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Eurofound Forum in Doublin

Published in English Content

doublin 1Anna Diamantopoulou participated on February 15, in the Conference on "Social and employment policies for a fair and competitive Europe", held in Dublin. The conference was organized by "Eurofound", a competent authority of the EU to improve living and working conditions in EU.
Mrs Diamantopoulou chaired the panel discussion on "Inclusive growth: What future for the European Social Model?"

The panelists:
Bernadette Segol, General Secretary, European Trade Union Confederation (ETUC)
Renate Hornung-Draus, Managing Director, European and International Affairs, BDA and Chair, Social Affairs Committee, BusinessEurope
Staffan Nilsson, President, European Economic and Social Committee EESC
Guthner Schmid, Professor Emeritus of Political Economy, Free University of Berlin and Director Emeritus, Social Science Researce Center Berlin, WZB.


swp anna 3

Speaking notes for
Kolloquium of Stiftung Wissenschaft und Politik (SWP) – Berlin - 17.10.2012

I had the opportunity to serve as a European Union Commissionnaire between 1999 and 2004, a very productive and challenging period for the EU, with among others, the introduction of the Euro and the enlargement to 10 new member states. In that capacity I had the chance to collaborate on issues of Social affairs and Equal opportunities, with the German Government, the chancellor, the ministers of Finance, of Social Affairs, of Employment and the ministers of the Landers.

Germany in Europe
Integrating Germany in the European Economic Community (EEC) (1957), the precursor of the European Union, guaranteed security, hope for a prosperous future and above all peace in the European continent. Germany’s role since the establishment of the EEC was that of a powerful member but not a leading protagonist.

It was during the Jacques Delors era [7 January 1985 – 24 January 1995] that the initiative of two important political leaders the French president Francois Mitterand and the German chancellor Helmut Kohl, the European project acquired a new impetus by extending its scope in many new areas

The unification of Germany initiated by chancellor Helmut Kohl paved the way for a new German role.
It was with Gerhard Schröder, the first German chancellor (1998-2005) born after the war (1944) that Germany asserted its interests as distinct of those of the rest of Europe.

Leadership and pedagogy
It is since the advent of the economic crisis in 2007 that Germany assumes a role of leadership in Europe.As a powerful protagonist it is regarded with admiration mixed with awe. Germany as a leader faces new demands. The economic might of Germany makes it the de facto leader. But leadership comes with responsibilities.

Germany needs to lead Europe while balancing the conflict between integration and preservation of national sovereignty.

While her legitimacy stems only from German voters, the German chancellor, in the person of Mrs. Merkel needs to persuade the rest of Europe for her European plans.

A leader has also a pedagogic role. Many German proposals have been positive, constructive and based on solidarity, but their political approach lacks in pedagogic method.

One cannot treat entire nations and their people as sinners that should undergo punishment as did Mr. Philipp Rösler the German vice –chancellor and minister of Economics and Technology, and he was not the only German politician to do so. A punitive approach provokes negative reactions of people in the periphery that are already in distress. Such reactions will hinder any political project and any positive outcome.

So while many German solutions to the crisis may be correct and there could be agreement on what to do, very little was done in terms of winning the necessary political consensus. Luckily, lately one sees signs of a change in the German approach.

I want to be frank and clear on this. In Greece there has been a financial mismanagement, largely the product of a clientelist political system. This a problem for Greeks to solve, and we will do so, if we continue to leave in a democracy.

At the onset of the crisis Greek people gained gradually self awareness of what was wrong in the Greek economy and the need to fix it. They accepted harsh measures and they were promised a return to market lending and mild growth by 2012. Those were the initial troika predictions. They were proven wrong. The lack of any visible results, the escalation of austerity measures and the deepening pain turned the initial patience into fear, despair and anger. It is now obvious that those in the troika that proposed a longer period of adjustment for Greece were more realistic.

Similar experiences are shared by other countries of the European periphery. As the whole European economy is slowing down, it is now widely accepted that reforms and austerity alone cannot bring back growth to Europe. A growth stimulus is necessary.

European unification – Politicians versus Citizens
The economic crisis has brought in the forefront the discussion for the future of Europe. A more unified Europe is needed, and this is supported by the majority of politicians in Germany and the rest of Europe.

This is not the case for European citizens. Those in the more prosperous countries do not want to share the burden of bailing out the periphery, and those in the periphery feel there are the victims of endless austerity with no sign of hope.

