Now that the German-led Eurogroup has rejected the Commission’s proposal for a timid expansionary fiscal policy, it’s up to the Parliament to take a stand and defend a Eurozone fiscal capacity that would allow such expansive measures, write Ernest Maragall and Jordi Angusto.
Ernest Maragall is a Catalan MEP with the Greens/EFA group and sits on the European Parliament’s Committee on Budgets, while Jordi Angusto is an economist.
The investment that almost everybody – the OCDE, IMF, G20, Commission—is calling on Germany and the Netherlands to make, would benefit the whole Eurozone and so it makes complete sense for the EU to take a common approach.
It’s all very well to name and shame one country or another for their free riding behaviour, but that kind of behaviour is typical and unavoidable in any cartel-like organisation, which is pretty much how the EU now behaves in some respects.
So we have to decide whether we want the European Union to remain the cartel it has become, or whether we believe that another Europe is possible. And we must make that decision conscious of the fact that the status quo is unsustainable and worse still, is actually playing into the hands of the Eurosceptics.
Some may argue that the treaty change needed to take this forward is almost impossible in the current political conditions. But the treaties can be quite forgiving when necessary!
A prime example of this was the financial rescue of several euro countries in spite of the treaties excluding any bail-out option. The fact is that rescues were deemed necessary in order to avoid a euro-country default that could have triggered a chain of defaults and a euro collapse.
It was not solidarity but common interest. And it is this common interest that must drive the EU forward now, given that cooperation and solidarity are rare virtues in realpolitik!
So let’s pursue this common interest: this same common interest that drives our fight against climate change so that tomorrow our world will still be liveable.
And in economic terms, our common interest means ensuring fiscal and economic coordination to avoid imbalances such as those behind earlier bail-outs; it means automatic stabilisers to stop downturns in any euro-zone country; and it means common investment when there is a huge lack of internal demand as we see now.
And this “we”, includes Germany, where more than 10% of jobs are sustained by third country demand, which points to a very real economic weakness.
Sharing a single market and a common currency means that our countries are inter-connected and inter-dependent, where policies in one country can benefit or harm the others.
But without fiscal union there is a risk that actions to benefit others are avoided – why should I do that from which I do not profit? – and instead policies harmful to others, like fiscal dumping, become unavoidable.
That’s why the fiscal union is necessary. And it’s necessary on both sides: incomes, where the present fiscal competition is triggering a very dangerous race to the bottom; and expenditure, where fiscal consolidation brings deflation that monetary policy alone cannot avoid.
Without fiscal union, monetary union alone is highly unstable and completely unable to guarantee the shared prosperity we all want. That’s why we need to go forward with the fiscal union.
And we need it because it is in our common interest!