New Economic Governance : Is there any alternative to the TINA ?

1. New Economic Governance :Is there any alternative to the TINA ? • Cécile Barbier • Observatoire social européen • A torn Europe? Europe in two tracks? Or a Europe based on solidarity? • Dublin, 10 – 11 May 2012

2. 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: entry into force of the LisbonTreaty. 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, adding a protocol on services of general interest at the request of the Netherlands. Issue of social housing in the Netherlands. • Maintaining the status legally binding Charter of fundamental rights even if the treaty is silent on 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 of social partners and the citizens' initiative.

3. Possible corrections on the basis of EU treaties ? • Using the procedure of Article 153 TFEU (bridging clause but question of political feasibility in a context dominated by the better regulation and social measures of austerity plans already imposed), enhanced cooperation in the field of taxation (corporate tax, green taxes ...), social clause (a mention in the guidelines for employment in October 2010) but what impact in face of the strenghtening of the Stability and Growth Pact? • With regards to SGI, the implementation of the treaty is highly speculative 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, April 2010). The ruling of the General Court of the Court of Justice is expected during 2012.

4. Europe 2020 Strategy • European Commission (3 March 2010): Fiscal stabilisation requires "significant structural reforms, particularly in the areas of pensions, health care and welfare systems and education. • After application of the Treaty of Lisbon, reforms continue to cover areas on the border of Community competences. • On how to do (governance), in "an effort to improve consistency, reports and assessments of Europe 2020 and the Pact of 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 own identity. "

5. Strengthening economic governance • Following the entry into force of the Treaty of Lisbon, two points stand out:Institutional inventiveness: Declaration of the Heads of States of member states of the Euro area (March 25, 2010) deciding on 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 » vote to impose sanctions for non compliance with the rules of 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 of "ownership" by member states in the field of fiscal policies (national budgets must reflect the recommendations of the Commission or the Council during the "European semester").

6. Governance of the euro area • Besides the «  blocking qualified majority ", the Commission proposals presented before those of the Task Force on September 29 focus on monitoring and sanctions. • According to the October 2011 European Council, the reform of European governance should be completed by June 2011. • Differenciation in the mecanism 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 (innovation introduced by the Lisbon Treaty) but no visibility. Growing political role of the European Central Bank. • May 2010 : ECB President « From the monetary Federation to the fiscal Federation ». The « reverse majority » was strongly supported by the ECB. • The majority of the EP followed the request of the ECB president to extend the « reverse majority » as far as possible. But no far enough for the ECB.

7. A limited revision of the Treaty on the Functioning of 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 of the instrument of financial support (European Financial Stability Facility (EFSF until 2013, established 7th June, 2010 following the Ecofin Council decision of 9 May). Need to legitimise this tool in Germany. The Greek bail-out and the euro rescue package were challenged before the German Constitutional Court in that it violates the « no bail-out » clause (article 125 TFEU). • 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.

8. Meanwhile, a profound questioning of 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 or cuts in public service, flexible labor laws, lower pensions, abolition of jobs in public service, deferral of the retirement age ...). • When several national components of the "European social model" are crumbling, the model itself is eroded and reduced. • With the « new governance » there is no alternative (TINA) to austerity. It consists of an Economic model which translates the highly criticised « consensus of Washington ». New vison 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 of the ECB who said the European Social model has gone (Wall Street Journal, 23 February 2012).

9. The new intergovernmental tools • The treaty establishing the European Stability Mechanism (EMS) : after the version signed by the Financial Ministers of the eurozone on 11 July 2011, the revised version was signed on 2 February by the Permanent Representatives of the eurozone MS • Institutionnalisation of the method of the « memorandum of understanding » listing the strict conditionnality to obtain the financial assistance. This is not a « solidarity » treaty as it is often wrongly said. • The treaty on stability, convergence and governance (TSCG) : the eurozone MS but signed by Heads of State and Governments of 25 MS (without UK and the Czech Republic). • Aim: Introduction of a fiscal « Golden rule » (also initially in the « Two Pack », the new strengthening of the Stability Pact proposed in November 2011 by th EC). Legalisation of the « reverse majority » introduced by the « Six Pack ». • Statement by the President Herman Van Rompuy at the signing ceremony, "its effects will be deep and long-lasting“. • Concretely : Spain is unable to respect its fiscal targets. But, iIn March 2012, the Spanish Prime Minister signed a treaty strenghtening the revised Stability (and Growth) Pact.

