I would like to thank you for your participation to today’s discussion. It was a high quality debate, which has highlighted important analyses, ideas and proposals.
I do not expect to offer answers to the many questions that were raised here today. In fact, research on these topics is still in progress.
In particular, I want to underline that the most important outcome of our work, not only of the last two days, but of the last two years, is that, also thanks to your valuable contribution, we have shown that there is an alternative to austerity policy.
It seems to be easy, but it’s not. Even for socialists it has been hard, for many years, to affirm so. Yet, there is, indeed, a valid alternative to austerity, and by making it clear and evident we may change not only the European political scenario, but also the cultural one.
Let me now focus on some topics that were raised during our discussion.
I would like, first of all, to look at the indications of recovery in the euro area. Recovery in the euro area will be the core of the conservatives’ electoral campaign next year. They will say “The crisis is over, thanks to austerity measures”. Which is not true, in my view. Of course there are signs that recovery is underway, but I want to underline its limits.
There have been sound export performances in some vulnerable member states, signalling some gains in their competitiveness, and signs of strengthening of the domestic demand in the core states. Overall, it seems that recession is now giving way to a modest recovery. Growth is relatively lively in Germany, it is modest in France, it is better than expected in the United Kingdom. Unfortunately, it is still negative in Italy, but it should turn moderately positive next year.
We are perhaps starting to see the light at the end of a very long tunnel. Yet, this is not the time to sit on our laurels and procrastinate vital decisions.
The question, in fact, is: Is this enough? Will this be a sustainable and durable growth? Will it be enough to bring about employment?
The recovery is still fragile, surrounded by risks. And it is uneven, asymmetric and unbalanced. Without any relevant impact on employment until now, and the forecast does not get better for the next one to two years.
I think that this fragility is linked to the fact that recovery is mainly guided by exports. And this might have the effect to make the imbalances between European countries even worse than they currently are.
Of course, it is not my intention to underestimate the importance of competitiveness between states, from which even Italy has taken some advantages (let’s look for example at its manufacturing sector). But we cannot think that European countries can fund their economic recovery only on exports. Every country in the world wishes to export its goods. But there are limits to the search for new markets: we are not able to export to the Moon yet...
Therefore, it is absolutely necessary to promote a strategy based also on other pillars.
There are other limits to our recovery that are strongly linked to the peculiarities of the European structure.
Last year, the growth performance in the euro area has been much lower than in other advanced economies which have also suffered from the recession. The growth shortfall of the euro area compared to the US is striking. We now know that these factors that have further hampered recovery lie mainly in the faults of the European Monetary Union’s architecture.
The lack of a proper banking union and of an adequate system of rules for banks and other financial institutions, the uncoordinated national responses to banks’ difficulties have caused a dangerous fragmentation of the single financial market, skyrocketing financing costs in some member states and triggering a negative loop, which eventually has jeopardized the very existence of the European common currency.
But there is more than this, because the main fault in the monetary union design is its political weakness, the illusion that a single market and a common currency could survive without a strong political authority, which was replaced, on the one hand, by the European Central Bank – with its fundamental goal: preserving monetary stability – and, on the other hand, by a set of strict rules and obligations.
This illusion, this ideology of the “governance of rules and obligations”, the inflexibility of these rules, the lack of vision of these obligations, the impossibility of adopting countercyclical strategies, ultimately the absence of politics have been ruinous. Indeed, politics has the enormous advantage of being flexible, compared to fixed rules and obligations.
This is the original sin. This is why the euro crisis is not only an economic crisis, but a profound political crisis.
Deficiencies in the EU’s institutional make up have been a barrier to progress and solidarity in Europe. We cannot deny that treaties and pacts in Europe have excessively focused on the role of coordination and monetary criteria without any reference to solidarity rules and social standards. Solidarity should become an important component of the EMU institutional foundations.
But the fact that we ask for more European solidarity does not mean that we are against fiscal responsibility. Quite the opposite.
But to focus purely on the question of the Southern Europe countries’ sovereign debts as the root of all sin has been a mistake. We should have shifted the focus on the fact that the euro area is characterized by deep macroeconomic disequilibria, which make it weak and difficult to manage, and which cannot be resolved by a “one size fits all” fiscal policy. In such circumstances correcting these imbalances is as important as to demand fiscal responsibility and policies aimed at creating jobs and at producing growth.
That is, we need a much wider strategy than the one implemented so far, which necessarily demands a reversal of our priorities.
