Towards a Memorandum of European peripheries

rally-spain-austerity-policies.siNapredne sile po vsej Evropi se združujejo. V Iniciativi za demokratični socializem smo skupaj s špansko Združeno levico napisali članek o tem kako podoben je v resnici položaj v naših državah. Tako Španijo kot Slovenijo pestijo podobne težave kot tudi druge periferne države Evropske unije. V članku zato pozivamo k podpori naprednih, socialističnih sil na volitvah za evropski parlament. Hkrati pa pozivamo k oblikovanju političnega bloka vseh perifernih držav in k pisanju skupnega manifesta. Vabljeni k branju!

Towards a Memorandum of European peripheries

Political elites of the European Union (EU) have built their response to this crisis through the signature of “Memorandums of understanding” with different peripheral countries. Memorandums with Greece, Ireland and Portugal shaped the intervention of anti-democratic forces in the very core of the political processes of these countries and introduced criminal policies that local governments have carried out in the last years in their condition of vassals. These Memorandums also represent the precedent of the strategic orientations of the central countries’ elites for the future of Europe. In 2012, with the collaboration of local elites, they approved a Fiscal Compact and created a European Mechanism of Stabilization (EMS), instruments that institutionalized the subjugation of our policies to the necessities of central countries.

It is time to start working on our own strategic response. It is necessary to oppose the tale of Memorandums of central powers with a Memorandum for the peripheries. Considering our common background, the work will be as necessary as difficult. From Belfast to Canary Islands, from Lisbon to Athens, from Nicosia to Ljubljana, peripheral Europe has been subject to political fragmentation. On the one hand, central elites have frequently used local divergences in order to avoid the concentration of power in our regions. At the same time, local vassals have frequently joined central powers in order to find support for their ambitions, to reproduce their own narrow power position, never mind the interest of their peoples. The cases of Spain and Slovenia will show how shocking the parallels within nations are and that peripheral countries are indeed facing systematic degradation, which derives its legitimacy under the pretext of the crisis.

1. Diagnosis

After the crisis broke out, several countries of the European periphery had to ask the EU for the financial bailouts. The bailout package was conditioned upon full and timely implementation of fiscal consolidation and growth-enhancing structural reforms agreed under the programme. In short, in exchange for the loans, countries were forced to follow strict austerity measures, which were proclaimed as the only guarantee for the resolution of the crisis. Instead, the same dire situation that emerged in Greece repeated itself also in other crisis countries like Spain and Slovenia, making austerity a receipt for universal deterioration of peripheral countries.

Even though Slovenia has not yet requested for an official international bailout, it is following the austerity measures on its own initiatives, and now faces similar consequences like Spain, which requested for assistance loan in July 2012. Since austerity measures begun, both countries have faced an increase in public debt. In Spain, public debt rose from 36% of GDP in 2007 to almost 94% at the end of 2013, with all projections further planning its increase to 105% in 2018. Austerity measure also managed to increase the public debt in Slovenia, which rose from around 22% of GDP in 2008 to almost 72% of GDP in 2013, and is expected to rise to 77.7% according to IMF estimates.

The reactions to projections of public debt increases were in both countries the same. Despite wider opposition and critique, the government elites in Spain as well as in Slovenia passed ‘the golden rule’ for budget stability in their constitutions. With this maneuver, both countries gave up the only macroeconomic policy tool, with which they could still independently regulate indebtedness. Leaving aside that both countries set their targets extremely unrealistically, with encompassing the golden rule in their constitutions, they have to follow the targets in order to avoid sanctions. ‘The golden rule’ does not permit any public deficit, only public surplus, which means that the countries plan to compensate public finances with state revenue. So far, one of the obvious ways of increasing state revenue were budget cuts that mostly entailed spending cuts and tax increases.

The first signs of aggravating effects of austerity measures can already be seen in the deterioration of social circumstances in both countries with the rapid drop in living standard and living conditions of their citizens. In Spain, more than the 25% of the working-age population cannot find a job and almost 20% of the population is on the edge of poverty. The situation in Slovenia is comparable since almost 20% of Slovenians either lived under the poverty threshold or are socially excluded. With youth unemployment rates increasing up to 55% in Spain and more than 26% in Slovenia, unemployment represents the biggest challenge for both countries’ economies. In addition, with continuous fragmentation of the labor market, both countries face growing precarization of their labor force, which is creating a new ‘social class’ of poor employees, dispossessed, deprived of most or even all their social benefits and facing a degradation of their retirement conditions. Needless to say, such social circumstances push more and more people into living in poverty and prevent them to provide a decent livelihood for themselves.

2. Alternative measures

In this scenario, a set of measures must be implemented in order to reverse the current tendency of economic recovery without employment. Austerity policy and the so-called structural reforms (or actual neoliberal reforms) must come to an end immediately. However, this will certainly not be enough. A program of economic development must urgently be implemented. The ‘New Deal for Europe’ proposed by Alexis Tsipras is the only possible way of ending the problem of unemployment that has become chronic and is socially devastating peripheral Europe. Investment in productive areas of economy is the first condition for reversing this situation. At the same time, availability of credit must be guaranteed for small and medium-sized firms, the ones that provide the backbone of our economies. For this, the mandate of the European Central Bank (ECB) must change radically, so it can become an institution at service of productive economy, and must be put under democratic control of the European Parliament. European states and productive initiatives should find an ally in their Central Bank, not an enemy at the service of speculative financial institutions.

Solutions offered by European political elites have proven to be economically ineffective, but also deeply anti-democratic. Since 2013, when the European Fiscal Compact entered into force, states cannot resort to fiscal stimulus in order to create employment and opportunities. National budgets are not anymore a tool for the peoples. Instead, they are subject to the dictates of the European Commission, the Eurogroup and the ECB, institutions that have set the priorities on deficit levels, putting aside the peoples to whom they are supposed to serve.

At the same time, according to the Fiscal Compact, debt levels of the countries should not increase over 60%. However, the debt of peripheral countries has increased spectacularly since the beginning of the crisis and, paradoxically, it is still not a matter of concern for European institutions. We should not expect mercy from our creditors, to whom loyal vassal elites are ready to sell out our countries. The problem of peripheral debt must be addressed urgently through a European Conference. European Left has proposed the path of the London Debt Agreement of 1953, which provided a frame in which the Federal Republic of Germany could afford a part of their debts while facing a prosperous future. The suppression of this agreement is a precondition of any initiative for the future of peripheral countries.

3. Concluding remarks: Periphery, unite!

A group of French economists calculated that the result of tax leniency, which forces member states to sell government bonds and get further indebted, causes on average a drop of 2 – 3% in their GDP and mostly covers only the payment of interest rates. This, in turn, causes a spiral effect that pushes countries into further recession. As seen, austerity measures are not and should not be the best solution for the resolution of the crisis, since they are the ones that caused and deteriorated it in the first place.

It is time to stop the devastation of austerity in our countries and unit in order to rebuild the system into a democratic and socially just one. As Alexis Tsipras said, we need to build the broadest possible social and political alliances. Therefore, it is important that European peripheral countries start cooperating closely with each other and other peripheries of the world to fight for an alternative, people and nation friendly, solution out of the crisis. Member states of the South need to unite to shift the balance of political power in Europe in order to change it into a better, socialistic one that will again serve its citizens and not the capital!