Another Europe is emerging. We must fight for it and in it

Originally published for the Labour for a Socialist Europe website

It’s well known that a day can be a long day in politics. Not so in European politics, where big changes usually take much longer. Yet it is fair to say that the centre of gravity of EU politics has shifted more in the last 3 months than in the last 10 years.

The arrival of the pandemic in continental Europe, at the end of February, has brought to a sudden halt the austerity season that characterised the last decade of EU politics. The suspension of the budget constraints of the Stability and Growth Pact, prompted by the EU commission on March the 20th, allowed EU countries to quickly increase spending in deficit above the 3% of GDP to boost the capacity of health systems and provide relief packages for workers and for economic sectors disrupted by the pandemic. The Commission further enabled EU countries to use the full flexibility foreseen under State aid rules which allowed them to pump billions to keep firms afloat during the lockdown. The European Central Bank followed suit, adopting the Pandemic Emergency Purchase Programme which inundated the market of sovereign bonds of EU member states with 1350 bn €, keeping on check interest rates and supporting cheap debt emission to finance member states spending.

These momentous changes matched equally significant shifts of economic policies happened in the UK and in the US, allowing EU countries to find the money to finance schemes to bail out the economy and pay the salary of workers forced to stay at home. Such measures were by all means similar to the furlough scheme established by the UK Chancellor, possibly the only relative success in the catastrophic handling of the emergency from Johnson’s government. Crucially, such changes happened relatively quickly in European standards. The President of the EU commission, the German Ursula Von Der Leyen and the president of the European Central Bank, the French Christine Lagarde, were quick to react and had an easy ride in finding the unanimous backing of the Commission and of the bank governing council. Such unanimity was not hampered by a ruling of the German Constitutional Court which questioned the legality of the ECB bond-purchase program that ended the eurozone crisis in 2015. The ECB was quick to issue a blunt, defiant response before expanding its new program by another 600 bn €.

Following the Commission and Central bank actions, the Eurogroup, the informal council of the eurozone finance ministers which took controversial stances at the time of the Greek crisis, also changed its tack. A package of measures was approved without much controversy at the beginning of April comprising 540 bn € of measures in support of firms, health expenditures and, crucially, workers. Under such agreement the Commission will kickstart an unemployment reinsurance scheme — Support to Mitigate Unemployment Risks in an Emergency (SURE) — to be financed through 100 bn € of bonds issued by the EU itself. The scheme seeks to supply aid to the hardest hit areas through state-financed income-support programmes for workers and is a first embryonic step towards a European welfare funded and controlled by a EU institution.

Even more significantly, on May 27th, the Commission has launched an ambitious proposal to support the European recovery. The program, called Next Generation EU, should be approved together with the Multiannual financial framework, the new EU budget of 1100 bn € which will start in January 2021 and last until 2027. This program constitutes a clear break from the austerity orthodoxy that was hegemonic in the last decade, in at least three different ways. First and foremost, the EU Commission has proposed to finance the recovery through an unprecedented borrowing scheme that would allow it to raise 750 bn € through the emission of European bonds. Second, and equally important, such money would be redistributed through a combination of grants and loans to the different member states, taking into account how much each country has been hit by the pandemic, allowing countries like Italy and Spain to become net beneficiaries of financial transfers from countries in the North of Europe. Furthermore, while the new European bonds would need to be repaid over a period of 30 years starting in 2027, the Commission suggested that at least a part of this new European debt might be reimbursed through the introduction of European taxation on the revenues of large multinational corporations benefiting from the EU single market, a digital tax applied on companies with a significant digital presence and revenues obtained taxing plastic waste and penalising CO2 emissions through the European Emissions Trading System. Following similar priorities, the money raised through the bonds emissions should be invested in the green transition and in programs of digitalisation presented by the different member states, under the supervision of the Commission. There doesn’t seem to be scope nor appetite, from the Commission, for punitive reforms or for the austerity measures of the two past European legislatures.

Indeed the new vibe of the European Commission reflects both a progressive shift in the European Parliament and of European politics as a whole. This shift started in Southern Europe, through the election, in recent years, of progressive/socialist governments, in Spain and Portugal, and was fostered by crucial developments in French and Italian politics. In France the wave of social protests of the last few years helped/forced Macron to understand that it was time for change in Europe if he wanted to stay in power in France. In Italy the second Conte government supported by the populist Five Star Movement, the moderate Partito Democratico and the Left, found its balance in a radical push for another Europe. Conte and Macron were the major actors behind the letter of nine prime ministers on the 25th of March demanding European solidarity, financial transfers and European bonds. The European Parliament is also quite different after the 2019 European elections. While the UK saw the victory of Farage (also thanks to the spectacular failure of a pro-Brexit Labour Party), in continental Europe a steep increase in turn-out (+8%) was accompanied by an overall swing of ~5% away from the Socialist and Democrats (particularly the moderate third-way parties) towards Greens and Liberals. On the right the swing from the People’s Party towards the euroskeptic right was lower than expected and mostly confined to Italy. On top, pro-austerity policies are not anymore popular among the right either. This resulted in an overall shift towards pro-European parties and a more diverse, overall more progressive and markedly more green majority in support of the new European commission and of even more ambitious plans for the recovery.

