Saturday

27th Feb 2021

Opinion

Banking union, political union ... where is the social union?

  • An ageing Europe at a crossroads: will it pick the right (fair) one? (Photo: European Commission)

Last autumn, tens of thousands took to the streets. In New York, in Madrid, Frankfurt and London. They were angry that banks got bailed out while average people had to stomach more and more cutbacks, rising taxes and unemployment.

In Athens, anti-austerity protests have turned violent several times throughout the last three years the country has been under strict EU and International Monetary Fund supervision linked to two consecutive bailouts.

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The Occupy movement may have faded away - the last camps in Germany are struggling to fight eviction.

But the anger and disappointment remains. Some people are turning against everything foreign - immigrants, the EU, the euro. Greeks blame the Germans for being stingy and cruel. Germans are fed up with footing the bill for what they perceive as laziness and rule-dodging.

Markets are more unstable than ever before. The speech of a central banker can boost shares, only to plunge them into the abyss when the message turns out to be a vague promise of help with strings attached.

Spain admits it can hardly refinance itself. Italy risks succumbing under a debt burden too big to handle. Greece is still on the brink of total collapse and euro-exit.

Trust is lacking everywhere. Banks do not trust each other, just as governments do not. And neither do their citizens.

According to the last Eurobarometer - a bi-annual opinion poll carried out throughout the EU - 51 percent say they do not feel closer to citizens in other EU countries.

Support for the euro is also on a downward slope: Those in favour of the currency dropped from 63 percent in 2007 to 52 percent this year, while the ones opposing it have risen from 31 to 40 percent over that same period.

The EU as a whole went from a "total positive" image for 52 percent of the EU citizens in 2007 to 31 percent this year, while "total negative" opinion rose from 14 to 28 percent.

The response of EU leaders to the lack of trust aggravating the economic crisis has been a promise to work on steps to reach a full political and economic union needed to support the euro.

But since those will take time and hard-to-win referendums, leaders first want to focus on what the European Central Bank told them to be the most urgent priority: a "banking union," meaning more supervision and possibly a fund for banks which need to be wound down in the eurozone.

The declared aim of this union is to save taxpayers as much as possible from future bank bailouts.

But at the same time leaders agreed that once the supervision is put in place, banks would be able to get financial assistance directly from the eurozone bailout fund, which is funded with public money.

Apart from the cynicism of a public relations exercise talking about a "banking union" after tens of thousands have protested against bailing out banks with taxpayers' money, leaders have also missed an opportunity to tell citizens what they are most worried about: will their pensions and savings be guaranteed if a country goes bust?

A 'social union' might have been a better response.

One reason why the eurozone is perceived as being in much worse shape than the US (which also has tremendous debt levels and high deficits) is because of the US federal level which can intervene if a state like California nears bankruptcy.

Also, US social security and health care are not paid at state level, but at federal level.

This is not the case in the eurozone.

Spain, Italy, Portugal, Ireland, Greece - all have to cut back drastically on their social spending to meet the fiscal targets and convince markets they will not go bust.

Meanwhile, public anger is growing and the support for such measures is zero. Which in turn fails to convince markets they will succeed even amid drastic reforms.

On the other hand, public support for a eurozone-wide social security scheme may also be hard to achieve.

Social spending is still considered a purely national, non-EU matter. But the reality is that eurozone deficit and debt rules make cutbacks mandatory which in the end affect wages, pensions, hospital bills, subsidised cancer treatments, schools, science programmes.

The most sensible thing to do would be to tell citizens that transferring some of these schemes at eurozone level may actually be a safer bet.

That in the end people would get their pensions no matter what and that research programmes will not be cut overnight to meet deficit targets.

But in order to do that, EU leaders would need something they have not shown in a long time: honesty and courage.

Disclaimer

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

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