Social Europe

politics, economy and employment & labour

  • Themes
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter

A European Treasury – One Answer To The EU’s Economic Woes

Katja Lehto-Komulainen 11th April 2017 2 Comments

Katja Lehto-Komulainen

Katja Lehto-Komulainen

In Rome, EU leaders pledged to build a “prosperous and sustainable Europe” where “economies converge”. Fine words – but empty ones without more investment, especially in Member States with weaker economies. That is why the European Trade Union Confederation is urging the setting up of a European Treasury for public investment.

The ETUC has been calling for higher public investment for years. But instead, the Stability and Growth Pact (SGP) has stifled spending, while post-crisis austerity has penalised countries in greatest need. Economists have already pointed out that struggling economies will suffocate – and support for Eurozone membership evaporate – without lower borrowing costs and scope for investment. Yet political leaders have embarked on ideologically motivated, all-round austerity policies, with damaging consequences on growth and employment and catastrophic social impacts. As a first step, the SGP must now be amended to offer more flexibility for investment.

In its 2017 economic policy recommendations for the Eurozone, the European Commission called for a ‘positive’ fiscal stance, in other words, fiscal expansion of up to 0.5% of GDP, equivalent to around €50 billion. Expansionary policies are of paramount importance, especially in Member States hit hardest by the crisis, in order to rekindle growth. Yet national plans in the Member States for the year to come, under EU fiscal rules, indicate a neutral fiscal stance. A European Treasury would allow for a positive fiscal stance without contravening these rules. Graph 1 below highlights the divergence between government plans and Commission recommendations.

Graph 2 illustrates how contractionary fiscal policies have affected different Member States since 2011.

Our job is keeping you informed!


Subscribe to our free newsletter and stay up to date with the latest Social Europe content.


We will never send you spam and you can unsubscribe anytime.

Thank you!

Please check your inbox and click on the link in the confirmation email to complete your newsletter subscription.

.

Fiscal stances in the Euro area and euro-area Member States 2011-2016

The Five Presidents’ Report on Completing the Economic and Monetary Union, published in June 2015, recognised that EMU decisions will increasingly need to be made jointly, and suggested that a Euro-area Treasury could be the place for such collective decision-making.

A European Treasury would enable Member States to decide together on a global level of public investment across the EU – for example 3% of GDP. It would issue securities to finance debt at European level. Removing public capital expenditure from deficits and financing it through the Treasury would allow Member States to increase their budget flexibility while maintaining current spending and respecting the rules of the Stability and Growth Pact.

It would work like this: the European Treasury would borrow money on the capital market and lend it to governments at low rates of interest. Member States would retain control over their own investment programmes and pay back the money later. The European Treasury would cover all new public investment, while national budgets would fund only current expenditure. Governments could therefore avoid slashing public spending, as they were obliged to do under austerity, and could lay foundations for their future. And higher public investment would aim as well to attract more private funding.

No debt mutualisation would take place. The SGP would continue to apply to current spending, and the Treasury would withhold grant payments if countries failed to meet budget targets, thus giving governments a strong incentive for sound policies.


We need your support


Social Europe is an independent publisher and we believe in freely available content. For this model to be sustainable, however, we depend on the solidarity of our readers. Become a Social Europe member for less than 5 Euro per month and help us produce more articles, podcasts and videos. Thank you very much for your support!

Become a Social Europe Member

To create new jobs and relaunch sustainable growth, Europe needs much higher public investment in schools, healthcare and social services, research and development, transport and infrastructure. This is all the more necessary at times when jobs are being lost due to economic recession and political irresponsibility, and growing inequalities are reducing workers’ self-sufficiency.

The ETUC was pleased to see the launch of Jean-Claude Juncker’s Investment Plan for Europe. But it was too timid, the funding too inadequate, and it relied too heavily on private sources, resulting in investment going to sectors and regions that were already better off. Funds should immediately be retargeted towards communities and industries in real need. On the basis of past experience, trade unions are sceptical about the benefits of public-private partnerships, especially in the provision of vital services.

Public investment is vital to promote economic growth and jobs because the private sector is still risk-averse, and too often focused on shareholder value and short-termism rather than public interest, standing in the way of investments that are beneficial in the long-term but may not yield immediate rewards. Public funding is needed both to boost confidence and to build sustainable and environmentally friendly economies that will serve the needs of future generations.

Yet public investment in the EU has been falling since 2009. By 2013, some estimated an additional €230-€370 billion was needed to fill the hole. Even those Member States that have extra fiscal capacity have been reluctant to invest in boosting cohesion or kick-starting growth elsewhere in the EU. In some Member States, the stock of public capital is falling, leading to a deterioration in schools, roads and other vital infrastructures.

The European Treasury we propose would not be limited to the Eurozone and would not exclude any Member State.

Changing from high-interest national debt to low-interest debt would mean significant budget relief for Member States under pressure, while countries with more financial leeway would be able to borrow extra on their national budgets, if they wished.

