Fiscal compact will 'weaken Europe'
by Conny Reuter
Austerity measures imposed by a treaty negotiated behind closed doors will restrict growth, weaken Europe's cohesiveness and erode democracy, argues the president of Social Platform
Angela Merkel referred to the recently signed fiscal compact as a "masterpiece" while her budget spokesman claimed: "It's an important step to the future". This new treaty, endorsed by 25 European Union member states on Monday, is certainly a step – but whether it is a step forward or backward for Europe is yet to be seen.
New treaties, such as this fiscal compact, should respect EU rules on transparency and democracy: including rules on social and civil dialogue. Yet this so called masterpiece was instead hastily negotiated behind closed doors. These treaty changes and other economic governance initiatives have been put forward at a rapid speed and without ensuring democratic legitimacy. This risks restricting sustainable growth, weakening the cohesiveness of a sustainable European society, and eroding democracy. Indeed the fiscal compact may weaken Europe instead of re-enforcing it, leading to a future with decreased support for European integration, a greater divide between north and south, increased unemployment, poverty, and exclusion, and greater inequality.
Already the economic governance of the EU – in response to the pressure of financial markets – enforces strict austerity policies on member states and does so without taking into account their social impact. At the international level, there is growing consensus that the focus on fiscal consolidation is self-defeating. Organisations such as the International Monetary Fund, the Organisation for Economic Cooperation and Development and the International Labour Organisation have issued warnings on the impact of austerity policies. The IMF has reported that Greece has reached the limit of what its society can endure.
The new fiscal compact will introduce even more austerity measures – which in turn will lead to more budget cuts to social services. Non-governmental organisations across the EU have reported that in some member states services such as welfare, health, front line social care and pensions, have been downsized or closed as a consequence of budget cuts in social expenditure. In the United Kingdom around 60 per cent of homeless organisations reported budget cuts in 2011, while half expect further cuts this year. In the Czech Republic budget cuts amounted to 15-20 per cent for the entire social sector. And in Ireland, the capital social housing budgets have been reduced by 67 per cent, from €1.38bn in 2008 to €450m in 2011, even though demand for social housing rose from 56,000 households to over 150,000 in the same period.
Only two years ago member states committed themselves to the Europe 2020 strategy, which envisioned a future where the EU would become a smart, sustainable, and inclusive economy. There were clear targets for the reduction of poverty and social exclusion, and for increased education and quality employment. Yet the implementation of these commitments seems to have been put aside for the greater good of fiscal consolidation.
Unemployment is at a historically high level in the EU of 9.9 per cent and the long-term unemployed account for an ever higher share; 43 per cent have been without a job for more than one year, compared to less than 40 per cent a year before and to just a third two years earlier. A European Commission report shows that most people are affected by the rise in unemployment, but hardest hit are the young, the low-skilled and migrants. The numbers of working poor in Europe are also increasing, with available data from 2010 indicating that as many as 18 per cent of the self-employed and 6 per cent of employees are classified as poor.
Poverty is on the rise too and young adults, children and single parents are particularly at risk. In Lithuania and Latvia the percentage of people facing severe material deprivation dramatically increased by more than 7 per cent between 2008 and 2010 and by 4 per cent in Hungary and Estonia.
Civil society organisations are calling on member states to integrate a social pillar in economic governance through a social contract. Such a contract should include measures for the promotion of social protection, social justice, quality jobs, and a sustainable economy, while combating inequalities. Europe should show that it is part of the solution and not damaging the European social model through fiscal and financial orthodoxy at the expense of fighting poverty and social exclusion. Only then can Europe look forward to a future where member states deliver on their commitments to high levels of employment, productivity and social cohesion.
Conny Reuter is president of Social Platform, an alliance of 45 pan-European networks of NGOs fighting for social justice and participatory democracy
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