European Socialists propose alternative to Barroso-Van-Rompuy pact

The centre-left leaders endorsed a plan that still backs austerity, but alongside it the introduction of a financial transactions tax that they say would deliver €250 billion a year to European coffers that could be invested in green technologies and infrastructure.

Striking an almost pre-electoral stance, the leaders, meeting in the Greek capital under the umbrella of the Party of European Socialists on the same day that their centre-right counterparts met in Helsinki, lashed out at what they called the "conservative dominance" of European institutions.

"To the Greek people ... I say: Don't blame Europe, blame the conservative majority of Europe," Poul Nyrup Rasmussen, the former Danish prime minister and head of the PES told reporters ahead of the meeting. "Greece has suffered so long because of the Franco-German alliance."

In February, German Chancellor Angela Merkel and French President Nicolas Sarkozy unveiled a ‘competitiveness pact' that would require member states to make constitutional amendments limiting borrowing, hike retirement ages and develop a common corporate tax base.

The proposal has since been taken up and reworked by Europe's two presidents, Jose Manuel Barroso and Herman Van Rompuy in an effort to overcome resistance within the European Council to what was seen as Paris and Berlin deciding for the rest of the bloc a course of action. The new proposals have provoked the ire of trade unions and the left for focussing on wage restraint and limiting public sector spending.

"Merkel is wrong. It is time for Merkel to really say to herself it's in Germany's interest to act together with others. It is not in Germany's interest to dominate as they do," he continued. "The lack of solidarity from the dominating conservative majority have been continuing long enough."

The Dane said that conservatives backed "austerity only" while the centre-left supported austerity alongside new investment. Speaking to this website, he also endorsed the European Public Service Union's call on Thursday for referendums to be held on the competitiveness pact.

"All throughout this, deals are being worked out by a very small number of people. You cannot say that this has been a democratic process, yet there are huge implications for social welfare, for democracy. There is a real need to open this up, let the people have a say."

"There will certainly have to be some countries that will have to have referendums on the pact. My country for instance, as they are demanding constitutional changes. Ireland, Sweden most likely the same."

Mr Papandreou, for his part said: "Europe has a huge potential unused, untapped, especially regarding the financial crisis and the wild ways of the market.

He said that it was time for bankers to contribute to the European pot via 0.05 percent levy on all financial transactions.

France's Martine Aubry and Germany's Sigmar Gabriel also criticised their own governments, saying that decisions should be made on a European basis and not by Paris and Berlin alone.

Irish Labour's Eamon Gilmore, whose party is currently in talks with the centre-right Fine Gael over the details of a government coalition agreement following last week's general election in the country, told EUobserver that Europe's left is not receiving the representation in the European Council that it should..

"The Council should remember that we are not just six heads of state and government. There are a number of social democratic parties in coalition governments and that needs to be represented more in decision-making."

Pressed by reporters over how the PES can reconcile its call for a more social approach with the stringent austerity imposed by three Socialist leaders in Greece, Portugal and Spain that have provoked a series of general strikes and civil unrest, Mr Papandreou said that if they had not been in power, the cuts would have been worse.

"We have opted not to lay off civil servants. We have tried not to place burden on the poorest, the most vulnerable. We are reforming the tax system in way that makes the wealthier pay more," he said. "We have opted to protect the thirteenth and fourteenth month salaries in private sector, protected health and education."

According to the PES, under the ‘Growth Pact', investment would see growth of 10.9 percent over the next five years, 4.5 points higher than the projections of the current path, leading to 8 million more jobs and an unemployment rate of 8.4 percent by 2015.

The group said that the current approach will result in a loss of 600,000 jobs over the same period and an unemployment rate of 10.7 across the EU.

Notable by their absence from the meeting however, were Spain's Socialist premier, Jose Luis Zapatero, and his Portuguese counterpart, Jose Socrates.

Mr Rasmussen hinted at why the two did not appear: "It's not easy for these two countries on the Iberian peninsula. They under heavy pressure. They feel the heat from the markets. This explains their reactions."

At the meeting the Socialist leaders also issued a call for the EU to lower the interest rates paid by Greece and Ireland on their multi-billion-euro bail-outs, a substantial increase in the lending capacity of the existing EU €440 billion rescue fund, and, in Mr Papandreou's words, the establishment of EU bonds, "so that Europe can manage collective debt properly."

It is thought that Messrs Zapatero and Socrates were nervous to appear at the meeting, with its combative stance, at the same time that they are battling within the European Council from a weak position.

PES sources said that their side is to take a "twin-track" approach, with Socialist parties trying to galvanise public opposition to the current proposals while within the European Council, Spain and Portugal attempting to win the best deal they can get.

The meeting follows calls by centre-left European heavyweights Romano Prodi and Jacques Delors, both former European Commission presidents, who wrote in the Financial Times that the competitiveness pact would be ineffective.