From the TUC

EU economic governance plans: more than a whiff of the Versailles Treaty

14 Feb 2011, by Guest in Economics, International

At the end of 2010, EU leaders agreed a permanent crisis mechanism to try to safeguard the stability of the euro area. But the big risk now is that the EU will act towards weaker economies more in line with the punishment provisions of the Treaty of Versailles after 1919 than the generosity of the Marshall Plan after 1945.

These are important issues. The existing (temporary) scheme is currently deployed to deal with the Greek and Irish problems and instill confidence that there will not be other casualties. It is not working very well at present. Austerity is killing growth which in turn is killing confidence. The bond markets are not particularly impressed with the sacrifices being made because they fear there will be little or no growth.

The proposed mechanism is predominantly penal with its emphasis on financial orthodoxy, paying off debt, cutting public expenditure, reducing pay and benefits, and making labour more “flexible” (i.e. workers more vulnerable and cheaper!). The aim is to reduce the level of pay and benefits in member states in trouble – a kind of internal devaluation and deflation but with actually more pain inflicted than would be the case with an external one of the kind that the UK has experienced so far in the past two years. And the proposed competitiveness pact would put the European Union on a collision course with social Europe.

European leaders have made the wrong choice. Instead of following the example of the Marshall Plan – a genuine European Recovery Plan – which stimulated the continent’s rise from the ashes and wreckage of the Second World War, they are following the mean spirited example of the Treaty of Versailles 1919. That Treaty was about punishment of the defeated, about painful austerity, and about national humiliation.

The result of Versailles was disastrous. Germany could not meet its reparation payments and out of its consequential hyper inflation and default came the Nazis and war.

This time, the war outcome is only a remote possibility thanks to the EU and its ability to pull the nation states of Europe into some kind of common endeavour. But the EU needs policies of hope as well as discipline. Most of all it needs policies to spur economic and employment growth and new economic governance rules that assist those processes.

So the scope of EU issuing its own bonds should be on the tables in Brussels. So should plans for a Financial Transaction Tax (at European level- if the rest of the world won’t follow our lead).  So should a European New Deal encouraging investment in young people (especially hard hit by the crisis) in a more sustainable economy and environment and on the new jobs of the future.

It took the threat of the Red Army in central and eastern Europe and the menace of powerful Communist movements in France and Italy to secure the Marshall Plan. What will it take today for a similar act of generosity? Or will our guide to the future be Georges Clemenceau, the President of France in 1919, and his disastrous reliance on reparations? Europe’s leaders have a heavy responsibility to make the right choice.

GUEST POST: John Monks is the General Secretary of the European Trade Union Confederation, a position he has held since 2003. The ETUC represents workers and their national affiliates at the European level, with 82 affiliated trade union centres in 36 European countries. Before being elected to this role, he was General Secretary of the Trades Union Congress in the UK. He is also Vice-President of European Movement International, and chairman of the People’s History Museum in Manchester.

One Response to EU economic governance plans: more than a whiff of the Versailles Treaty

  1. theyenguy
    Mar 5th 2011, 12:16 am

    Leaders will meet again for a crucial summit in Brussels.

    Economic governance of the Eurozone will not come by means of the Competitiveness Pact; rather it will out of the failure of the economic and political paradigm of Neoliberalism, which occurred, February 22, 2011, as seigniorage failed, with the downturn in distressed securities, like those held in FAGIX, which caused the stock market, ACWI, to turn lower.

    Neoliberalism is a dead man walking; it is a bankrupt, burned out and zombie economic and political paradigm, that has turned toxic and cannot sustain investment or growth.

    Bible prophecy of Revelation Chapter 13 reveals that a new political and economic paradigm, that being rule of the sovereigns, will emerge out of Götterdämmerung, an investment flameout, where a Chancellor, that is a Sovereign, and a Banker, a Seignior, will arise and govern through global corporatism. Such leadership may come out of Germany heralding the strength of a revived Roman Empire, as Germany has its ancestral roots in that former empire. National leaders will waive national sovereignty and announce Framework Agreements. These Agreements will appoint stakeholders to oversee regional economic governance. The two leading Sovereigns will provide a new seigniorage, that is a new moneyness, with austerity and democratic deficit for all. Perhaps one of these two leaders will be EU Council President Herman Van Rompuy as he has defends the European Union as being the “fatherland of peace” euobserver.com, January 17, 2011. The word, will and the way of the sovereigns will be law replacing constitutional as well as historical rule of law.