10. Institutionnal innovations of the two treaties • Innovations : the two treaties are linked - 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). • 2) As of the ratifications : the ESM treaty will enter into force if ratified by 85% of the votes cast. • 3) State of play of the ratification process • EMS treaty: First country France (ratification with the abstention of the Socialist PM in both Chamber of the French Parliament). • The TSCG: ratification by 12 MS on the 17 eurozone MS. • The Portugese and Slovenian Parliaments ratified both treaties the same days (13th and 17th April 2012). Germany and Italy plan to fulfill the procedure the same day before the Summer. • Referendum in Ireland (31 May 2012). High pressure. Why not raised the question of the legality of the “reverse majority” ?

11. Contested treaties • Story-telling on the treaties is revealing of the malaise they produce. • EMS treaty contested in the Netherlands by the National Auditors (in Dutch ‘de Rekenkamer’). Not opposed to the strenghtening of the European Institutions as such, in a letter they sent to the members of the National Parliament the auditors denounce the way in wich 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? German Cancellor made it a condition for the EMS treaty and the ECB president for maintaining its “non conventional” activities. • President of the Eurogroup, Jean-Claude Juncker: ““reverse majority is a political commitment(…)” as this procedure is not in the treaties.(26 January 2012 http://www.europaforum.public.lu/fr/actualites/2012/01/chd-jcj-traite/index.html). • 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 »

12. The way forwards • The new French President initially proposed the renegociation of the fiscal treaty. Now, is it just question of adding something about growth ? • The EP adopted a resolution on the European Council of January 2012. • As of 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». http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P7-TA-2012-0023&language=EN&ring=B7-2012-0044 • Or will it just be the occasion to legalise the « reverse majority » which does not exist in the current EU treaties ? • The UK (and the Czeck Republic) should be involved in the adoption of the fiscal treaty by now. The free marketers (among which non Eurozone MS such as UK, Sweden, Denmark) are the main supporters of further liberalisation of the internal market (letter of the twelve). President of the ECB, Mario Draghi, who said the European Social model has gone, speaks now of the need of growth… based on structural reforms.

13. What can be done? • 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 not only. • From a contested role during the Summer 2011 (secret letters from the ECB to the Italian and Spanish governments), the recipes of the ECB to create growth by «  structural reforms »- are now explained with resignation in the press. Not in the streets of Barcelona. • A non elected institution such as the ECB is becoming the arbitre of last resort in the « composed economic government » of the EU. • Adoption of the « Two Packs » whithout visibility. This is probably why there is so much noise about the fiscal treaty. • Complaint before the German Constitutional Court? Several complaints could be brought before the German Constitutonal Court by Die Linke but also by civil society organisations under the platform « Mehr Demokratie » (More Democracy).

14. Obligation to act in view of restoring Democracy : a shared responsibility for the Social movements and NGO’S • In Germany; the« Assoziation für kritische Gesellschaftsforschung » (the Association for critical social research) published a text criticising the autoritary liberal turn in Europe titled : «  Democracy Instead of the Fiscal Treaty! ». • A call from German Trade Unions from du DGB and its components (Ver.di, IG Metall) and researchers, signed notably by Jürgen Habermas pleades 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”. • The second Joint Social Conference gave an opportunity to formulate some common ideas and actions. Mobilisation against the austerity and debt for perpetuity (treaties) by opposition to the incantation for a flawed exports-led growth model.

15. Democracy in great danger • Austerity in Portugal : 40 % of abstention at the last legislative elections (June 2011). • Boycott by former veterans of the Carnation Revolution at the celebrations of 25 April 2012. According to one of the so-called « April Captains » : « The political direction taken by the current political powers no longer reflects the democratic regime handed down by the 25th April revolution ». • Lastly, the result of the Greek legislative elections of 6 May 2012 express a strong rejection of the method of the « memorandum of understanding ». Autism of the European authorities. • European Civil society must play a role of watchdog of Democracy both at the National and European levels by participating in the various calls and initiatives launched including in the framework of the Citizens initiatives against the liberalisation of water or other initatives to be launched in the spirit of solidarity in the noble sense of the term. This could include a reflection on the way we interact with the limited ressources of the planet while being able to live longer.