EU Observer (Link) - Leigh Phillips (June 9, 2011)
The European taskmaster has cracked the whip. However much austerity has been imposed by EU member states, it is simply not enough.
That is the overriding message from the European Commission that runs through its recommendations for each of the 27 member states in the new, post-crisis system of radically centralised oversight and correction of national economic policies by the EU known as the �European Semester�.
�We are now implementing the new system of European governance,� commission chief Jose Manuel Barroso said in the European Parliament in Strasbourg, heralding the unveiling of 27 detailed - or �granular�, to use the adjective EU officials use - national prescriptions, telling member states what they are getting right and wrong with their fiscal policies and what they must do to �fix� their economies.
It goes further than fresh call for austerity: it is a recipe for much deeper liberalisation of the European economy than has yet been seen.
From intervening in collective bargaining to cut wages, to making it easier to fire workers, to a shift away from progressive taxation, through the new system, the EU hopes to utterly transform its member-state economies to be more competitive with the likes of the US, China and emerging economies.
Under the new, six-month system repeated annually, the commission in January sketches out a rough idea of what it expects national economic policies to look like for the coming period, a document that is then endorsed by the European Council, representing the member states.
All 27 states then submit their budgets and broader economic plans to the commission - before they are submitted to national parliaments - to see if they are sufficiently rigorous.
Then in June, in the current and penultimate step in the process, the commission gives its appraisal of these plans, setting out what must be corrected, a series of recommendations that must also win endorsement from the European Council.
Over the following 12-18 months, governments must put in place all the changes ordered by the Council-Commission duo.
If countries are in the eurozone, this oversight is backed up by the imposition of stiff fines for delinquent governments up to a maximum of 0.5 percent of GDP. For an economy the size of Spain, such a fine would amount to �5.25 billion.
In announcing its recommendations, sensitive to accusations of a power grab, the EU executive denied that it was replacing national parliaments: �This is not about dictating policy ... National governments retain responsibility for economic policies implemented in member states.�
�But the impact of those policies no longer stops at national borders,� it continued, laying out its argument as to why such unprecedented centralisation is necessary: �The commission is the only EU institution with the political autonomy, the technical expertise and the pan-European perspective to be able to oversee this process.�
The commission did however acknowledge the anger regular Europeans feel at the austerity and liberalisation that has already been imposed in response to the crisis, but argues there is no alternative and that these changes should have been made years ago.
�There is discontent among citizens in several member states,� the EU executive concedes in its main document giving an overview of the changes that it says need to be made.
�However, under the pressure of events, many of the changes needed to remedy structural weaknesses, which have often been delayed for years, are now being considered or implemented.�
A mantra - whose wording changes subtly here and there, but whose essence is the same - is repeated through all the documents: �Fiscal room for manoeuvre is very limited.�
�We know that achieving the goals we have collectively set ourselves means sometimes hard choices. But these efforts, if made seriously and by all, will allow Europe to leave the crisis behind it and safeguard our future prosperity.�
Indeed, with just five centre-left governments remaining in the EU after a series of electoral debacles (two of which, in Spain and Greece, are on their last legs), the right, which also controls the three European institutions, feels increasingly confident that the growing number of strikes and protests are an unrepresentative irrelevance. Most citizens approve of the strategy of austerity, they believe.
Speaking to reporters on Tuesday, Barroso, a conservative himself, crowed how in his native Portugal that parties that rejected austerity had been trounced in the recent general election.
�Insufficient ambition, vague, lacking focus�
Overall, the commission�s conclusion is that the economic programmes submitted by the member states �broadly reflect� the priorities it outlined in January, but that some countries, according to Barroso: �show an insufficient level of ambition, and others are lacking in specificity.�
�Many member states need to show more ambition when it comes to fiscal consolidation,� he said. The commission also described many of the proposed measures as �vague, lacking sufficient focus.�
The general semester recommendations for all states call for a review of wage-setting systems to ensure that wages keep in line with productivity in order not to undermine competitiveness. They also look to increasing the statutory retirement age across Europe and then automatically linking regular adjustments to this age to changes in life-expectancy. Early retirement should also be phased out.
Such efforts will not be easy to implement in many places. Efforts to increase the French retirement age last year provoked widespread strikes and blockades that paralysed much of the country as critics argued that such changes would hit blue-collar workers hardest and increase youth unemployment.
Governments should make it easier to hire and fire workers, the commission also recommends, although the language deployed is a more technocratic call to �rebalance employment protection.�
�Urgent action� should be taken to ease the regulation of companies while payroll taxes should be reduced.
Brussels has also called for taxation in general to be shifted away from labour, where the higher the income, the higher the rate paid, and onto consumption, where everyone pays the same rate, regardless of income levels. Many countries have also been ordered to introduce so-called debt brakes - legislative or constitutional changes to enforce budgetary discipline.
It is not all dour news however: the recommendations in many cases also call for efforts to reduce school drop-out rates, increase the participation of women in the workforce, boost support for vocational training and life-long learning, and achieve greater energy efficiency.
However, the reality is that almost all countries apart from Britain will have to significantly up their game.
The thread running through almost all the recommendations is that the masochism must continue.
COUNTRIES UNDER EU-IMF TUTELAGE
NB. Five governments, Greece, Ireland, Latvia, Portugal, and Romania, received only one recommendation: to follow through on the austerity and structural adjustment imposed in return for national bail-outs.
Click on the name of the country to link to the complete semester recommendation.
Economic Crisis ~ Europe ~ New World Order