Rescuing the European project.
Artículo aparecido en "Policy Network" el jueves, 2 de mayo de 2013.
Spain, like Portugal and others, is going through an economic and social emergency that is turning into a political and institutional crisis with no clear exit yet. The social costs are spiralling, yet, on the European airwaves, every day we hear that European countries, particularly in the South, that find themselves in economic turmoil are getting what they deserve after decades of waste and excesses. The idea of the virtuous north versus the wicked south is backed by more and more people. “The party is over” titled a well known liberal magazine. Indeed, these discourse can be picked-up within the progressive family of European centre-left parties.
I will not deny the errors and the big mistakes that former governments took in the past. But, people are quick to forget that the cycle of crises started because over the course of decades conservative governments, and also progressive ones, deregulated financial markets, abolished laws like the Glass-Steagall act in United States – our dear Bill Clinton -, and lived happily in a world of free financial markets and bubbles of all kinds. Progressives in particular forgot how wealth is created. We only worried about its distribution, joyfully accepting the incomes generated by financial deregulation and real state speculation. Those were the days when Spain, only 4 years ago, had a stock of public debt below 40% of GDP, a 2% budget surplus and hardly any analysis arguing against the soundness of its macroeconomic performance, the quality of its growth and companies, and the sustainability of an economy fully integrated in the euro miracle that reached full employment in 2007. Nobody was aware of the tragic storm that was approaching, neither in the wise north nor of course in the clumsy south.
It is important to admit that progressives were too loose with deregulation, and wrongly believed then that income from finance in all its kinds, including high-octane speculation, was at least as good as that coming from traditional industrial activities. Now, we are humbly back calling for a renewed focus on industrial policy as the cornerstone of broader prosperity.
To achieve this broader prosperity in a more competitive and global world, it is important to remember Dani Rodrik’s paradox that says that global markets, states, and democracy cannot coexist. The conclusion, from my perspective, is that we should choose among those three and give up the concept of a nation state in favour of a federal Europe. But instead, the tragic consequence of this paradox, as we are living it now in some European countries, is that what we are giving up is democracy and not the nation state. It is quite difficult to get rid of nation states in this crisis. The EU is giving the same medicine to every eurozone country despite knowing that the illness they suffer is not quite the same. When countries like Spain that now suffer unemployment rates dangerously close to 30% and that have already lost over 15% of their GDP and 25% of public revenue in just 4 years remember that they joined the euro zone to “borrow credibility” they realise the nightmare they are in. Interest rates are lower outside the eurozone and economic policy is in the hands of foreign countries that debate domestic adjustment programmes in their national parliaments while their parliaments give up controlling EU or troika decisions. The loss for democracy is huge. It is so big that national elections do not matter anymore because no government no matter its political or ideological orientation can change the orientation of the policy mix that is leading Europe to a disaster. Not only to a disaster but to an awkward situation where the elections that really matter are taking place in Germany.
That is why some countries or parties among the progressive family might feel abandoned and that is why we need a common progressive approach. It is difficult to take seriously the actual EU approach for growth since it has already taken more than a year to apply decisions such as the youth guarantee scheme or the Growth and Employment Pact. The absence of common rules in too many fields is too obvious, even when it comes to bailing out bankrupt banks where different rules and standards apply depending on whether the bank is Dutch or German or if they come from the south.
Europe needs to step forward in policies or projects like the banking union and the fiscal union. Consideration should also be given to harmonising revenue, and changing the way the European Central Bank manages monetary policy and exchange rates to refocus on growth. Additionally, we need to look again at the way the ECB manages interest rates for a single currency that lives with a financial market fragmented by interest rates differentials, a market that is many things but not a single financial market.
The onus is on the centre-left to rescue the European project from the severe democratic stress that is running through its core.