Remarks on the Report to the European Parliament
Transform conducted this interview with Pervenche Berès, French Member of the European Parliament, Socialist Party, S&D Group (Progressive Alliance of Socialists and Democrats in the European Parliament), Rapporteur of the Special Committee on the Financial, Economic and Social Crisis to the European Parliament, Chair of the Employment and Social Affairs Committee.
In your Report to the European Parliament on the Financial, Economic and Social Crisis you stress that the crisis is the consequence of the mutation of capitalism, with a corresponding increase in global inequalities and a reduction of the ratio of wages to capital in the calculation of value added as well as of the purchasing power of households. How was this analysis received? What is at stake in the debate over your report?
Surprisingly or not, this analysis of the origins of the crisis was perceived as ideological by the current political majority in the European Parliament, and, as a result of the power balance, it was mostly deleted from the report. Even though I was aware of the blunt nature of some of my statements and proposals, I was surprised at this battle over the causes of the crisis, because I had the impression that I had only put on paper what a majority of experts had already explained in numerous hearings over the last year, or what IMF economic advisor Raghuram Rajan wrote in his last book Fault lines. I have the impression that, at least as far as the causes of the crisis are concerned, we are facing the same difficulties as the US’s Financial Crisis Inquiry Committee, with some politicians refusing to question their belief in a system that failed. But, paradoxically enough, this divergence of views did not prevent us from putting forward many ambitious recommendations for the future.
You stress that the Growth and Stability Pact has not diminished the inequalities and divergences between countries; quite the contrary. You warn against the threat that a return to balanced budgets poses to social protection systems and to public services, and higher public debt to cover spending for the future (education, research and infrastructure) seems acceptable to you. You declare that the Union has reached the limits of a market based on “fair and undistorted competition”. Doesn’t all this undermine the liberal concept of the current construction of Europe? What is the role of the ECB?
The report “recognises that within the European Union the construction of the internal market without some tax harmonisation, notably regarding corporate taxes or a definition of the components of social protection, have led to some extent to excessive competition between member states seeking to attract taxpayers from other member states”, and it “considers it essential that the Single Market Act include an ambitious agenda for social and consumer protection by way of a social clause in all legislation related to the Single Market, legislation on services of general economic interest, a legislative agenda to strengthen workers rights, an ambitious legislative package for consumer protection which makes a difference to the daily life of citizens and better tax coordination through harmonisation of the corporate tax base and VAT rates”. I believe this to be a promising step.
Regarding the ECB’s role in the near future, I call for astrong vigilant attitude toward the shift of power that will result from the new supervisory architecture that has just been adopted. However necessary and welcome the establishment of the three new authorities and the European Systemic Risk Board was, we should be aware that it strengthened the ECB even further, including macroeconomic surveillance. That is why the forthcoming developments in the field of economic governance are so important.
Your proposals are based essentially on the need to reinforce the European level, to build the EU’s own competences and to allocate a real budget to the EU with its own resources. How would all this help prevent or manage any future crises?
The central statement in this report is that “what Europe needs is a more united, efficient and less bureaucratic Union and not just more coordination“. This means that “the Commission, whose task it is to define and defend the general European interest, must, as a priority and in line with its right of initiative, commit itself to action on behalf of the Union in those fields where it has shared competences or has the competence to coordinate member states’ actions“. We are very critical of the model developed in the last decade, in which the Commission merely set guidelines for member states’ liberalisation policies to build the internal market. What we are calling for through this report is a more interventionist model, where the EU takes direct action to ensure the completion of the objectives we have set in terms of employment, the fight against climate change and energy independence. The first field test of such a change of paradigm in EU governance should be the creation of an energy union. I strongly believe that if implemented, this change in governance will ensure that all dimensions, not only the liberal internal market one, will be integrated when shaping public policies.
Isn’t the democratic deficit one of the problems? Wouldn’t reinforcement of the European level constitute a danger from this point of view? How do you envision democracy on a European scale, the connection among national parliaments and with the European level, particularly with regard to budgetary policies?
As a strong advocate of economic coordination to counterbalance the integrated monetary policy, I believe that we need to overcome a contradiction. We have been calling for more ex-ante coordination because growing divergences over the last ten years have shown how inefficient ex-post control and sanctions alone are. But reinforcing economic governance will necessarily mean that the members will accept more budgetary sovereignty at EU level. The question is how do we ensure that the new economic governance does not boil down to finance ministers dictating member states’ choices in terms of employment, social policy and pensions from a mere accounting and budgetary consolidation perspective and under the pressure of financial markets. The European as well as national parliaments need to be at the centre of budgetary policy and on the side of the executive; social ministers need to be involved on equal footing with economic and finance ministers.
One of the forward-looking proposals in the report is that to embody economic coordination, we need a Mr/Mrs Euro along the lines of the High Representative for Foreign and Security Policy, i.e. a Vice-president of the Commission who would also chair the Eurogroup and represent it at the global level.
At the end of your Report, you briefly touch on the question of moving to a “green economy”. Isn’t it a question of a new model of production and what role the EU could play toward this end?
In the report we underline that “the absence of a more sustainable pattern of production, distribution and consumption in the face of climate change, the loss of biodiversity and the depletion of natural resources feeds into the root causes of the crisis“. As a consequence, we call for a “fair and equitable gradual transition to a green economy; [we believe] that the job losses resulting from the transition need to be anticipated with measures to step up training and improve workers’ skills in the new technologies“.
I strongly believe that we missed an opportunity in Copenhagen and that we shouldn’t wait for the rest of the world to start its environmental transition before we move. It might create a competitive disadvantage at the beginning but will pay in the medium term. Moreover, we have many other assets in the global competition to put forward: developed transport, communications and social infrastructures and our human capital.
It is up to the EU level to ensure that our regulatory framework fosters long-term investments geared towards a job-creating growth, so as to avoid a situation as in the .com bubble, where dynamic growth rates didn’t translate into the creation of jobs, not to mention decent jobs.
In the report we call for a tax on financial transactions as well as Eurobonds. I believe that the revenue from these new tools could, among other thingss be used for investments needed for our economy’s transition.