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Europe′s salvation lies within itself

Red alert, passengers. We are not joking anymore. We are not talking about the possible “restructuring” of the sovereign debt of a single peripheral country.

By: EBR - Posted: Thursday, January 5, 2012

Indeed it is no news for attentive observers that most Southern European economies suffer from deep structural weaknesses that have been partly responsible for their weak growth rate in recent decades.
Indeed it is no news for attentive observers that most Southern European economies suffer from deep structural weaknesses that have been partly responsible for their weak growth rate in recent decades.

by Simone Disegni*

In question is the very survival of the Euro as our common currency, perhaps of the EU itself, most importantly of the livelihood of the continent’s economies.

That is the sense of the signals that top-level EU leaders have resolved to communicate to the public opinion in the last few months, with particular clearness since last September. Never before had they met twice in a matter of three days to discuss an urgent issue within the highest EU organ, the European Council. If the summits were ostensibly convened in order to reassure the markets with regard to the solvability of Greece and Italy’s public debts, the extraordinarily tight agenda made clear to everybody to what extent top leaders were frightened of a wide-scale attack to the credibility of European economic governance.

Let the protocol wait outside, therefore, and formal relationships be somewhat revised for the time being – EU institutions have taken decisively the lead in order to pressure the weakest governments to adopt extraordinary measures through all possible means: public letters, private messages, intensified meetings, visits in the capitals, etc. Some have even claimed that the ECB and the European Commission – undoubtedly supported by the strongest Eurozone member, Germany – have de facto gained control of national economic policy-making in those countries.

Besides formal aspects, however, what is really the substance of the suggested “emergency package” to tackle such critical situation throughout the continent? If we look at the first set of measures approved by Athens’ Parliament as well as those requested from other countries in danger, the key target in order to redress troubled public finances seems to be bold cutting of the heaviest chapters of State expenditure. That can include – depending on the “danger level” of concerned countries – the extension of the age or working period required to retire, the dismissal of exceeding servants working within the public administration or a generalized salary cut, measures facilitating the firing power of companies and institutions, and so on.

Indeed it is no news for attentive observers that most Southern European economies suffer from deep structural weaknesses that have been partly responsible for their weak growth rate in recent decades: an oversized and inefficient public sector, often due to the effects of political patronage and the absence of efficiency mechanisms; a poorly competitive productivity rate; an obstructed labor market and a generalized rejection of merit-based selection mechanisms, which seriously hinders social mobility, and so on. It is a broader, widely accepted fact, moreover, that European pension systems need to be revised in order to account for the longer living age and to prepare for the retirement of the substantial “baby-boom” generation.

Yet the dominating approach to solve Europe’s crisis hides two serious dangers. On the one side, a stubborn insistence on austerity and collective sacrifices, while easing public budgets in the short-term, exposes at the same time the EU to the gloomy risk of a long and painful stagnation, by depressing the economy and hindering any prospect of growth and relaunch.

On the other side, perhaps even more importantly, on the altar of budgetary sustainability Europe risks sacrificing the very essence of its socio-economic model: if governments and parliaments choose to tackle the crisis by targeting social services, labor protection standards or the salaries of low-income public servants, they do not only risk facing growing anger and social tensions. Most importantly, they attempt at one of the core features of the EU’s identity itself, perhaps the one that has most contributed to make European societies the healthiest and most attractive in the world. As President Barroso has himself recently highlighted, in sum, « in no other place on earth has it been possible to put together this combination of civic, political and economic freedoms. Equality of rights between men and women. Respect for the environment. The ambition for higher levels of social cohesion and social protection. The solidarity with other parts of the world less fortunate than ourselves. In other words (…) the social market economy we have consolidated through the process of integration».

Despite not bearing the main responsibility for the current crisis, European citizens – in Southern EU countries, but not only – will probably have to undertake new efforts and submit to some sacrifices in order to overcome the critical conjuncture. Yet EU leaders need to explore other avenues than the ones mentioned to respond to that challenge in order to ensure a powerful relaunch on the medium term as well as the safeguard of the very essence of Europe’s social model. At stake is nothing less than the right for future generations to enjoy the opportunities they deserve.

* Simone Disegni is a member of the Writing Team at ThinkYoung, the first think tank concerned with young Europeans. [email protected]

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