Tuesday, August 31, 2010

The European Union and the Crisis

The EU monetary crisis - all what Eurosceptics or Euroholics are constantly talking about. An interesting piece, which has been published on the webzine of Young European Federalists is definitely worth reading to understand roots and consequences of the EU policy ever since it has been established. 
Room for social policies
In order to understand the current situation, it is appropriate to analyse the social policies in Europe in a historical perspective. Since the end of the Second World War, Western Europe has developed a welfare system completely different from that of the United States, especially from the one put forward by the republican governments. Actually, the US themselves contributed to establishing the European social model through the Marshall Plan.
Post-WWII Europe needed to meet the citizens’ social needs
Post-WWII Europe needed to meet the citizens’ social needs which were already present prior to the conflict such as: large-scale public education, certainty of a home and work and a health care accessible to all. In each European national state the peculiar pattern of divergence between governments and social groups caused the emergence of different models of social state. Since then, the European institutions have had an inadequate and uneven approach in this area. In its early years the ‘ECSC’ developed its own model which was about trying to find a harmony between employers and workers and eventually turned out to be successful. Moreover, this model allowed the matching of the monetary, fiscal and political needs with those of the historical contrasting conditions of the Cold War.
In particular the ECSC model managed to align the necessity of a relation with the US with the approach of the trade unions that were far too close to the national communist parties. In practice the social policy realised by ECSC addressed the social problems caused by ECSC itself: the reorganisation of the coal-mining and steel industry. The means used were the most common ones: funds to protect workers and the industries themselves. The European communities that came later did not commit themselves in the same way in the social field. Actually the only country among the six founding members that pushed for a European common approach on the topic was Italy (because of her strong regional imbalances). This lack of European commitment in the social area meant a strong boost to the free movement of labour, to the protection of workers’ rights in destination countries, anti-unemployment measures, training plans and professional preparation. Hence, a long work was done to include these issues in the treaties of Rome.
At the end of the 1960s the European Community had to again address problems such as unemployment, immigration and education. The European Economic and Social Committee was an important but often forgotten innovation introduced by the treaties of Rome and progressively deprived of its real potential. When employers and their associations found out more suitable channels to lobby their interests, they quit this institution and left it to trade unions. Moreover, the very functioning of the EESC has made it eclipsing and caused its main problems such as opinions remained unheeded and recommendations sent too late. EESC represents the emblem of what the European institutions have not been able to do for years: use their position to be heard. Few years later, during the 1970s, the European structure changed radically and also in its approach to social issues. The turning point was the movement of 1968. Up to that time the Common Agricultural Policy and the free movement were the only common policy areas of the EEC with repercussions to the social field. Eventually, social policies were included among the competences of the EEC as one of the result of the Council of Paris in 1974. The ambitions in the social field were great and to achieve them a Community action was fundamental.
The 1970s witnessed severe crisis, especially for young people looking for their first job. Of primary importance became reducing unemployment and therefore vocational training was funded. In this context the European Centre for the Development of Vocational Training was established. This European agency started to draw attention, but it was evident that adequate social policies needed more money, yet there was a lack of political willingness to fund such programmes. For this reason the main measures adopted were legislative acts, as in the cases of equal opportunities, disabled people and the European Social Dialogue (within which the European Trade Union Confederation was established). These actions did not represent any cost for the European Institutions, gave leeway to national states and allowed the European Community to avoid facing its social responsibilities. Only after 1985 social issues went on the agenda again. This is the case of the White Book of the Delors Commission “Completing the internal market” which seemed to be based on notions of neoliberalism but came from people who were not really neoliberals (such as Mitterand, Kohl, Delors). Rather than proposing a common European social model however, the European Union since then sends recommendations to national states. The only area where the European intervention appears to be relevant is the employment but also in this case is limited to the financing of unilateral programmes undertaken by singular European states.
At this point an important question is: why in this context the EU did not start from the bottom by establishing an authentic European society to which it would be easier to apply a unified European policy? We should properly estimate however, the real achievements of the Union.
Welfare is costly!
These achievements are few, but should be considered in a historical perspective: the European project started in a continent destroyed by the most devastating war ever. Nowadays it would be senseless to find excuses and to not see the reality: welfare is costly! Welfare states were established in a historical moment that made it possible. The not so easy task of reallocating the resources for social purposes was lightened by a great economic growth, in a moment of relatively weak global competition. In the light of what is happening today the main objective is therefore to save what is still left of these welfare systems: namely to save what we still can.
Consequently, the German proposal should be considered in relation to the current global situation. In a globalised economic system competition is strong. Economies such as the Indian and Chinese ones have a better position in the global competition due to their less developed welfare system and lower labour cost. The rapid decreasing of resources’ availability is a matter of concern not only for Italy but for the entire Europe. In the European Union what has been the role of the Commission and what of the national states? They normally propose solutions for the short term but the question is constantly the same: who has to pay for the crisis? Can we afford to keep spending relatively more just because we are protected by our euro ‘shield’? If the holder of the shield is weak, how can we bear this situation in the long run? Hence, when the last breaking point is reached a domino effect for Europe and then for the whole world will become a possible scenario.
The functions of Euro
Is the only function of Euro is to protect us? Or do we need something else for our development? Here we should not underestimate the power of a strong currency. Americans can take advantage of the dollar as there is somebody ruling over it. The European integration reached thanks to the Euro should remind us of the power of currencies for specific purposes. Nevertheless, we should learn how to make use of currencies. In order to do so there is only one way: equalising the value of the currency with the real value of the economy. Today, the problems are the substantial economies and the governments that control them. This does not mean that the Euro has been poorly managed. Actually the contrary is true, the good management of the Euro is due to the fact that the European Central Bank has been based on the principle of responsibility. Therefore, the ECB has properly addressed the crisis but keeps tottering because of the lack of a unified government supporting its action.
United or we will perish
In this moment of crisis who looks after the European Economy? And who will look after it in the future? Is the option proposed by Zingales of a pull-out of Greece from the Euro feasible? This solution would not we just create further gaps? Once again there is only one way out: a common European fiscal and economic policy ruled by a European government which is properly empowered and thus able to provide an appropriate guidance. We also need a common European budget in support of the economy and of the people. The solution for the crisis should not necessarily be at citizens’ expense. Either we become united or we will perish, for the umpteenth time.


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