Seminar: The Economic Governance in the EU: Is there an alternative to austerity to leave the crisis?

FEPS together with the Rafael Campalans Foundation organized on 25 May 2012 a seminar to analyse the crisis of the euro and economic alternatives proposed at European level, from a progressive perspective.

The seminar was opened by Miquel Iceta President Rafael Campalans Foundation, who said “We must show that there is an alternative to austerity, and we are able to carry it out.” Iceta added further that “the left must recognise that it failed to provide alternatives to neoliberal thinking “. Ernst Stetter, Secretary General of FEPS, found that “the biggest problem is the architecture of Europe, especially at tax level” and claimed that “we need to reconfigure the layout of European economic governance from top to bottom.”

Antoni Castells, Professor of Public Finance at the University of Barcelona and director of EuropeG said “the Greek debt crisis shows the consequences of an incomplete Monetary Union and a subsequent mismanagement.” According to the former adviser of Economics and Finance of the Generalitat of Catalunya, “it is not possible to have a real Monetary Union without real fiscal integration” and “bear in mind that there may be State without currency, but there cannot be currency without State”. On the other hand, he remarked that “the choice is among democracy, globalisation and national sovereignty. We can only maintain democracy in a globalized world if we give up national sovereignty”. For Castells, “what it is lacking in Europe is better political governance, through a federal model.”

Josep Oliver, Professor of Applied Economics at UAB, was the first speaker of the table “The euro crisis: what went wrong?” moderated by the Economist and Professor at the Pompeu Fabra University, Carles Rivera. Oliver illustrated the idea that “the problem of the euro is the internal imbalances in the eurozone, some imbalances that have accumulated and have finished exploding” and he noted that the basic error is “an incorrect view of the functioning of our economies.” Oliver added that “in Spain, austerity de facto has not started; because we have 5 years getting by public debt (…) if we cannot grow or go into debt, the situation is much worse” and he predicted that “an eventual exit from the euro would only multiply the problems of Spain.”

Professor of International Economics at the University of Rome “La Sapienza”, Paolo Guerrieri, recalled that the obsession with austerity is a strategy, and shifts the cost to the most vulnerable groups in society, and he advocated “the long-term investment “as the best alternative strategy to austerity. Guerrieri, recalled that “some countries, like Italy and Spain, had problems before the crisis, but they were hidden by a large flow of credit.” According to him, “the debt crisis is closely linked to the banking crisis but governments have not wanted to admit it. Some governments have had to borrow in order to solve the problem of borrowing from banks. Therapy should not only cut public spending, also fix the banking system. We should put the banks at the heart of the problem and implement a common Deposit Guarantee Fund in the EU. If we do not, we will go into depression.”

Marcus Miller, Professor of Economics at the University of Warwick, claimed the figure of Keynes, and recalled that “debt is a problem of debtors but also creditors: both are responsible.” According to Miller, “you must create a Stability and Growth Fund to issue bonds for stability to international markets and also issued bonds for growth to States to be financed at reasonable rates. Stability is needed for investors and investment instruments for debtors. This must be done by restructuring the debt from a European Stability and Growth Fund. “

Carlos Mulas, director of the IDEAS Foundation and professor of Economics at the UCM, was present at the roundtable “The paradigm of austerity: no choice, no alternative? Moderated by the coordinator of the Economic Area of the PSC, David Fuentes, he defended “the strategic role of public sector out of the crisis.” Mulas made it clear that in cases where it is necessary “to use the European Stability Fund to bail out troubled banks in Europe”, otherwise there is a risk of harmful effects on the economy provoke a rescue to the set of the State when it is not the origin of the problem. Mulas also added that “the euro area needs to nationalise the problematic banks, postpone the goal of deficit of 3% until 2015, promoting a comprehensive European investment strategy 2020 to link the financial perspectives 2014-2020, making the ECB in an institution geared to growth and create Eurobonds.”

Nick Martin, Assistant National Secretary of the Australian Labor Party, explained the pro-growth response of the Australian Government to the economic and financial crisis, and Stuart Holland, Professor of Economics at the University of Coimbra, who argued that “Europe needs a New Deal, a large investment program funded with Eurobonds”. For Holland, “there will be no recovery without review of the treaties, new institutions and fiscal transfers” and therefore, “we must promote stabilisation through bonds of the Union and promoting recovery through Eurobonds, which will be used to invest and not to pay current expenses.”

The seminar was closed by Enrique Baron, former president of the European Parliament, who said “this is a political crisis and we need a left political will to be present in the future of Europe.”

Background papers gathered ahead the conference
Read the PPT – “The Pro-Growth Australian Response to the Global Recession” by Nick Martin
Read the PPT – « Good bye Capital Controls in Europe. Hello Multiple Equilibria – and crisis!” by Marcus Miller
Read the PPT – The paradigm of austerity: ¿no choice, no alternative? by Carlos Mulas-Granados
Read the PPT – « Beyond Austerity -without Treaty revisions, new institutions, fiscal transfers or national guarantees” by Stuart Holland

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