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Unions deplore EU ‘austerity pact’ as ministers go slow on finance tax

As the sovereign debt crisis spreads to more and more Member States, the attempt by the Council of Ministers to guide their economies in a euro-pact has been criticised for its lack of a social dimension or any concern with growth. At the same time the hope of initiating a financial transactions tax (FTT), approved of by trade unions, has receded. We examine why EU leaders seem to be heading in the wrong direction.
 IT IS PERHAPS A GOOD RULE OF THUMB THAT long-term plans should not be made under short-term pressures. But that it is exactly what EU leaders appear to have done recently.  Meeting at an informal summit where the financial market pressure on bailed-out Greece and Ireland was top of the agenda they waved through a proposal by France and Germany for a ‘pact for the euro’. In the interests of competitiveness the pact aims to hold down wages, particularly in the public sector, decentralise pay bargaining, eliminate the indexing of salaries to inflation and reduce social benefits and pensions while raising the retirement age. When added to the previous proposals on economic governance and the annual growth survey, as well as attempts to interfere in the economies of Greece and Ireland (see our previous issue) it seems that the union view that together they ‘constitute a grave threat to the economic future of Europe and to the living standards of working people’ is hard to contradict.  Chief of many trade union criticisms is the absence of any stimulus for economic growth. Instead of boosting productivity through investment the European Trade Union Confederation fears a ‘race to the bottom’ which ‘will force member states to enter into a competitive downward spiral of undercutting each others' wages and working conditions. This risks pushing the economy further towards deflation and depression’ according to ETUC general secretary John Monks. The pact is silent on the growing inequality in European societies and the increase in precarious jobs. To address these the ETUC wants to see a programme of investment amounting to 1% of GDP to tackle unemployment,



Even if no agreement could be reached on a worldwide tax, the parliament recommended that the EU takes the ‘first step’. Yet only a few weeks later the Council of Ministers retreated from this pledge by promising only to ‘take note’ of a European Commission assessment of a global FTT;at the same meeting rubber-stamping the competitiveness pact. As the deputy general secretary of the European Federation of Public Service Unions, Jan Willem Goudriaan put it: ‘Europe’s government leaders keep on protecting the culture of speculation, greed and high bonuses. The Euro-Pact is asking for more concessions from nurses, teachers, fire-fighters, tax inspectors, social benefits officers etc ... There is no balance. This is not the Europe we want!’.
So what sort of Europe do we want? As well as the immediate programme demanded by the ETUC, the German trade union federation, DGB, has had a think about long-term reform. They want to preserve the euro by introducing Eurobonds so that all government debt would be shared and markets could not exact higher interest rates for more indebted countries.  Rating agencies would no longer set credit ratings, instead this would be done by the European Central Bank. As well as an FTT and bank levy all financial products would have to be passed as being socially useful. Wealth and inheritance taxes should reduce the amount that individuals have for financial speculation while free collective bargaining increases the spending power of workers. It seems that Europe has reached a crossroads, without a change of course DGB predicts the unleashing of ‘major economic, political and social turmoil’.

Union leaders Monks and Goudriaan (left) with Greek MEP Podimata

upgrade infrastructure and stimulate growth as well as enhanced minimum wages and extended collective bargaining to boost spending power.
The other measures advocated to correct the tilt away from wages and towards profits and dividends are the regulation and taxing of financial markets. It seemed that some progress was being made on this topic when the European Parliament voted overwhelmingly in March in favour of a report by Socialist MEP Anni Podimata calling for a Financial Transactions Tax (FTT), often known as a Robin Hood tax in the UK. At a very low rate of about 0.05% it is estimated that this could bring in €200 billion throughout the EU.



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