In the name of the markets : Is the revision of Europe's - - PowerPoint PPT Presentation

In the name

• f the markets

: Is the revision

• f Europe's

« constitutional setting » a source of legitimacy ?

Cécile Barbier Senior Researcher, Observatoire social européen (OSE) The impact of financial, Economic and Euro Crisis on the “Social Dimension”

• f the European Union,

International workshop, European University Viadriana, Frankfurt Institute For Transformation Studies Berlin, 29 November – 1st December 2012

Plan

1) The « social dimension »

• f the Lisbon

Treaty 2) Europe 2020 3) Two new international tools 4) The increasing role

• f the European

Central Bank

1)The "social" dimension of the Lisbon Treaty

Reminder: in 2004, the support to the Constitutional Treaty by both the European Parliament and the social actors was a "yes but... ". 1 December 2009: implementation

• f the Lisbon
• Treaty. It contains

some progress in the social field: Article 9 TFEU contains a horizontal social clause, Article 14 TFEU on services of general economic interest contains a new legal

• basis. After

the rejection of the Constitutional Treaty, it added a protocol

• n services of general

interest (SGI) at the request

• f the

Netherlands. Maintaining the status legally binding Charter of fundamental rights even if the treaty is silent

• n the procedure

for the revision (3 countries outside the scope of the Charter); Social Governance: inclusion of OMC procedures in 4 articles, but without naming

• them. As before, the employment

guidelines must comply with the broad economic policy guidelines that can be "enhanced" between member states of the Euro area. Recognition of the role

• f social partners

and the citizens' initiative.

Possible progress toward a more Social Europe on the basis of EU treaties ?

Using the procedure

• f Article 153 TFEU (bridging

clause, but question of political feasibility in a context dominated by the better regulation and social measures

• f austerity

plans already imposed), enhanced cooperation in the field

• f taxation (corporate

tax, green taxes ...), and social clause (a mention in the guidelines for employment in October 2010) but what impact in the face of strengthening the Stability and Growth Pact? With regards to SGI, the implementation

• f the treaty

is highly speculative and/or risky. The question of general interest tasks assigned to social housing in the Netherlands is raised (action against the European Commission, Case T-202-10, introduced in April 2010).

2) Europe 2020 Strategy

• European

Commission (3 March 2010): Europe 2020 presented as « a vision of Europe’s social market economy ».

• f Europe's

social market economy for the 21st century

• Fiscal stabilisation requires

"significant structural reforms, particularly in the areas of pensions, health care and welfare systems, and education.

• After

application of the Treaty

• f Lisbon, reforms

continue to cover areas beyond the border of Community competences.

• On how to do (governance), in "an effort to improve

consistency", reports and assessments

• f Europe 2020 and the

Pact

• f Stability

and Growth Pact (SGP) will be conducted simultaneously (while remaining separate instruments) This will allow these two strategies to pursue similar goals of reform while retaining their

• wn
• identity. "

Strengthening economic governance

• Following

implementation

• f the Treaty
• f Lisbon, two

points stand out: Institutional inventiveness: Declaration

• f the Heads
• f States of

member states in the Euro area (March 25, 2010) deciding

• n the

establishment of a Task Force on Governance. The task force issued its report prior to the European Council of 28 and 29 October.

• Institutional

creativity: introduction of a « reverse majority » rule to impose sanctions for non-compliance with the rules

• f the revised

Stability

• Pact. In fact, a «

blocking qualified majority » should be held to interrupt the proceedings leading to sanctions, which amounts to give the mechanism a quasi-automatic nature.

• Report of the Task

Force: The importance of the logic

• f "ownership" by

MS in the field

• f fiscal policies

(national budgets must reflect the recommendations

• f the Commission or the Council during

the "European Semester").

Governance

• f the euro area
• Besides

the « blocking qualified majority », the Commission proposals presented

• n September

29 focus on monitoring and sanctions.

• According

to the October 2011 European Council, the reform

• f

European governance should be completed by June 2011.

• Differentiation

in the mechanism leading to the sanctions for the Member States of the Eurozone (and addition of a new procedure for macroeconomic imbalances leading to sanctions for eurozone MS)

• Adoption of the «

Six Pack » under the ordinary legislative procedure (former codecision) which involves the implication of the European Parliament but with no visibility.

• Growing

political role

• f the European

Central Bank which is now an EU institution.

• May 2010 : ECB President

« From the monetary federation to the fiscal federation ». The « reverse majority rule » was strongly supported by the ECB.

• The majority
• f the EP followed

the request

• f the ECB president

to extend the « reverse majority » rule as far as possible.

A limited revision

• f the Treaty
• n the Functioning
• f the Union
• Following

the European Council in October 2010, the European Council President was assigned to study how to modify the TFEU by incorporating « a permanent mechanism for crisis management to maintain financial stability in the euro area as a whole ».

