Nicolas Sarkozy : "And if they refuse to tighten their belts?" Angela Merkel : "We'll pull at their bootstraps"

Honey, I shrank the social model

The competitiveness pact put forward by Angela Merkel and Nicolas Sarkozy to end the crisis is ambitious, but threatens the social traditions of most European countries, warns El País.

Published on 7 February 2011 at 15:09
Kichka  | Nicolas Sarkozy : "And if they refuse to tighten their belts?" Angela Merkel : "We'll pull at their bootstraps"

The most recent European Council, held last week, has opened a Pandora’s box. On Angela Merkel’s proposal (backed by Sarkozy) a competitiveness pact for the eurozone to curtail the increase in and relaxing of rules around the bailout fund for countries in difficulty. This is one more step to get beyond monetary union and advance towards that economic government that everyone is pining for. In essence, this agreement supports decoupling wages from inflation (the new pairing would be wages versus productivity), limiting deficits and debt by law, harmonising pensionable age, agreeing a common tax base for corporations, coming up with a unified rescue strategy for banks in trouble, and mutually recognising degrees and training programmes.

There is no one path towards economic government. The one that has been chosen reflects the conservative practice of most of Europe’s leaders. Germany and France are led by executives and leaders from the right, who include among their number the European Council President, Van Rompuy, the President of the European Commission, Durão Barroso, and the governor of the European Central Bank, Jean-Claude Trichet. These are the personalities that are marking the current path out of the crisis and defining the future of the European Union.

The competitiveness pact has not yet been approved, but has been left to ripen fully for a new European Council summit in March. As far as is known, opinions on its methods and content were divided. Its approval will depend on the finance ministers of the eurozone, which has sparked protests from the Commission that it is being ignored: what’s the use of the European Commission if its role is sidestepped in a reform as crucial as this?

Europe shields itself in rigidity

Regarding the measures, various countries and economic and social actors are wondering what will remain of the European model of social consensus if issues such as wages or retirement are overlooked. What will be the purpose of the social pacts so inherent to European culture? If, in collective bargaining, the link between wages and price trends (past performance, not projected) is cut, it would mean the end of the review clause model, which is what allows salary increases to be adjusted for inflation and so avoids the permanent loss of purchasing power, while helping firms to recover accrued losses.

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Faced with American pragmatism, Europe shields itself in rigidity. How will Europe climb out of future recessions if deficits or debt are restricted by laws? By practicing selective exceptions according to the power of each country, as Germany and France did when they allowed their deficits to exceed the ceiling (3% of GDP) set by the Stability and Growth Pact for five consecutive years following 2001 (before the Great Recession had arrived); or by looking the other way when countries such as Italy blithely exceeded the accepted percentage of public debt (60% of GDP); or by applauding, as Sarkozy has, the rise in retirement age in other countries while in France it continues to be below average.

Among the bruises left by the Great Recession is an increasingly narrow interpretation of the European social model, which fails to take into account issues such as the culpability of those who were principally responsible for it, what ideas brought it about, and who has benefited most from the imbalances that are now to be corrected. Amazing.

Translated from the Spanish by Anton Baer

From Budapest

Orbán finds German-French initiative hard to digest

“The longest lunch of Orban’s life.” On Népszabadság's front page, Viktor Orbán found little to savour in the working lunch of the heads of state and government of Europe on 4 February. The competitiveness pact proposed by Germany and France is casting a shadow over the programme that the Hungarian prime minister wanted passed by the EU27 during Hungary’s presidency of the union, which runs out on June 30. The daily writes that the six measures that Orbán should soon put forward – for harmonising the economic policies of member states and assessing their economic performance – will be tough to reconcile with the German-French pact for the seventeen countries in the eurozone. According to Népszabadság, Viktor Orbán understands the need to defend the euro but regrets that this affair does not revive the debate on "Europe's hard core" and "Europe's periphery."

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