First of all, it will be essential to introduce policies aimed at sustaining investments and employment. Here the state plays a fundamental role.
Secondly, the correction of the financial system and the establishment of the banking union.
And thirdly, fiscal consolidation.
Growth must be strengthened both from a quantitative and qualitative point of view. It is necessary to invest in physical capital, but also in intangible capital (that is, knowledge) and in human capital (that is, education).
We should promote the establishment of a sort of “European research area” and should encourage competitiveness, in particular in the service sector.
The European Single Market is still largely incomplete and its completion would offer new prospects and potentials.
Green growth innovation, not only in the field of energy, would improve our life standards, and it would create significant opportunities for growth.
Employment will grow if demand will be strong enough, but also if there will be more incentives to hire. This requires fiscal policies oriented to job creation and active labour market policies for youth.
Labour reforms are costly. Nevertheless, I believe that they should be given priority in governments’ balance sheets.
An “employment golden rule” could be adopted, providing for the expenses for employment to be excluded in the calculation of the deficit, for the purpose of complying to the Maastricht criteria.
As far as the question of the correction of the financial system is concerned, I would like to underline the fact that as long as the financial system – I am referring to banks - will not be re-enabled to give credit to the real economy, neither the monetary policy (even if expansive), nor fiscal policy, nor structural reforms will be able to impact significantly on growth and employment.
Fiscal policies should not exclusively be a tool which aims for some balanced budget and should not be a “one size fits all” policy. Fiscal policies should be used as countercyclical policies. Thus, more coordination between EMU and national level fiscal policies and a greater EU budget are required, as was highlighted by our debate.
The introduction of Eurobonds can help reduce national debts and create a truly European debt. This would also be an extremely important step towards the establishment of a real political union.
Finally, some form of debt relief for heavily indebted European countries should also be considered.
We shall acknowledge the fact that we are strictly interconnected and that in order to be competitive we cannot introduce reforms only in the deficit countries. Rather, we must introduce macroeconomic and structural policies aimed at increasing demand.
We must promote a growth led not only by wages. I agree with this, yet I believe we need a larger bid: growth must be led by investments. In particular investments in innovation. Moreover, we must improve family’s purchasing power. This means acting on wage policies, but also on the fight against poverty and on the welfare state.
I would also like to underline that the increase of internal demand is even more important in the surplus countries like Germany.
Besides these measures, it will be necessary to foster industrial development. Since the mid-1990s productive investment in Europe has stagnated. This is also a field in which the state plays an important role.
I would now like to conclude. During the debate, we were asked a crucial question, which for us is a challenge: why do the electoral trends across Europe reward the conservative forces at the expenses of the progressive ones? And this precisely in the midst of an economic and social crisis?
In my opinion, the trend is changing compared to some years ago. After the defeat of the Labour in the UK and of socialists in Spain, only the Austrian chancellor was a socialist within the European Council. Now there are twelve of them.
However, it is true that it is difficult to undermine the Right. I am not talking just of the traditional conservative parties, but of the nationalistic and populist Right, which are active in all European countries.
I think that the key to understand this phenomenon is this: if the approach to the crisis remains a nationalistic one, if we close ourselves within our national boundaries, the Right will always be stronger than us. It will prevail also because it is more capable of creating a sense of mistrust in Northern European countries towards Southern ones, and feelings of resentment in Southern countries towards the Northern ones.
The only way for Progressives to reverse this trend is to develop a strong and consistent common plan, a common vision. Only in this way, our values and our goals, from social justice to labour policies, will gain a realistic dimension.
The fragility of socialist parties in Europe, particularly when we were in government, has been to always try to implement weak projects, which made us hostages of rules imposed by national schemes and by European neoliberal bureaucracies.
Before saying goodbye, I would like to add that at FEPS and together with our partners, such as the ECLM and the CDPR, we have prepared a study which demonstrates that, as I mentioned at the beginning of my speech, an alternative is possible. A progressive economic model is not only desirable but it is viable. What has been missing so far is the courage and political will to implement it. It is up to us Progressives to do it together, preparing next European elections with coherence. Because, let’s be honest: we are very strong in talking and taking positions, but weak in acting in governments. It’s time to act strongly, it’s time to work to change European policies for a more democratic Europe, a Europe able to deliver jobs, to deliver hope, to deliver a better future for young people, the Europe we want, the Europe we are working for.