Macroeconomic Dialogue

Brussels, 14/02/2011

- President, welcome this opportunity to become involved in the discussions which are leading to a new system of extended economic governance system in Europe.

- This is a matter of the greatest importance for the future of the EU

- Get it right and there is the prospect of a more highly integrated EU economy with fiscal co-ordination to match the single monetary policy of the euro area.

- Get it wrong and there will be discontent and hostile reactions because of a perception that the EU is imposing austerity on countries in an anti-democratic manner.

- The ETUC has already been critical of the steps taken to date, including the measures take on behalf of the EU/IMF in Greece, Ireland and Romania. The dangers of treating member states in a quasi colonial way are clear.

- The measures insisted upon go considerably further than the EU’s competences, as defined in the Lisbon Treaty, and also go further too than imposing short-term austerity. They are aimed at weakening collective bargaining systems, which we find intolerable, and will risk strengthening the hand of anti EU forces – watch Sinn Fein in Ireland – Now what is happening in these three hard pressed countries is to be the template for economic governance more generally.

- I will focus on the labour market aspects of the Annual Growth Survey and the European Economic Semester, and a comment on the Franco-German proposals which have been floated recently.

- The first point is that the proposals are anti pay and wages. Wages – and labour markets did not cause this crisis. Lest we forget, it was the banks which were at the epicentre, feeding asset booms with excessive credit growth, resulting in unsustainable private sector debt loads. But the burden of adjustment is now switched to workers and their wages.

- Would a balanced budget here made any difference in Ireland? What have the wage indexation systems of Belgium and Luxembourg to do with the current crisis; they were not at the heart of the crisis. Where are the positive popular measures? What about financial transaction taxes, what about eurobonds? What about a European wide plan for youth unemployment.

- And if we are to take positive lessons from Germany and there are many – what about short-time working subsidies, what about co-determination (Siemens), what about re-orientating our economies away from financial engineering to real engineering and stop bankers and CEOs consuming such a vast share of GDP, and pushing inequality to 19th century levels. That is highly relevant to the current worrying imbalances and very serious balance of payments deficits.

- The EU needs good news as well as teaching hard lessons. The EU has provided many helping hands in the past. Indeed it carried forward the spirit of Marshall, it should not risk now 1930s economics. It can do much better than that.

- How about an enquiry into what can be done with representatives of the social partners/Nobel Prize winners and others to look into balance of payments deficits and ideas to rebalance economies.