In this context German leaders have the historic task to move Europe ahead while persuading the German people and the European people.

What will the German and European policy and narrative be ?

Should it keep singling out a small country like Greece with 1,6 % of European Union GDP or the periphery countries as the culprits solely responsible for the crisis ?
A crisis that has by now been proven to be a systemic one?

New policy – New narrative
German leaders could rally around them the majority of Europeans if they restore the power of elected representatives and their legitimacy by harnessing those economic powers that led to the crisis and keep profiting from it at the expense of Europe’s people:

By harnessing the financial sector which was left unregulated and beyond any essential control indulged in excesses out of infinite greed. The rating agencies that failed in their task to inform the public on the excessive risks that the financial institutions were exposed to.

Why should profligate Banks be bailed-out at the expense of European citizens, while the prevailing narrative calls for punishment of those who were less responsible for the crisis.

The Financial Transaction Tax currently under discussion would be a positive step in this direction.

This is a policy and a narrative that can ally European citizens. This together with a visible prospect of growth will permit the necessary structural reforms that will restore overall European competitiveness and give Europe a prominent role in the global economy.

Instead of finger-pointing to presumed sinner countries, instead of punishment, fear and austerity, what is needed is solidarity, hope and concerted action for growth, based on the rule of democracy on a path of prosperity and happiness for European citizens.

In a nutshell, Europe needs leadership now, if Germany wants to assume this role it should propose a policy and a corresponding narrative consisting of the following:

1.    Peace (EU’s great achievement) and respect for nations and people.
2.    A new geopolitical role for Europe
(By 2050: world population will be 9bn and Europe only 7% of that down from 20% in the 1950s, the largest EU countries will have maximum 1% of world population, and Europe’s GDP only 10% of world, down from 30% in the 1950s)
3.    Democracy (New treaty, enhanced democratic legitimacy in decision-making)
4.    Economic Justice (harnessing the financial sector)
5.    Growth equitably shared

Failures of Politicians in handling the crisis
As a politician I can say that our ranks failed in providing proper leadership. My colleagues in the core European countries pointed the finger at and asked for punishment of the profligate periphery instead of addressing systemic deficiencies.

In particular most German politicians and the economic elite failed to speak out and convince their people that helping for the survival of the Euro was in the long-term interest of Germany. Furthermore the German public believes that the bail-out money has been paid out in cash, although most of it is guarantees and loans with interest. And they are not aware of the benefits from the euro crisis: Germany has gained 80 billion Euros so far due to reduced interest rates on German bonds only.

In the periphery, and I can speak of my experience as a Greek politician, we failed to tell the truth to are people, that many reforms were long overdue and should be carried out because they were a condition for the survival of our economies. Instead we chose to present the reforms as necessary because they were demanded by our foreign creditors.

Thus we all worked in the wrong direction, contributing to create two conflicting public opinions.

I believe we urgently need a unified common European narrative.

European Social-Democracy
I have been a long time member of the European Socialist party. The SPD has played a constructive and positive role during the present crisis both in Germany and in the European Parliament. It avoided a populist rhetoric and its leadership as well as its prominent member and president of the European Parliament Mr. Schultz should be commended for their stance.

I believe the SPD can play important role in the creation of a stronger pan-European Social-Democratic Party, and so can CDU with its allies. The existence of strong pan-European parties is a necessary condition for a strong democratic and more unified Europe.

Conclusion – Hope versus Fear
The Nobel prize for peace awarded to the European Union, came at an appropriate moment. While our focus is exclusively on the crisis, we underestimate our achievements, it reminds us what the European project has achieved for Europe, peace and the protection of Human Rights.

Now, building on our achievements, it is the time to advance towards a more unified Europe based not on fear, punishment and austerity but on hope, solidarity and growth for a prosperous and happier future for European citizens.

belfercenterlogoIn a public address on Europe’s imminent choices, former EU Commissioner Anna Diamantopoulou offered a sobering analysis of the origins of Europe’s crisis and sketched a new narrative necessary to ensure European cohesion. She highlighted the lessons her country, Greece, had learned from the crisis and pointed to new opportunities for growth, as part of her Fisher Family Fellow speech on October 23, 2012.