The implementation of the Commission plan is not a foregone conclusion. A handful of EU countries led by the so-called “frugal four” (Netherlands, Sweden, Denmark and Austria) have raised objections to the Commission proposal and call for a reduction of the financial transfers and of European bonds emission. The negotiations will indeed be tough as EU rules require unanimous agreement of all EU countries during a European Council meeting, and the EU Commission itself acknowledged that this won’t happen before July. Yet it is evident that we are witnessing a nascent paradigm shift within more dynamic European institutions rising to the occasion to impress a radical change of pace to the process of European integration in the direction of more solidarity and cooperation among EU states.

If agreed in the EU council in July, the mutualisation of debt entailed by the Commission proposal would not only reduce the burden of public debt (and interests) weighing on southern Europe countries finances. It would allow raising money to invest in the recovery as Europeans and not as individual member states. This is important because all states will need to hugely increase their level of debts to face the consequences of the pandemics. If they all compete with each other to sell their bonds on the market, the interests and their spreads are bound to grow. If European bonds are issued instead, there is no competition, just cooperation, and the interest on the debt would stay low because they would be guaranteed by the European Central Bank. For decades, the lack of social transfers and economic burden-sharing has been described as the major shortcoming of the European project. This ‘Hamiltonian moment’ would indeed be an historical step towards another Europe.

The major driver of this tectonic shift has of course been Germany. Chancellor Angela Merkel ended Germany’s historical opposition to debt mutualisation in a video conference with Macron, ahead of the EU Commission proposal. Her shift came about less suddenly than generally thought and it was at least in part the result of new political conditions, including the new socialist leadership of the SPD, partner in the coalition government. But it was certainly also the result of internal pressure from Germany, where a vast front of progressive intellectuals raised their voice for European solidarity, and external pressure from other European governments, particularly the Italian prime minister Conte, very active on German media and pan European initiatives like the “open letter to Angela Merkel”, signed by some of the most important European historians and supported by organisations such as Another Europe Is Possible, written by a group of comrades which I was honoured to coordinate.

Merkel will take up the presidency of the European Council on July the 1st. The slogan chosen for the semester of such presidency (“Gemeinsam. Europa wieder stark machen/ Together. Making Europe strong again”) suggests a strong determination to impress new impetus to the European project. This will happen in stark opposition to Trump’s America, preventing a new cold war by promoting dialogue with China, defending international institutions like the WHO and taxing American web giants. It will be important to see whether she will also support the launch of the “Conference on the Future of Europe” announced by Ursula von der Leyen in July 2019 which would create a momentous occasion to re-discuss the  constitutional arrangements of the EU, as demanded by the Citizens Take Over Europe coalition.

Constitutional reforms and treaty changes are needed. A more progressive Europe is not a socialist Europe and much more will need to be done to transfer power and wealth from the top to the bottom. It will be important to fight to make the temporary measures adopted in response to the pandemic permanent, constitutionalising a generation-long ‘Green New Deal’; to level up and strenghten workers’ right across the Union; to bring about a serious crackdown on tax avoidance, tax havens and tax evasion, relaunching at the same time the battle for a Tobin Tax on financial transactions. It will be crucial to challenge the authoritarian drift in Eastern Europe and assert the European rule of law as a bastion for democracy, freedom of expression and civil rights. But it would be extremely important if the EU would take steps to increase its role in the new world order reshaped by the pandemic, standing up, against Trump, for international cooperation and multilateralism, leading the fight against climate change and contributing to that for a rebalancing of the economy.

Much of what will happen will depend also on the struggle of grassroots movement at the European and national level in 27 European countries. But for the sake of the internationalist Left in Britain, these are developments which are no longer possible to ignore. Another Europe is not just possible. It is emerging in front of our eyes and it is bound to develop in a direction opposite to that taken by Brexit Britain under this Conservative Government. Johnson’s strenuous defense of Cummings is clearly linked to the determination to defend a Brexit plan of deregulation, subdued by Trump’s US geopolitical and commercial interests. An extension of the Brexit transition phase, which has to be agreed before the 30th of June, and which is the only guarantee against a catastrophic no deal on December 31st, is the first step to derail that Brexit plan and preserve our ties with this new EU. Another Europe is emerging. We must fight for it and in it.

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