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

The Stability And Growth Pact Has Failed

Dimitris Papadimoulis 7th November 2016

Dimitris Papadimoulis

Dimitris Papadimoulis

Seven Eurozone member-states have received a warning letter from the European Commission on potential deviations from the prescribed budgetary norm in 2017 and likely need for fiscal tightening. Cyprus, Spain, Portugal, Italy, Finland, Belgium and Lithuania face problems in abiding by the rules and requirements of the Pact (S&GP) with respect to the rate of public spending and the concomitant deficit.

The first point we need to stress is that the requirements and fiscal/budget targets included in the S&GP render the implementation of a growth-oriented policy almost impossible for a growing number of member-states, and not only for the weak European South. If countries with traditionally robust economies, such as Finland, or countries of the “inner core” of the EU, such as Belgium, are being named and shamed, this simply deepens doubts over the effectiveness of the Eurozone’s current financial model, let alone its validity.

Weak growth and lack of investment force member-states to increase public spending in order to mobilize consumption and production, breaching the restrictive threshold of 3% of GDP for public deficits. Furthermore, decision-makers in Brussels are failing to accelerate the harmonization of the fiscal framework such as spreading the financial burdens equally among all social groups and establishing the same flat-rate system among all member states, while the efforts to tackle expansive tax evasion and regulate ‘fiscal paradises’ (tax havens) fall woefully short. In this context, progressive governments in Greece, Italy or Portugal experience a hard time in implementing a growth-oriented policy that would also promote social justice.

The second point to emphasize is that deviation from the S&GP rules can also happen the other way round. This is the case of Germany whose domestic economy runs smoothly, with no public deficit, thus no recurring issue of public spending cuts, mainly owing to powerful and sustained trade surpluses. These surpluses are ruining competitiveness in other member-states, but also in the Eurozone altogether.

Since 2011 Germany has constantly increased its exports towards the rest of the Eurozone, thus breaking EU rules over the maximum level of trade surplus or no more than 6% annually. In 2015, the German economy succeeded in reaching a record 8.8% trade surplus, while in 2016 this is expected to dip slightly to 8.5%, according to the European Commission.

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.

.

With regard to the German case, Brussels seems not to follow the same rules for all at a time when other member-states, such as Italy, are being forced to adopt additional fiscal measures to offset their budget deficit. This asymmetric, biased policy is destructive as it damages social and regional cohesion, preparing the ground for a wider revolt against EU institutions and decisions taken in Brussels.

The third and last point to be addressed is that the Eurozone needs a revised institutional framework that would allow it to focus more on sustainable growth policies. Social and regional cohesion is in the interests of Germany as well, as the current balance of power within Europe seem to increase negative feelings against Berlin.

Within this complex context, there is an urgent need for major changes in Europe. These changes have to come from the EU institutions and national governments, with European citizens, their voices and concerns at the core of the debate.

The role of the European Parliament as the EU’s only elected body should also be vital. The pressure it exerts on the Commission and Council is growing, led by a group of MEPs coming from different political families (i.e. Left, Social Democrats, Greens), forming the Progressive Alliance and pushing for the revision of the Pact.

The unstable political environment in Europe and the fact that many member-states are entering into electoral campaign mode (especially France, Germany, The Netherlands) or faced with big challenges, such as the referendum on constitutional reform in Italy or the fragile majority of the conservative government in Spain, could either impede positive developments or trigger a new phase that drags the EU away from catastrophic austerity.


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

The European Left has the opportunity to foster broader alliances at the domestic level and fight for a dominant and influencing role in the upcoming elections in member-states. Empowering the role of the Left at regional or central level is vital for an urgently required shift of Europe towards progressive policies.

Dimitris Papadimoulis

Dimitris Papadimoulis is Vice President of the European Parliament, MEP and head of the Syriza party delegation.

Home ・ Economy ・ The Stability And Growth Pact Has Failed

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

Labour,Australia,election,climate,Greens,teal Australian Labor’s climate policyAnna Skarbek and Anna Malos
trade,values,Russia,Ukraine,globalisation Peace and trade—a new perspectiveGustav Horn
biodiversity,COP15,China,climate COP15: negotiations must come out of the shadowsSandrine Maljean-Dubois
reproductive rights,abortion,hungary,eastern europe,united states,us,poland The uneven battlefield of reproductive rightsAndrea Pető
LNG,EIB,liquefied natural gas,European Investment Bank Ukraine is no reason to invest in gasXavier Sol

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

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

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

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