Praising the US for its handling of the 2007-2008 financial crisis, Diamantopoulou pointed to the lack of a banking and fiscal union in Europe, which had made addressing the effects of the crisis in 2008 particularly difficult. The European Union had devised ad hoc mechanisms to bail out those member states that could not borrow at reasonable interest rates: Greece first, then Portugal and Ireland. These mechanisms had been the result of tense bargaining around Brussels’ negotiation tables, which had tested the unity of the Eurozone. The impression that the protracted negotiations had left on the rest of the world was that these responses were overall “too little, too late.” She was optimistic that the more flexible final procedures would ultimately result in greater integration: the creation of a banking and fiscal union and increased efforts to complete the economic and political union.

Dissolution of the European Union now seems all but off the table, she noted. Too great were the implied costs and too threatening the loss for the global economy. She cited a Prognos study, whereby the departure of Greece, Portugal, Spain and Italy from the European Union would result in a $22.3 trillion growth loss for the world economy. Already threatened by demographic decline that would leave the largest European countries at most at 1% of the world population by 2050, the EU’s political leaders needed to define a new vision for Europe to ensure its continued global relevance.

Europe needed new leadership and a new project, she said. This, however, could not be a single-nation enterprise. Germany, the largest economy in the Union and most probable leading country, was an “isolated giant.” She recommended German leadership use its leading position to build consensus and convince governments and European citizens of the necessity of the European enterprise. Germany would need to approach its role at the heart of Europe using a different paradigm: one of solidarity, discipline and vision, instead of dictating rules and engaging in finger-pointing. As of yet, she was unable to detect this necessary shift in the German government: it seemed to be guided more by internal electoral considerations and less by a long-term vision of Europe, which was “essential for Germany itself.”

Key to reinvigorating a European vision of the future was a new narrative. This had to incorporate five elements: advocacy of and pride in peace – the Union’s greatest achievement – and respect for nations and people; the definition of a new geopolitical role that included military strength and soft power; increased internal democracy, with a new treaty and greater democratic legitimacy in its own decision making; greater economic equality and finally, a better mechanisms to increase competitiveness and share the Union’s growth. European governments had to be willing to assume leadership to craft this narrative, but its institutions were similarly responsible. The ECB and the core European institutions had to work together to design a fiscal stimulus project similar to that implemented in the US. Perpetual austerity, she warned, would not produce growth. European leadership had to “inspire citizens with vision and deeds.”

She advocated for a “new kind of global understanding and cooperation,” to avoid a prolonged slump. Global growth would return as confidence in the European markets returned, she noted, echoing a recent article by former UK Prime Minister, Gordon Brown.

Greece in recovery

The crisis had demanded that her own country, Greece, make rapid fiscal adjustments. This had led to high levels of unemployment and an overall rise of poverty, threatening basic aspects of every day life, Diamantopoulou said. This uncertainty was giving rise to opposition movements on the democratic fringe: for example, Golden Dawn, an avowed neo-Nazi party was voted into the country’s parliament at the last election. “I am serious when I talk about a threat to democracy – it is also a threat for the stability in the Balkans and the viability of the European unification process,” she added.

Europe needed to initiate a “New Deal” for growth on its periphery. This would lend additional heft to the measures introduced by the current three-party coalition government in Greece that reformed taxation and the public sector. “Greek society needs relief, reform and recovery – just as was the case in the United States in 1933,” she said.

Lessons from the crisis

In the last part of her presentation, Commissioner Diamantopoulou reflected on lessons learned from the crisis. “The Greek adjustment program had important flaws,” she said. The Troika had set overly ambitious targets, which meant Greece could not but fall short of achieving them. Original predictions by the Troika had assumed that Greece would be able to borrow on the international market at reasonable interest rates by now. “We are far from that,” she noted. Greece could not be compared to a corporate restructuring project. “A whole people cannot be made to follow orders, as if they were employees.”

While European leaders had not facilitated the task of the Greek political elite by speculating on a Greek exit from the Euro, the Greek government had failed to see the depth and breadth of the problem at the outset. “We thus proceeded leisurely at the onset of the crisis and later postponed tough decisions. Most ministers refused to assume ownership of the reform programs they were instituting and measures introduced were often socially unjust, while in some cases failing to fulfill their objectives.”

Four lessons were now obvious: In a crisis of this magnitude one had to act immediately; implement the toughest measures right away; convey ownership to win over the ‘hearts-and-minds’ and communicate openly with the public to sustain this support. “One must pick goals that project national pride and increase social justice,” she said. She hoped the current Greek government had learned these lessons and would be able to – in the long-term – renew a country, which had “immense potential.”

Anna Diamantopoulou, 2012. Content is distributed with a CC A-NC-ND-Gr-3.0 licence

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