Local view for "http://purl.org/linkedpolitics/eu/plenary/2005-02-22-Speech-2-018"
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"en.20050222.4.2-018"2
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".
Mr President, Commissioner, ladies and gentlemen, the debate on macroeconomic policy is becoming increasingly ideological. In this context, a conservative and liberal majority distorted my preparatory report on the broad economic policy guidelines by removing all references to the need to coordinate European economic policies, even though this is required by Article 4 of the Treaty. That majority refuses to accept the evidence; the Stability and Growth Pact must be adjusted to the economic cycles and the Commission must also assess the quality of public expenditure by analysing any deficit that a country may have accrued. Fortunately, the Ecofin Council is soon set to disappoint these devotees of stability at all costs. In order to confirm this ultraliberal pigheadedness, that majority adopted two amendments, one demanding a reduction in the general level of taxation, the other considering that an overall rise in working time is unavoidable. For some Members, that probably represents the balance between flexibility and security advocated in the Koch report; more work for the workers and less tax for the wealthy.
Mr President, let us calmly take stock of the European economy. 2004 was a vintage year for the world’s economy. The volume of international trade has never been so great. The new report by the International Labour Organisation (ILO) says, however, that despite strong economic growth – more than 5% – unemployment across the world has scarcely gone down. Relative poverty has fallen sharply, though. The EU has experienced only moderate growth and a very slight fall in unemployment, particularly in the new Member States, yet productivity in the EU of the 25 has, according to the ILO, ‘improved at a faster rate than the world average’. This probably explains why the Union is the biggest exporter of goods and services and why Germany alone is performing better than the United States, China or Japan.
A Europe that is the biggest exporter and the biggest buyer in the world – a Europe that manages to balance its books – cannot be in as bad a situation as the prevailing euro-pessimism would have us believe. I am not about to lapse into blissful euro-optimism. The Union could do better. There is not enough growth and there is too much unemployment, particularly in certain large countries, starting with the Union’s traditional powerhouses, Germany and France. For these ultraliberals, the root cause is clear; the problem lies with the constraints of the stability policy and the absence of structural reforms. Yet structural reforms have been implemented in a number of countries; the Raffarin Government has pursued pension reforms and Chancellor Schröder has secured the adoption of Hartz 1, Hartz 2 and more recently Hartz 3 and 4.
Without growth, however, the boldest structural measures run out of steam. This is the view of the Economic Policy Committee, whose annual report on the structural reforms clearly states that governments ‘will only enjoy the fruits of their structural reforms in terms of growth and jobs in an appropriate macroeconomic environment’. Whilst it is true that the euro zone’s overall deficit has increased, albeit remaining significantly inferior to that of the United States or Japan, the result will astonish the defenders of the faith. The Stability and Growth Pact was designed to prevent public debt from leading to spiralling interest rates and thus to prevent the euro from becoming a weak currency. As things have transpired, the European Central Bank has been able to set all-time low interest rates, and the euro is performing almost too strongly against the king dollar. Despite fluctuations and the oil markets, the inflation rate in the euro zone has remained very low, and the purchasing power of those living in the euro zone is superior to that of residents of the US and the UK.
According to the evidence, the euro zone’s problem is not a lack of stability but a lack of growth. In Germany and France in particular, but also in Italy, internal demand is insufficient. All countries have reduced investment in order to limit government deficit. Because the Germans and the French are not consuming enough, private investment also remains hamstrung. Why invest if demand is so moribund? The rate of saving, on the other hand, is at high levels in the euro zone, particularly in France and Germany. This is indicative of a lack of confidence and a fear of the future. One major European country, however, is experiencing considerable growth and a less alarming unemployment rate, and that country is the United Kingdom. Why is that the case? The UK Government has supported internal demand by means of a more active investment policy and a tax policy which does not become bogged down in blind devotion to the orthodoxy of stability, but which aims for balance throughout the economic cycle. Furthermore, the British are consuming, even if they are running up almost US-scale amounts of debt. The one disadvantage for the British in comparison with the euro zone is that they pay a basic interest rate of 4.75%, as opposed to 2% in the euro zone.
The EU, and in particular the euro zone, needs more growth, and that growth can only come from internal demand, from public and private investment and from consumption. Some 90% of the Union’s trade is carried out between the countries of the 25. Even though the Union remains competitive in world trade, growth cannot come from external demand. Whilst certain small countries live primarily off external demand, the large countries always rely primarily on internal demand. Furthermore, those clamouring for European competitiveness based on the social lowest bidder and on lower salaries must acknowledge that most trade is with countries with salary levels and social security costs that are similar to those of Europe. Accordingly, it is not by slashing salaries, and hence consumption, that the Union will move forward. Consumption and, most importantly, investment must be reinvigorated in a coordinated fashion. Article 4 of the Treaty calls for economic policies to be coordinated. Thanks to the intelligent reform of the Stability and Growth Pact, the Union will see a regeneration of growth and jobs."@en1
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