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

It’s Time To Stand Up To Troika Austerity (Part II)

Thomas Fazi 19th June 2014 1 Comment

Thomas Fazi, Troika Austerity

Thomas Fazi

In the first part of this article I looked at the mounting evidence against austerity by organisations as varied as Caritas, the ILO, the Council of Europe and the IMF. So why is the European establishment pushing for more of the same?

Social and economic misery and despair, growing inequality, dwindling public services, loss of hope and ballooning debts: this is austerity’s scorched-earth legacy. And yet, in a telling demonstration of the extent of their dangerous ideological fanaticism, Europe’s austerity zealots insist that Europe needs ‘more austerity’.

Take Olli Rehn, the infamous Commissioner for Economic and Monetary Affairs, who recently stated that rigour and austerity are working and must not be abandoned, and on the contrary should become part of the agenda of all the governments of the EU and eurozone. Unsurprisingly, a similar degree of ‘crisis denialism’ informs most of the Commission’s documents, such as the latest round of ‘country-specific recommendations’ (part of the EC’s Macroeconomic Imbalance Procedure). In it, the Commission paints a fairytale-like picture of Europe which bears little or no resemblance to the bleak reality hitherto described: one in which ‘financial stability is returning’ and ‘the rise in public debt is being controlled’; in which ‘the EU is moving […] towards a more sustainable growth path that will generate jobs and improve standards of living’; in which even Greece has ‘stabilised’ its situation and is on the way to recovery; and in which ‘all economies are expected to be growing again’ by 2015 (on the Commission’s tendency to always over-estimate potential growth variables see here).

All of which, of course, demonstrates that fiscal consolidation ‘has been instrumental in improving the conditions for more balanced growth’, and that member states must stick to the path of austerity and structural reforms. Special recommendations were spelled out for those countries judged to be cutting too slowly or lagging behind with reforms: Italy, France, Ireland, Spain and others. This is a kind of ‘last warning’, with non-compliance resulting in the interested countries being placed in a dreaded ‘excessive deficit procedure’, in which case an even stricter system of monitoring and surveillance kicks in.

It’s the same mixture of denial, over-optimism (refuted even by the Social Affairs Commissioner himself, as we have seen) and pro-austerity zeal which can be found in the ECB’s official statements. As the central bank’s latest ‘projections for the euro area’ report reads, the various austerity measures already approved by national parliaments (or likely to be so) for the 2014-16 period ‘fall short of the fiscal consolidation requirements under the corrective and preventive arms of the Stability and Growth Pact’, and it will thus be necessary for governments to adopt additional fiscal consolidation measures by 2016. The ECB concedes that ‘fiscal consolidation measures often have negative short-term effects on real GDP growth’, but these – it says, despite overwhelming evidence of the contrary – are offset by ‘positive longer-term effects on activity’, as preached by that blatantly disproven economic myth that goes by the oxymoronic name of ‘expansionary austerity’.

Is Ideology Driving Austerity?

How should we explain such apparent reality- and reason-defying stubbornness of behalf of the European establishment? Most critics point to ideology – more precisely, neoliberal ideology. In my book I argue that ideology isn’t sufficient to explain the current onslaught, and that we have to face the fact that there might be a more sinister logic at play. As even the aforementioned Caritas report notes, there is good reason to believe that ‘the major programmes embarked on to reduce public expenditure and introduce structural reforms, ostensibly justified by the crisis, were in fact aimed at reconfiguring whole areas of the European social model’, in a process that ‘arguably represents the largest transfer of wealth from citizens to private creditors in Europe’s history’. That said, it is undeniable that ideology plays a crucial role. Given the models on which the Commission bases its policy recommendations, the unfolding social and human tragedy was not only predictable – it was inevitable.

The problem is that the EC judges member states according to a set of parameters – government deficit, public debt, current account balance, labour market ‘flexibility’, competitiveness, investment, etc. – that, while important, leave human beings – and a whole set of other factors that weigh heavily on the quality of life, such as the quality of the environment, the availability of decent jobs, poverty and inequality rates, community, and so on – entirely out of the picture. To paraphrase Bobby Kennedy’s famous definition of GDP, we could say that the EC’s tools ‘measure everything except that which is worthwhile’. To the extent that a factor like unemployment is taken into consideration, the shockingly high rates of unemployment that we see today in many European countries are in most cases considered ‘natural’ by the Commission (more on the EC’s ‘natural rate of unemployment’ model here).

