13th May 2021


Europe needs to reconcile its two faces

EU institutions resemble a Janus head with two faces looking in opposite directions - one calls for more budgetary discipline and austerity, the other warns of the dramatic social consequences and risks of a deep recession of just such austerity. The two faces must urgently be reconciled.

A simple comparison of conclusions by different ministerial meetings makes this very clear. While finance ministers call for tougher fiscal consolidation by cutting unemployment benefits, employment and social affairs ministers warn of rising unemployment and poverty and insist on job creation and reinforcement of social security schemes.

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  • Focusing only on austerity risks further alienating citizens (Photo: Ojo Espejo)

In the European Commission, Economic Affairs Commissioner Olli Rehn claims that stepping up austerity measures is the only way to regain market confidence. At the same time, Social Affairs Commissioner Laszlo Andor tweets about how pro-cyclical austerity is killing Europe.

The result is that this year's Annual Growth Survey, the Commission's policy guidance for member states, prescribes stepping up fiscal consolidation measures in the first chapter and then in another chapter proposes measures to alleviate the social consequences of the crisis. It does so without addressing the tension between the two.

The European Council is the logical forum to address this tension and resolve incoherency. Unfortunately, EU leaders have so far failed to do so.

Indeed they have mainly ignored most of the messages coming from those dealing with employment and social affairs, and only endorsed the ones proclaiming fiscal stability.

Although they slightly adapted their tone during a summit on 30 January, the actual proposals for launching economic and social recovery remained vague and merely repeated former commitments. This was in sharp contrast to the tough rules on budgetary discipline in the so-called "six-pack" of legislation, repeated in the Fiscal Compact treaty.

Member states should take the European Parliament as an example. Parliament is the first institution to come around to addressing the tension between fiscal and budgetary policy on the one hand and social and employment policy on the other.

It started out with the same detached debate as among member states and the commission. The committee on employment and social affairs and the committee on economic affairs each have a separate report on the Annual Growth Survey.

But after the amendment phase, both reports became largely complementary. Now both the employment and social affairs report as well as the economic affairs report point to the risk that Europe-wide austerity - which does not differentiate between economically weaker and stronger member states - will lead to a recessionary spiral with serious social consequences.

Funding for investment in job creation, green development, innovation and education must be found somewhere, otherwise there is no prospect to a way out.

To ignore the obvious link between fiscal consolidation and its social consequences is a tremendous mistake. Without sustainable finances, there can be no social welfare for future generations. But if economic governance is narrowly defined as keeping government budgets in line, it will further alienate citizens and drive the European economy into the ground.

The Spring European Council later this week (1-2 March) is the first opportunity to do something about it.

There should be a counterbalance to austerity by investment in job creation, innovation and education, in particular by economically stronger countries. The call for reforms should not just be inspired by reducing costs, but also by enhancing welfare. Member states should be made accountable for increasing poverty just like they are accountable for excessive deficits.

Over the last two years, the European Council has taken care of the budgets. Now it is time to recognise that these budgets are actually there to serve the people, not the other way around.

The writer is a member of the European Parliament for the Greens and Rapporteur on the Annual Growth Survey 2012


The views expressed in this opinion piece are the author's, not those of EUobserver.

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