"The real issue to be addressed at this moment is not to withdraw but how to maintain and significantly improve fiscal stimulus," reads a statement issued by the European Trade Union Confederation (ETUC).
Their call came after finance ministers instead stressed the need to cut expenditure by 2011.
According to ETUC's calculations, the stimulus measures applied by member states have so far amounted to 0.6% of the EU's total GDP in 2009, which means less than €80 billion. Member states agreed in 2008 to spend around €200 billion (1.5% of GDP) to prop up the EU economy.
Unions are concerned by what they consider a "too limited and highly fragmented" European recovery plan, and suggest strengthening it by committing to "an annual 1% of GDP investment effort into the greening of the economy". This would amount to nearly €130 billion.
Trade unions believe that the priority is to further invest public money to help tackle growing unemployment, which reached 9.5% in August in the euro zone with even more worrying figures in specific member states. In Spain, it hit 18.9%, Latvia 18.3%, Ireland 12.5% and Slovakia 11.6%. It is close to 10% in France and 8% in Germany, according to Eurostat figures.
Cutting social expenditure rather than increasing it is expected to worsen the current situation, unions say. Instead of helping fiscal consolidation and a gradual recovery, unions fear that it will trigger a negative spiral, inducing citizens "to spend less and increase precautionary savings," reads the ETUC statement.
On Tuesday (20 October) finance ministers sent a clear message about their intention to start exit strategies by 2011. "The Council agrees that, beyond the withdrawal of the stimulus measures of the European Economic Recovery Programme, substantial fiscal consolidation is required in order to halt and eventually reverse the increase in debt and restore sound fiscal positions," read the conclusions of the Ecofin meeting.
Funding the fight against unemployment
Unions, however, think it is too early to talk about exit strategies because "the current recession is not a normal recession" and it will have longer term effects on employment and the overall economy.
To fund the extra expenditure demanded, unions call for the adoption of a Tobin Tax on capital transactions. "With a financial transactions tax, Europe can finance the major part of the €130 billion European investment plan the ETUC is asking for," said John Monks, ETUC's general secretary.
Ministers also relaunched the idea of European bonds guaranteed by the EU institutions, which Monks said "would increase market liquidity and reduce liquidity premiums in interest rates to be paid by governments".
Indeed, ETUC underlines that raising public debt would be "manageable" if interest rates on debt did not increase. If they were to fall, financial pressures on governments would ease even with more ambitious recovery plans in place. To reach this objective, "the European Central Bank can help substantially by buying government bonds so as to bring long term interest rate costs for government lending back down," reads the ETUC statement.
"While exit strategies must indeed be foreseen not to endanger member states' financial stability, our understanding is that the Ecofin also made it clear that it does not expect aggressive budget consolidation policies to be put in place before 2011. This decision is to be welcomed, since it caters both to the long term need to ensure a proper fiscal exit strategy and to the short term necessity to ensure support for the crisis recovery programmes recently put in place," Gerhard Huemer, director for economic and fiscal policy at UEAPME, the European craft and SME employers' association, told EurActiv.
"Such extraordinary measures are bearing their first fruits – withdrawing them too soon would endanger Europe's economy or worse still trigger a 'W-shaped' crisis that must be avoided at all costs," Huemer said.
