herman van Rompuy and commission chief Jose Manuel Barroso issued their declarations following a frosty annual summit between the major European employers’ associations, representatives of the continents’ workers and the EU Council and Commission presidents.

The new president of the European Trades Union Council, frenchwoman Bernadette Segol, struck a combative stance, warning that the EU’s current doctrine “could get out of hand, bringing recession, depression” and blamed the banks rather than public overspending for the crisis.

She said the financial sector had “made profits since the last crisis, but instead of investing this ... they have spent it on shareholders and bonuses. This must stop. It is unacceptable.”

The union leader said her organisation recognises the need for balanced state budgets but that this should be implemented over a longer period of time and that the current strategy “it is not working in Greece and in fact is causing problems in the social fabric of the country.”

“We see attacks on collective bargaining,” she told reporters. “The [EU-ECB-IMF] troika has demanded that Greece to suppress national collective agreements. We see demands to put at negotiations at the lowest level possible, initiatives in Hungary to suppress union rights. This is not the way to construct a social dialogue.”

The unions would instead prefer to see an EU and state-directed programme of massive public stimulus via green technology and energy infrastructure to jump-start the economy at a time of reluctance on the part of the private sector to commit to new investment.

Instead, “austerity is often used as an excuse to liberalise everything and to undo negotiating structures,” she said. “The basic structures of social relations are under attack.”

She also warned the leaders against taking undemocratic decisions: “Democracy is a very important part of the European Union project ... When we see currently heads of state just acting between themselves and taking decisions, this is not exactly the way we would like to see things implemented at the EU

“If this is not done [in a democratic way], citizens will not support the European project.”

The employers’ association, Business Europe, for its part, felt it necessary to “remind the trade unions” that both sides had signed a joint declaration earlier in the year on the need for a growth strategy.

“We are in favour of strong social dialogue. But we must discuss the real issues: How we can manage change,” said Philip de Buck, the head of the boss’s association, stressing the need for “flexicurity”, an easing of job protections in return for a stronger social safety net while people look for new work.

De Buck said that the “real priority now is to put an end to the governance crisis and confidence crisis”.

He said employers are advocating further labour market liberalisation and reform of benefit systems as a response to the crisis, along with efforts to improve skills of the population in a way that matches the jobs needed filling in the private sector.