Thursday, 1 December 2011

One Step Forward, Two Steps Back





This week’s speech in Germany by the Polish Foreign Minister Radosław Sikorski, in favour of a Federal Europe, is a significant development in Polish and European politics.

With the Eurozone facing the possibility of collapse, Sikorski urged its strongest economy Germany to act in order to save the currency zone and thus the European Union. In dramatic language he described the huge negative consequences that such a collapse could bring. In order to divert such a development he has called for further EU integration, including the establishment of a common fiscal, immigration and foreign policy. In historically significant language he stated that:
I will probably be the first Polish foreign minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity.

The political response in Poland to Sikorski’s speech has been depressingly predictable. PiS accused Sikorski of betraying and subordinating Poland to Germany and even suggested that the Foreign Minister should be brought before a state tribunal. All this has diverted attention away from the real content of Sikorski’s speech and the vision of the type of EU that he proposes is created. In turn the mainstream left has fully backed Sikorski’s statement, failing to highlight its many negative elements.


There are parts of Sikorski’s speech that can be evaluated positively.


Firstly, Sikorski is one of the first major politicians in Europe to have spoken openly and candidly about the seriousness of the choices facing the EU today. He put the issue straightforwardly: either Europe unites and integrates more or it will break apart. As a representative of the Polish state, Sikorski could remind his audience in Germany of the historical lessons of division and conflict that have occurred in the continent.


Sikorski also addressed some of the myths that are being repeated during the present crisis. In particular, he challenged the idea that the eastern enlargement of the EU is in some way responsible for the Union’s current problems. He counteracted the argument, that is increasingly popular currently in the EU’s richer states, that expansion has only brought them costs and no benefits. Talking about the economic profits enjoyed by the richer EU economies from the opening up of the eastern economies Sikorski noted:

Enlargement has created growth and wealth all over Europe. The EU15 exports to the EU10 countries rose almost twofold in the last ten years. It’s even more striking if you break it down by countries. Britain’s export to the 10 countries that joined after 2004 rose from €2.2 bln in 1993 to €10 bln last year; France’s, from €2.7 bln to €16 bln, Germany’s, wait for this – from €15bln to 95 billion Euros. The total volume of trade between EU15 and EU10 amounted to €222 bln last year, up from €51 bln in 1995. A tidy sum. I guess it sustains a job or two in Old Europe.
The Polish Foreign Minister also reminded about the positive effects of Poland’s entry in the EU and at how it has been the most successful EU economy (in terms of GDP growth) since the outbreak of the crisis.

Furthermore Sikorski warned about the dangers of protectionism and nationalism and argued against the prospect of further integration being confined to a select group of EU countries. Integration inside the EU, he reminded, should include all of the EU27 states.

Yet when we go beyond these general statements of unity against division, we find that the type of new Europe being proposed by Sikorski is highly regressive and that it would in fact deepen the current crisis. Sikorski’s repeats the myth that the major cause of the current crisis is too high public spending and debt. He therefore reasons that the best way to address this issue is for there to be an increased and expanded programme of austerity and spending cuts throughout the EU.

This argument ignores the experience of those countries that have introduced draconian spending cuts inside the EU. These have tended to repress economic growth, increase unemployment and therefore actually inflate public debt and budget deficits. Sikorski has also failed to highlight the reasons for Poland’s recent positive economic growth. This has been achieved by allowing a moderate expansion of public debt and the budget deficit in order to increase public investment and capitalise from the inflow of EU funds. Sikorski would have to look no further than his own backyard to realise that investment and not cuts are the best way forward for the European economy.

In contrast Sikorski has lauded the Polish government’s recent decision to implement its own austerity programme as an example for other EU states to follow:
Next year alone we intend to cut our budget deficit to 3% of GDP and the overall debt to 52% of GDP. By 2015 the deficit will be brought down to 1% of GDP and public debt to 47%. The retirement age will be lifted to 67 years for both genders. Pension privileges for soldiers, policemen and priests will be cut. The disability pension contribution will increase by 2%. Child-benefits will be taken from the rich and given to the poor.
Sikorski continues that the policy of cuts and austerity should be assured through introducing new rules and punishments that would prevent national governments from expanding their spending and debt:
In order to strengthen economic convergence the Commission and the Euro group would get the right to scrutinize in advance all major economic reform plans with potential spill-over effect in the euro area, impose sanctions on countries failing to effect policy recommendations, and permission for groups of countries to synchronize their labour, pensions and social policies. Financial discipline would be strengthened by giving access to rescue funds only to members abiding by macro fiscal rules, by making sanctions automatic and giving the Commission, the Council and the Court of Justice powers to enforce the 3% ceiling on deficit and 60% ceiling on debt. Countries in excess deficit procedure would have to present their national budgets for approval by the Commission. The Commission would get powers to intervene in the policies of countries that could not fulfil their obligations. Countries persistently violating rules would have their voting rights suspended.
These proposals of increased ’fiscal discipline’ are almost the sole basis of Poland’s idea for further European integration. Yet what is even more striking is what Sikorski suggests leaving outside of his new Federal Europe. In probably the most important extract from his speech, Sikorski states:
The more power and legitimacy we give to federal institutions, the more secure member states should feel that certain prerogatives, everything to do with national identity, culture, religion, lifestyle, public morals, and rates of income, corporate and VAT taxes, should forever remain in the purview of states. Our unity can survive different working hours or different family law in different countries.

What this means is clear. Countries would be allowed to maintain regressive policies on such things as the relationship of the Church and State and same sex marriages. The practices of social dumping would also be expanded through allowing some countries to maintain low tax rates and longer working hours. (For an excellent article in Polish on this see here)

Despite this reality the parties now claiming to represent the left in parliament - both the Palikot Movement and Democratic Left Alliance - have almost uncritically given their backing to Sikorski’s speech. This represents an extremely dangerous development in Polish politics, where the two political options being presented to the population are either neoliberal Europeanisation or nationalist conservatism. A good start for the left in challenging this hegemony would be to articulate an alternative vision for a federal democratic, secular and social Europe.

2 comments:

  1. Interesting post. The bigger issue as you kind of imply here, is the institutional architecture that emerges from whole mess, rather than exact level and nature of fiscal adopted in short medium term, but the two are kind of connected. Didn't Hayek want a liberal free market European federation run by well schooled technocrats in 1940s?

    In the sense, it is also probably legitimate to think about the role of Germany - always central to European integration - and the position of smaller CEE states or economies.

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  2. Germany is of course crucial here. Unfortunately it seems to be playing the wholly negative role at the moment of using its strength to push austerity. Sikorski's comments however remind me of a joke I heard in the 90s: 'One of our major fears is that the Germans are coming; our biggest fear however is that they are not'

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Go for it - but if its abusive then it gets blocked