It is becoming fairly obvious that ideological conviction rather than empirical or economic circumstance is driving fiscal austerity in countries such as the UK, and, I would argue – Ireland. This is not hugely surprising. What is most depressing, however, is the Eurozone response. There are a whole variety of reasons for the absence of solidaristic coordination. Political preference is driving economic policy and centre-right conservative governments dominate the Commission. Economic policy is always determined by the strategic terrain of politics. Presently, in Europe, the politics of Euro-conservativism is dominating the policy agenda.
Centre-right conservative governments hold the balance of power in Ireland, UK, France, Germany, Sweden, Netherlands, Italy and Finland and almost all of the accession Central and Eastern European countries. It is no suprise then that there has been minimal coordinated policies to tackle the problem of 25 million people unemployed across Europe by the end of 2010, 8 million, of which are directly associated with the recession. This is not sustainable and Euro-coordination is required. But, is this solidaristic response possible in the absence of a progressive politics that is willing to assert the autonomy of people and democratic institutions over markets?
What would such progressive policies look like? To begin with, Europe needs to;
- establish a larger budget to stimulate structural investment. Presently it is less than 0.5 percent of Euro GDP. It should be increased to at least 5 percent.
- develop alternative institutions to generate public ownership of debt via Euro-bonds to end reckless speculation.
- establish a public Euro-independent credit rating agency to replace the existing market agencies who serve the interests of those who hold financial assets.
- generate diagnostic tools beyond the growth and stability pact to assess the structure of government public finances to enable progressive taxation policies.
- introduce a tax on financial transactions and harmonise corporate tax rates.
All of this requires European policy makers (particularly economists) and politicians to stop thinking of solidaristic support and transnational coordination as ‘foreign aid’ and recognise that punishing peripheral countries for their financial difficulties is counter-productive for the Eurozone as a whole. Presently; Ireland, Spain, Greece and Portugal are being hammered by anoynomous and unaccountable bond markets (financial investors). The European response (driven by the Commission) has been to encourage more cuts, more austerity and more pain. Thus, peripheral economies are in a double bind – cut to appease market sentiment and then get hammered for deflationary policies that reduce growth.