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“The Aid from Europe Is Conditional on Fresh Austerity Measures”
24/05/20
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Faced with the mounting economic crisis, European leaders have promised aid to the hardest-hit member states. But there’s always strings attached. For France Insoumise MEP Manuel Bompard, the proposals for loans and grants ignore the real scale of the crisis — because they all put debt repayment above the needs of average Europeans.
At their press conference this Monday, German chancellor Angela Merkel and French president Emmanuel Macron again asserted their close partnership — announcing that they would together propose a €500 billion European fund to bail out economies hit hardest by the crisis. After months in which wealthier eurozone member states like the Netherlands (and Germany itself) had resisted “paying for Southern Europe’s debts” many media hailed the Berlin-Paris agreement as a breakthrough.
Yet a closer look at the proposal offers a less optimistic picture. Even apart from possible resistance by figures like Austrian premier Sebastian Kurz, the proposed grants and loans are dwarfed by the scale of the crisis — and the need to relieve the multi-trillion-euro debt already weighing down countries like Italy. Ominously, the Macron-Merkel proposal again invokes the post–2008 crisis language of aid given in exchange for privatizations and budget cuts, as it is to be “based on a clear commitment of member States to follow sound economic policies and an ambitious reform agenda.”
For Manuel Bompard — a Member of the European Parliament for France Insoumise — these proposals are “a return to austerity plans.” In a May 8 interview for l’Heure du Peuple (speaking before the Merkel-Macron press conference), he told Antoine Prat about the European Union’s responsibility in previous health care cuts, its lack of a coordinated fiscal response, and France Insoumise’s proposals to tie debt cancellation to a wider reordering of the economy.
AP
The whole continent is being shaken by the pandemic. What are the European Union’s responsibilities in the current crisis?
MB
The European Union is clearly responsible for the current situation in several ways.
First of all, there is the weakening of our public health systems, caused by years of austerity policies. For several years now, as part of the “Semester” process [i.e., European monitoring of national budgets] the Commission has made recommendations to European member states on the policies they should implement in order to comply with its budgetary criteria. We have looked at the record: and since 2011, sixty-three different recommendations related to the privatization of certain parts of the health care sector or to the reduction of public spending on health care. These budget cuts had a very strong impact and very clear effects: these include the lack of beds and low pay for health care works, among other things. There is a kind of indecency in the way the President of the European Commission says she salutes the dedication of caregivers — she ought to be apologizing to them.
Moreover, free-trade dogmas and the refusal of all forms of protectionism have allowed for the proliferation of factory relocations as well as the closing of sites of production on European soil. Naturally, we are thinking here about the production of masks, medical equipment, and medicines for which 80 percent of the active ingredients are now produced in India and China. The consequences of this are clear: national production of medical supplies is very low in Europe at a time when imports are made harder by the overload of global demand.
Lastly, we know that the proliferation of these epidemics is tied to the impacts of human activity on biodiversity, on the movement of animals, and on deforestation. All this encourages the transfer of diseases from animals to human beings. It is clear that European Union policy can also be held responsible for some of these issues. How could one think otherwise considering that a free trade deal is still being negotiated with Mercosur even as the destruction of the Amazon rainforest is continuing at record levels.
AP
How do you judge the reaction to the crisis from the European Union (and especially the Eurogroup and European Central Bank, ECB)
MB
At first, the European Union’s reaction was nonexistent. Even when Italy and Spain were massively struck by the epidemic, no solidarity action was taken. Faced with the spread of the virus throughout the continent, different member states have responded with different and uncoordinated strategies even though, as we all know, the health of their populations is interdependent.
When the European Commission decided to act, it did so in a way that was completely insufficient. Naturally, European funds were put to use, notably on the initiative of the chair of the European Parliament’s Regional Development Commission, our comrade Younous Omarjee. Of course, some dogmas have fallen away, like the budget deficit rules. However, the response has mostly been held prisoner by the doctrine of ordoliberalism.
So, the Eurogroup did approve a proposal to support limited-time working schemes on the national level, which is positive. It discussed a loan scheme via the European Investment Bank (EIB) for keeping companies afloat during the crisis; such a mechanism had already been set up, but risks financing only very profitable companies, since the EIB will do everything possible to maintain its AAA rating. The Commission also decided to activate the European Stability Mechanism in order to lend money to member states (up to 2 percent of their GDP).
However, the amounts of funding being advocated are derisory. We are talking all together about €540 billion, which are essentially loans, while France alone, on the national level, has put forward more than €300 billion euros in loans. Above all, the funds coming from the European Stability Mechanism — aside from those going directly to the health sector — will be given on the condition of compliance with budgetary trajectories; that is to say on the condition of fresh austerity measures. This is the same recipe that was given to Greece.
AP
However, the agreement reached by the European Union was presented as an “excellent agreement” by Emmanuel Macron’s finance minister Bruno Le Maire …
MB
That’s just bureaucratese. All the truly ambitious measures were blocked by the “club of the tight-fisted” lead by Germany and the Netherlands. And as is often the case, France prefers to submit than to resist. There is, however, a unique opportunity to bring together a bloc from southern Europe to influence these negotiations.
AP
What alternatives are being proposed by La France Insoumise and the European Parliament delegation to which you belong?
MB
Like our representatives in the French National Assembly, our delegation to the European Union has adopted an approach of making active proposals. At this point, we have put forward twenty-five emergency measures to be taken at the European level to respond to the current public health challenge. For example, these measures deal with the establishment of real European health planning as well as providing protection for workers by deciding what activities really are and aren’t essential to the public health battle.
We also mobilized to increase the funds to aid the most disadvantaged, to defend the most precarious workers such as part-time workers that are not eligible for partial unemployment measures, to support the cultural industry, and to call for the suspension of free trade agreements and a strategy for bringing industry back to the local level. We have also demanded that any stimulus measure be brought into line with the Paris climate agreement, but the majority of the European Parliament, including MEPs from [Emmanuel Macron’s] La République en Marche, unfortunately refused this.
AP
And what about public debts?
MB
We are in favor of direct intervention by the European Central Bank with the objective of canceling a part of publicly held debts. Logically enough, these debts are going to rise substantially in the months to come. These debts will put member states under unreasonable budgetary constraints if action is not taken. However, the coming challenges will be both major and very exciting. We must work to strengthen our public health care systems, which have been weakened by austerity policies. We also need to rebuild European industry in order to regain the sovereignty which we are so missing faced with the virus. We also need to work to include the concept of ecological conservation as part of our economic decisions.
Yet, it is clear that we will not be able to do all of this if we are crushed by the weight of debt. The European Central Bank already holds a fifth of European states’ economic debt. It could however transform some of this into very long-term debt and, due to the zero interest rate and inflation, they would gradually melt away. We could therefore cancel these debts equal to the amount that states have to spend on health, social issues, and confronting the industrial and ecological challenges that lie before us.
That’s the solution we are proposing. European institutions have so far refused it. However, more and more economists of all persuasions defend this vision today. In the United Kingdom and the United States for example, the central banks have already broken taboos by deciding to finance states directly. It’s time for the European Union to do the same, rather than telling Europeans that they have no future other than paying off debts.
[Top photo: German chancellor Angela Merkel and French president Emmanuel Macron, seen present live via video, speak to the media at the Chancellery during the coronavirus crisis on May 18, 2020 in Berlin, Germany. Andreas Gora - Pool / Getty]
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