• Aim: To ensure

sustainability

• f the instrument of financial

support (European Financial Stability Facility (EFSF until 2013, established 7th June, 2010 following the Ecofin Council decision

• f 9 May).
• In order

to revise the treaty, the simplified revision procedure was

• used. It required

a unanimous decision by the European Council and all national ratifications. This must be completed in 2013 to succeed the EFSF. What about the ownership

• f such

a decision? Is this revision valid (Pringle Case, C 370/12) ?

Meanwhile, a profound questioning

• f the

"European social model" is in fact a reality

Market pressures: the introduction of reforms in several countries considered "courageous" by the European institutions (wage freeze

• r

cuts in public service, flexible labor laws, lower pensions, abolition of jobs in public service, deferral

• f the retirement age

...). When several national components of the "European social model" are crumbling, or worse dismantling, the model itself is eroded and reduced. With the « new governance » there is no alternative (TINA) to austerity. It consists

• f an Economic

model which translates the highly criticised « consensus of Washington ». New vision of the Washington/Frankfurt /Brussels Consensus since it is not possible to devaluate the national currency, « structural reforms » are the only way to produce an internal devaluation. The « master of the game » is the President. All of this to regain competitiveness, a consensus goal not being put into question since the Single European Act and the Maastricht Treaty (See White Paper

• f

the European Commission on growth, competitiveness and employment

• f of

1993 and Krugman's criticism).

3)Two new intergovernmental tools

1) The treaty establishing the European Stability Mechanism (EMS): after the version signed by the Financial Ministers

• f the eurozone
• n 11

July 2011. The revised version was signed

• n 2 February

by the Permanent Representatives

• f the eurozone.

Institutionalisation

• f the method
• f the «

memorandum

• f understanding

» listing the strict conditionality to obtain the financial

• assistance. This is

not a « solidarity » treaty as it is

• ften

wrongly quoted. 2) The treaty

• n stability, convergence and governance

(TSCG) : the eurozone MS but signed by Heads

• f State and Governments
• f 25

MS (without UK and the Czech Republic). Aim: Introduction of a fiscal « Golden rule » (also initially in the « Two Pack », the second strengthening

• f the Stability

Pact proposed in November 2011 by the EC). Legalisation

• f «

reverse majority » rule ? Statement by the President Herman Van Rompuy at the signing ceremony, "its effects will be deep and long-lasting“.

Institutional innovations of the two treaties

Innovations : the two treaties are linked and suppression of the requirement of all the national ratifications. 1) The granting of financial assistance will be conditional, as of 1 March 2013, on the ratification of the TSCG by the ESM Member concerned and, upon expiration of the transposition period referred to in Article 3 (2) TSCG on compliance with the requirements of that article (inscription of the Golden rule in the national legislation or constitutions). 2) As for the ratifications. The ESM treaty: ratification by 90% of the votes

• cast. The TSCG: ratification by 12 MS of the 17 eurozone

MS. 3) State of play

• f the ratification process

ESM treaty: First country France (ratification with the abstention of the Socialist PM in both Chamber

• f the French Parliament). The ESM

treaty entered into force on 8th October 2012. The Portuguese and Slovenian Parliaments ratified both treaties the same days (13th and 17th April 2012). Referendum in Ireland (31 May 2012). A yes of fear ? End November 2012: one ratification is missing.

Contested treaties

Story-telling

• n the treaties

is revealing

• f the malaise they

produce. ESM treaty contested in the Netherlands by the National Auditors (in Dutch ‘de Rekenkamer’). Not opposed to the strenghtening

• f the

European Institutions as such, in a letter they sent to the members

• f

the National Parliament, the auditors denounce the way in which the EMS treaty reinforces European institutions at the expense of democratic controls, which is definitely not the way to go. Former European Investment Bank (EIB) considers the fiscal treaty as “useless but necessary”. Why? The German Chancellor made it a condition for the ESM treaty and the ECB president for maintaining its “non conventional” activities. The fiscal compact is not neutral as it imposes austerity for perpetuity even if from a constitutional point of view “A constitution is not intended to embody a particular economic therory...it is is made for people of fundamentally differing views » German Constitutional Court on both treaties (September 2012).

The way forwards

Resolution

• f the EP on the European

Council of December 2011 (2/2/2012). As with the fiscal treaty, the EP « Insists that the contracting parties fully respect their commitment to integrate, within five years at the latest, the Treaty on Stability, Coordination and Governance into the EU treaties and asks for the remaining weaknesses of the Treaty of Lisbon to be tackled on this occasion». Or will it just be an occasion to legalise the « reverse majority » rule which does not exist in the current EU treaty ? The UK (and the Czech Republic) doesn’t participate in the fiscal treaty. The free marketers (among which non Eurozone MS such as UK, Sweden, Denmark) are the main supporters of further liberalisation

• f

the internal market (Letter of the twelve, 18 January 2012). President

• f

the ECB, Mario Draghi, who said the European Social model has gone, speaks

• f the need
• f growth…

based

• n structural reforms.