We know that the European Commission is due to put forward further proposals for deepening Economic and Monetary Union in May. These must be designed for the benefit of Europe and Europeans, fusing interests in the service of the whole population. Putting aside the uncertainty generated by its ‘five scenarios’ for the future of Europe, the Commission must now have the courage to pursue the deeper integration and cohesion that we believe is the only way to preserve European unity. EU leaders will need to deliver on the commitments they made in Rome.

This column is sponsored by the European Trade Union Confederation (ETUC).
Katja Lehto-Komulainen

Katja Lehto-Komulainen is deputy general secretary of the European Trade Union Confederation. She was previously head of international affairs at the Central Organisation of Finnish Trade Unions (SAK).

Home ・ Economy ・ A European Treasury – One Answer To The EU’s Economic Woes

Most Popular Posts

schools,Sweden,Swedish,voucher,choice Sweden’s schools: Milton Friedman’s wet dreamLisa Pelling
world order,Russia,China,Europe,United States,US The coming world orderMarc Saxer
south working,remote work ‘South working’: the future of remote workAntonio Aloisi and Luisa Corazza
Russia,Putin,assets,oligarchs Seizing the assets of Russian oligarchsBranko Milanovic
Russians,support,war,Ukraine Why do Russians support the war against Ukraine?Svetlana Erpyleva

Most Recent Posts

Gazprom,Putin,Nordstream,Putin,Schröder How the public loses out when politicians cash inKatharina Pistor
defence,europe,spending Ukraine and Europe’s defence spendingValerio Alfonso Bruno and Adriano Cozzolino
North Atlantic Treaty Organization,NATO,Ukraine The Ukraine war and NATO’s renewed credibilityPaul Rogers
transnational list,European constituency,European elections,European public sphere A European constituency for a European public sphereDomènec Ruiz Devesa
hydrogen,gas,LNG,REPowerEU EU hydrogen targets—a neo-colonial resource grabPascoe Sabido and Chloé Mikolajczak

Other Social Europe Publications

The transatlantic relationship
Women and the coronavirus crisis
RE No. 12: Why No Economic Democracy in Sweden?
US election 2020
Corporate taxation in a globalised era

Foundation for European Progressive Studies Advertisement

EU Care Atlas: a new interactive data map showing how care deficits affect the gender earnings gap in the EU

Browse through the EU Care Atlas, a new interactive data map to help uncover what the statistics are often hiding: how care deficits directly feed into the gender earnings gap.

While attention is often focused on the gender pay gap (13%), the EU Care Atlas brings to light the more worrisome and complex picture of women’s economic inequalities. The pay gap is just one of three main elements that explain the overall earnings gap, which is estimated at 36.7%. The EU Care Atlas illustrates the urgent need to look beyond the pay gap and understand the interplay between the overall earnings gap and care imbalances.


BROWSE THROUGH THE MAP

Hans Böckler Stiftung Advertisement

Towards a new Minimum Wage Policy in Germany and Europe: WSI minimum wage report 2022

The past year has seen a much higher political profile for the issue of minimum wages, not only in Germany, which has seen fresh initiatives to tackle low pay, but also in those many other countries in Europe that have embarked on substantial and sustained increases in statutory minimum wages. One key benchmark in determining what should count as an adequate minimum wage is the threshold of 60 per cent of the median wage, a ratio that has also played a role in the European Commission's proposals for an EU-level policy on minimum wages. This year's WSI Minimum Wage Report highlights the feasibility of achieving minimum wages that meet this criterion, given the political will. And with an increase to 12 euro per hour planned for autumn 2022, Germany might now find itself promoted from laggard to minimum-wage trailblazer.


FREE DOWNLOAD

ETUI advertisement

Bilan social / Social policy in the EU: state of play 2021 and perspectives

The new edition of the Bilan social 2021, co-produced by the European Social Observatory (OSE) and the European Trade Union Institute (ETUI), reveals that while EU social policy-making took a blow in 2020, 2021 was guided by the re-emerging social aspirations of the European Commission and the launch of several important initiatives. Against the background of Covid-19, climate change and the debate on the future of Europe, the French presidency of the Council of the EU and the von der Leyen commission must now be closely scrutinised by EU citizens and social stakeholders.


AVAILABLE HERE

Eurofound advertisement

Living and working in Europe 2021

The Covid-19 pandemic continued to be a defining force in 2021, and Eurofound continued its work of examining and recording the many and diverse impacts across the EU. Living and working in Europe 2021 provides a snapshot of the changes to employment, work and living conditions in Europe. It also summarises the agency’s findings on issues such as gender equality in employment, wealth inequality and labour shortages. These will have a significant bearing on recovery from the pandemic, resilience in the face of the war in Ukraine and a successful transition to a green and digital future.


AVAILABLE HERE

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us on social media

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube