In December, the European Council of Ministers agreed to an apparently minor amendment to the Treaty of Lisbon. After a proposal from German Chancellor Angela Merkel, the European Union’s heads of government agreed to write a permanent bailout mechanism into the treaty from 2013 for eurozone member states which may need assistance from other eurozone countries.
As Britain is outside the eurozone, it has been widely reported that the treaty change is of no relevance to the United Kingdom. But while this country will not be called on to provide financial support for eurozone members in difficulty, it would be a mistake to believe that this amendment to the treaty and the economic policies linked to it will have no impact on us. Decisions made now about managing the eurozone, and on economic policies across Europe, will have profound consequences for decades to come. And given the fact that around half of Britain’s exports go to eurozone countries, what happens to the economies of the eurozone will have huge implications for us. Yet the Tory-led Government has failed to take any effective action to protect Britain’s national interest in Europe’s economic future.
Eurozone countries are right to draw up a permanent crisis mechanism to deal with financial or debt crises that arise after 2013. To that extent, the change to the Lisbon Treaty is sensible. However, it is part of a wider approach which is completely inadequate when it comes to addressing Europe’s current economic problems.
Eurozone members will need to do more to demonstrate commitment to one another if they are serious about reducing the risk of more short-term crises in financial markets. Individual countries also need to make sure their fiscal positions are sustainable and that high levels of borrowing come down as their economies grow. But every European country also needs to pull together to support growth across the continent.
Given the dominance of right-wing heads of government in the EU, there is a very real risk that all eurozone countries end up adopting policies of rapid, deep economic retrenchment and fiscal consolidation all at the same time – even those such as Germany which are in a much stronger financial position.
Underpinning this, alongside the change to the treaty, are a set of measures from the European Commission designed to increase austerity in the eurozone – including tough fines for member states whose public spending plans do not comply.
But none of this explains where growth is to come from. If all European nations are cutting back at the same time, growth is likely to be sluggish at best in many countries and those hit hardest could find themselves facing stagnation or even recession, as Ireland has found to its cost. Each individual country seems to be hoping that increasing exports will see it through. However, if every country is cutting back at the same time, it isn’t clear who is supposed to buy those exports. The risk is lower growth and higher long-term unemployment across Europe, with poorer member states suffering most.
Europe 2020 is supposed to be a 10-year strategy for “jobs and smart, sustainable and inclusive growth”. Its stated aim is to help Europe deliver structural reforms and recover from the crisis. However, although the strategy is full of good intentions, like its predecessor the Lisbon Strategy, it lacks real teeth. The strategy is not mandatory in any way and it will be entirely subordinate to the more recent plans for retrenchment from the European Council and European Commission. In other words, both the Council and the Commission have effectively turned their backs on serious support for jobs and growth.
Despite the absence of any evidence which demonstrates that the recovery is yet strong enough, or that private sector job growth will be fast enough to compensate for jobs lost in the public sector, Europe’s Conservative leadership is determined to press ahead with policies which will make economic recovery fragile and uncertain.
If that is bad news for the eurozone, it is also extremely worrying for Britain. A crucial ingredient of any economic recovery in this country is an increase in demand from eurozone countries for British exports . Under the current plans from individual countries, the European Council and the Commission, there is little prospect of this happening in the foreseeable future. Even Germany, with Europe’s largest and strongest national economy, will not benefit from one-size-fits-all austerity programmes which will prevent the scale of growth that Europe needs and thereby undermine the eurozone’s ability to recover.
This presents a huge challenge for the centre-left across Europe. In nearly all parts of the EU, the right is in the ascendant. It is right-wing policies, underpinned by right-wing values, which dominate the Council of Ministers and the European Commission. Both the values and the policies have to be countered and replaced. While this has to be done in each country by individual parties, crucially, the international nature of the challenge we face demands international co-operation. That is why Labour’s full engagement in the Party of European Socialists is vital in order to promote a coherent and co-ordinated strategy for growth and jobs that is right for Britain and right for Europe.
Wayne David is Shadow Minister for Europe and Labour MP for Caerphilly