4) The increasing role

• f the ECB

The EU is fragmented and with the exception of the internal market and trade policy, action at the EU level is more and more an impracticable

• way. Accompanying

measures to soften austerity by enhancing growth (FTT, project euro-obligations) are opposed by Germany, but they aren’t alone. From a contested role during the Summer 2011 (secret letters from the ECB to the Italian and Spanish governments), the recipes

• f the ECB to

create growth by « structural reforms » are known. A non elected institution such as the ECB is becoming the « referee of last resort » in the « composed economic government »

• f the de facto

« coercive fiscal federation ». Adoption of the « Two Pack » without

• visibility. This is

probably why there is so much noise about the fiscal treaty. President ECB (September 2012) : On the new operation « Our operations would

• nly

take place in the secondary market, which ensures that money would pass to investors holding sovereign bonds, not to governments ».

Day of the German Industries”

• rganised

by the Federation

• f German

Industries, Berlin, 25 September 2012

The increasing pressures on the ECB

"The euro area is in a recession, driven by faltering confidence, which is projected to persist into the early part of 2013. Growth is projected to pick up only slowly during 2013 and into

• 2014. On-going

fiscal consolidation will hold back activity, but private demand will pick up as confidence and the functioning

• f the financial

sector

• improve. Continued

high unemployment and a large margin

• f excess

capacity will depress inflationary

• pressures. The main risk

is a lack

• f sufficient

progress by policy makers in resolving the crisis. Stronger bank balance sheets and a full banking union would reduce the adverse feedback loop between sovereigns and the banking

• system. Vulnerable

economies should enter the ECB’s Outright Monetary Transaction (OMT) programme if needed. To support demand, the ECB should reduce interest rates further and issue forward guidance on maintaining the accommodative policy stance for a long period. In the event

• f severe

turmoil, further non- standard measures should be taken." Euro Area - Economic forecast summary (November 2012) (OECD) http://www.oecd.org/eco/economicoutlookanalysisandforecasts/euroareaecono micforecastsummary.htm

Democracy in danger

Austerity in Portugal : 40 % of abstention at the last legislative elections (June 2011). Boycott by former veterans

• f the Carnation Revolution

at the celebrations

• f 25 April 2012. Words
• f one former «

April Captains »:« The political direction taken by the current political powers no longer reflects the democratic regime handed down by the 25th April revolution ». Result

• f the Greek

legislative elections

• f 6 May 2012 express a strong

rejection of the method

• f the «

memorandum

• f understanding

» (MoU). In Greece and the other countries under MoU, privatisation of public and health services is high

• n the agenda.

In Italy, the result

• f the referendum on the de-privatisation of water (June

2011) was cancelled by the reforms introduced by the Berlusconi government (August 2011). The Italian Constitutional Court ruled that decision illegal (20 July 2012). Will the European Commission listen to the Citizens (EPSU’s citizen initiative on water as a common good and not as a commodity) ?

Restoring Democracy: a shared responsibility for the Social movements and Trade Unions?

In Germany; the « Assoziation für kritische Gesellschaftsforschung » (the Association for critical social research) published a text criticising the authoritary liberal turn in Europe titled : « Democracy Instead of the Fiscal Treaty! ». A call from German Trade Unions from DGB, its components (Ver.di, IG Metall) and researchers, signed notably by Jürgen Habermas pleads for “a European social movement of citizens which embarks on a radical change of path, and acts against the current disastrous crisis

• policy. A first step on this road must be the rejection of the fiscal pact in

its current form, and new negotiations on fiscal and political frameworks”. What about the Six Pack and the Two Pack ?

The new French President proposed before its election the renegociation

• f the

fiscal treaty. June 2012 European Council : adoption of a Growth Pact, is it really something new ? In fact, before and after the crisis the European consensus on competitiveness was not put into

• question. On the contrary, it

was even reinforced (from the Franco- German proposal

• n a «

competitiveness pact » to the « Euro plus pact » and the application of the Six Pack,…)

The increasing leading role

• f the ECB

In the absence of a European Demos, is a European public sphere possible ? Summer 2012: article published by Habermas launching a debate

• n new

step towards political integration and the need for a « Social Europe ». As many

• thers, he

proposes the organisation of a referendum to legitimate the European

• project. Is it

realistic at a time when everything is done to avoid any public discussion on the MoU, the Fiscal Treaty

• r
• n the Two

Packs? Firenze 10 + 10 (November 2012): launch

• f the European

Progressive Economists Network. Aim: find alternatives to the TINA. Mario Draghi: «(...)

a genuine European public space is essential for supporting the long- term vision of the euro area. Citizens need to be in basic agreement that, within a monetary union, certain economic models are no longer possible. They must understand that there are limits to national discretion in economic policies that affect the area as a whole. In other words, there needs to be a new consensus on economic policies that will reinvigorate the European social model and make it fit for the 21st century ».

President

• f the ECB on receiving

the M100 Media Award 2012 Potsdam, 6 September 2012