A recent report written by Alessio Terzi and Guntram B. Wolff for the European Parliament makes this painfully clear. The authors looked at the frequency with which certain keywords appear in the memorandum documents prepared by the Commission for Greece, Portugal, Ireland and Cyprus. Predictably, words like ‘fiscal’, ‘consolidation’, ‘reforms’ and ‘business’ figure heavily throughout the programme documents; words like ‘poverty’, ‘inequality’ and ‘fairness’, on the other hand, are almost entirely absent. Clearly the EC considers these to be variables of negligible importance.

This highlights the crux of the problem: that some of the EU’s key institutions – chiefly, the Commission (and in particular its stick-wielding arm, DG ECFIN) and the ECB – are in the grip of an extreme neoliberal ideology; and, more importantly, that even if we accept that these policies are simply the product of a misplaced but well-meaning neoliberal faith in the virtues of fiscal rigour and the free market (which is arguable), we would do well to come to terms with the fact that these institutions are never going to bring about a change of policy of their own accord, regardless of the piles of ‘evidence’ that we bring to their doorsteps. They have to be stopped.

The next European Parliament should make this one of its key priorities, beginning with the dissolution of the troika. A positive first step in this direction came in March, in the form of a non-binding EP report which argued that the troika was an ‘ad-hoc’ set-up with no clear legal basis and with no democratic scrutiny from the European Parliament, whose measures ‘have led in the short term to a rise in income distribution inequality’ and poverty. The report is especially critical of the huge power accrued by the ECB in the wake of the crisis, recalling that ‘the ECB’s mandate is circumscribed by the TFEU to the areas of monetary policy and financial stability and that involvement of the ECB in the decision-making process related to budgetary, fiscal and structural policies is not foreseen by the Treaties’. The report concludes by calling for a ‘phasing-out’ of the troika and the creation of a European Monetary Fund ‘subjected to the highest democratic standards of accountability and legitimacy’.

Of course ‘disarming’ the troika and bringing economic policy under some degree of democratic control, at the EP level, won’t in itself put an end to austerity. As is well known, since 2010 the European Commission and the Council have adopted, behind closed doors and beyond public scrutiny, a complex system of new laws, rules, agreements and even a treaty – the Fiscal Compact – aimed at permanently institutionalising austerity on a European scale. As Caritas writes, ‘Europe is now committed to a policy which involves cutting spending even in a depressed economy… This could be a recipe not just for one lost generation in Europe, but for several lost generations’.

Importantly, this new system of economic governance rests on a series of ‘automatic correction mechanisms’ and quasi-automatic sanctions in the event of non-compliance with the rules, which effectively accomplish a lifelong neoliberal dream: the complete separation between the democratic process and economic policies. As Hugo Radice, life fellow at the University of Leeds, writes: ‘These proposals, when fully implemented, will not only enforce a permanent regime of fiscal austerity, but also further remove macroeconomic policy from democratic control… In essence, it is the politics of depoliticisation’. This means that any change of policy and re-democratisation of economic policy in Europe necessarily hinges on abandoning the Fiscal Compact, and the absurd sets of regulations on which it is based: chiefly, the ‘six-pack’ and the ‘two-pack’. The European Parliament approved these, and it can overturn them.

As I pointed out in this article, the broad progressive anti-austerity camp – if we include the more left-leaning wings of the ALDE and Greens/EFA groups – will be the third force in the next Parliament. It is now up to the European progressive movement – at all levels: in the European Parliament, within single member states and, of course, on the streets – to seize this historic opportunity, and use all the instruments at its disposal – from civil disobedience to legal action – to get our democratically elected leaders to do what is necessary to save Europe from its self-inflicted misery. As Yanis Varoufakis aptly puts it, what is needed is ‘nothing short of a democratic backlash against Europe’s establishment’.

Thomas Fazi

Thomas Fazi is a writer, journalist and activist. He is the author of "The Battle for Europe: How an Elite Hijacked a Continent – and How We Can Take It" Back (Pluto, 2014) and "Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World", co-authored with economist Bill Mitchell (Pluto, 2017).

Home ・ Politics ・ It’s Time To Stand Up To Troika Austerity (Part II)

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

Sakharov,nuclear,Khrushchev Unhappy birthday, Andrei SakharovNina L Khrushcheva
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

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

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

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

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