Potsdam,
March 18-19, 2005Potsdam,
March 18-19, 2005
THREE PROPOSALS FOR THE “STABILITY PACT”There has been a lot of discussion about reforming the stability and Development Pact.
Throughout the next week consultations among the finance ministers are expected to continue, with the aim of achieving an agreement on the reform of the Stability and Development Pact.
If an agreement is achieved, it is expected that it will be ratified by the heads of the EU member states at the summit convening on March twenty second 2005.
The general picture, however, remains blurred. The European Central Bank, as well as the European employers organization, have taken a position against any relaxation of the existing pact. On the other hand, at the governmental level, a wide consensus supporting a relaxation of the pact seems to be forming. There is no agreement, however, as to the particular way in which this will materialize.
The Proposals of the presidency suggest that a number of factors should be taken into account during the evaluation of the countries performance, such as the promotion of structural changes, the economic conditions - in the sense of the phase of the economic cycle, the existence of special needs due to natural disasters, and other factors. Germany is requesting the exemption of the re-unification expenditures, as well as its contributions to the European budget. France asks for an exemption of military expenditures, of expenditures for the Olympic Games in case it organizes them, as well as the exemption of research expenditure and assistance for third countries. Many new member states, like Poland, Slovenia, Hungary, and others are requesting various exemptions due to reforms which are under way in their pension systems or due to adjustments they are required to make pending their inclusion to the Euro-zone.
Is it possible that the existence of all those differences, will permit an agreement? Many, including Commissioner Almunia, doubt that.
I think that a common platform is necessary in order to make the involvment of our parties and the social movements more effective. That is important because, even if the current discussions lead to an agreement, the problems will remain. This is why I want to put forward some proposals:
Firstly we should evaluate the direction of ongoing discussions regardless of their outcome.
Do the various proposals have something in common? I think they do. This is the transformation of the Stability Pact from an instrument of fiscal discipline to a means of political pressure, in other words to an instrument of political discipline. That means that the same Pact shall be looser for the strong countries, but also for those countries obeying the politically dominant doctrines. Conversely, the Pact will be applied more severely to countries that diverge politically from what is considered “politically correct”.
This is already happening today. For instance Germany has not subjected to any penalty even through its deficit has exceeded the 3% limit for four consecutive years. At the same time, Greece is threatened with heavy penalties if it does not reduce its deficit to below 3% within two years, in other words. if it does not speed up the policy of privatizations, liberalization of the labor market and other painful changes.
The Greek governments, of course, are not innocent. They proceeded with the adoption of the Euro while simultaneously under- taking the Olympic Games without negotiating an exemption of the relevant expenditures from the deficit, as France is now correctly requesting in the face of the possibility of undertaking the 2012 Olympic Games. So, the extensive use of the so called “creative accounting”, was the only way to secure an accordance with the terms of the stability pact.
Regardless of this, I think that as forces of the left we must, as a matter of principle, take a position against the selective or discretionary application of the Stability Pact. Any Pact, any rules that are in place, should be applied equally to all countries, large or small, and independently of the policy that each country democratically selects and applies.
Secondly the Stability Pact is an important structural element of the European Monetary Union, but not the only one. Other structural elements are the European Central Bank and the European budget. Therefore, no change to the Stability Pact can facilitate development, employment and social cohesion if it is not accompanied by changes in structure and policy of the European Central Bank and the budget of the EU.
This is why a wider agenda is needed: a triple reform affecting the European Central Bank, the Stability Pact and the European budget. We think that, in this respect, the proposals put forward by the European Economists Network could be accepted for further discussion.
Lastly, as far as the Stability Pact itself is concerned, the question that arises is whether any Pact is really necessary at all. In our view under the circumstances of a common currency some form of a Pact is needed. The existing Pact, however, regardless any extent of its reform cannot serve priorities of development, sustainability and employment. We should, therefore, as Left parties, address the citizens under the terms of a radically new Pact, aiming to achieve stability through development, reduction of un-employment, protection of the environment and strengthening the social cohesion.
In this sense the extent of unemployment and the needs for material and social infrastructures are among the criteria that should be taken into account.
The discussion on the European “Constitution” presents an opportunity for informing and the involving of the citizens. For this reason we in Greece have disagreed with the decision of the Greek government to bring the so-called Euro-constitution to the Parliament for approval. We asked for a referendum to be carried out, precisely so that our proposals can be put to the judgment of citizens.