The Spinelli Group, formed within the Socialist Group of the European Parliament after the Treaty of Nice was signed, presented to the press in Brussels its programme in support of "economic and social governance" launched on 11 February in Strasbourg (see EUROPE of 26 February, p.5, and 13 February, p.4). According to the group's members, these proposals should be at the heart of the electoral programme of the Party of European Socialists (PES) for the European elections in June this year. The full text (in French, English and German) is published in our series EUROPE/Documents.
PROPOSAL OF THE SPINELLI GROUP FOR A PES PROGRAMME OF ECONOMIC AND SOCIAL GOVERNANCE
FOREWARD
The Spinelli Group
The Spinelli Group is made up of Members of the European Parliament from the Party of European Socialists (PES). It was set up following the signature of the Treaty of Nice and has been actively involved in the debate on the future of the European Union ever since. It has proposed new ideas that are broadly supported within the PES, such as its manifesto for a new federalism. With half of its steering committee members sitting on the European Convention, it has played an essential role in the work done in that respect and in particular has submitted a series of contributions concerning economic and social governance.
This document outlines the issues raised and studied by the Spinelli Group at a seminar held on 21 and 22 January 2004 in Brussels and to which both Members of the European Parliament and national experts Jean-Louis Bianco, Josep Borrell, Ferd Crone, Emilio Gabaglio, Reiner Hoffmann, Laura Pennacchi, Jean Pisani-Ferry, Philippe Pochet, Paolo Ponzano, Maria João Rodrigues, Jouko Skinnari, Loukas Tsoukalis, Frank Vandenbroucke, Juhna Vartiainen, Norbert Wieczorek, Josef Wöss specialised in matters related to economic and social governance and the eurozone were invited.
The aim of the Spinelli Group is to contribute to drawing up a unique programme for the Party of European Socialists for the European elections of June 2004 by means of the proposals contained in this manifesto. This document will be addressed to the leaders of the various socialist parties of Europe.
The Members of the Spinelli Group
Enrique Baron Crespo, Pervenche Berès, Maria Berger, Max van den Berg, Ieke van den Burg, Carlos Carnero Gonzalez, Paulo Casaca, Proinsias De Rossa, Olivier Duhamel, Robert Goebbels, Giorgos Katiforis, Jo Leinen, Pasqualina Napoletano, Raimon Obiols i Germa, Reino Paasilinna, Elena Paciotti, Michel Rocard, Bruno Trentin, Anne Van Lancker.
INTRODUCTION
1999 was the year of the euro. It also marked the start of a new legislative term in Europe. In anticipation of the upcoming elections of June 2004, it is now time to take stock of the past performance record of the eurozone with the aim of drawing up a programme for the European socialist parties focussing on the economic and social governance of that zone.
The euro is a success. It has brought the economic players within the eurozone closer together and during the recession protected the eurozone states from exchange risk and competitive devaluations.
However,
The citizens of Europe do not consider the eurozone to be a credible response to the current poor growth rate and unemployment figures. They feel that their purchasing power has been restricted as a result of rising prices above all in terms of everyday goods.
Their social welfare protection provisions are being called into question as a result of the budgetary constraints imposed by the Stability Pact. Structural reforms, which are affecting first and foremost pensions, are being dictated by objectives related to cleaning up the public purse to the detriment of the social model. Despite the efforts made through the Lisbon Strategy to involve Ministers for Social Affairs in this wave of reform, the Ministers of Finance continue to hold the reins.
Furthermore, the integration of the markets has indeed led to increased flexibility of working rights, but this is hampered by the poor labour mobility within the eurozone. It has also lead to privatisation of public services and business relocations. Competitiveness, which is all too often viewed over the short term, is seen to be a more important aim than that of a new and fairer type of social policy adapted to the challenges of globalisation and population growth.
In addition, neither the euro nor monetary union itself have always produced the expected economic results:
the share of the eurozone in global GDP fell from 19% in 1980 to 15.5% in 2003, whilst that of the United States of America dropped by only 0.5%;
since the launch of the euro in 1999, the contribution of the eurozone to world growth has not yet exceeded the 9% threshold;
average growth in the eurozone from 2001 to 20003 was 1% whilst the United Kingdom and USA achieved rates of 2%;
labour productivity has dropped by 1% in the eurozone since 1995, but increased by the same amount in the United States;
the recent appreciation of the euro against the dollar has led to increasing concerns in view of the fact that a 10% appreciation in the value of a currency leads to a drop in 0.3-0.4% points of growth and no less than 0.6% after 2 years;
In this document, the Spinelli Group presents its conclusions as to the best possible plan of action for the socialist and social-democrat parties of Europe in view of these concerns. The text is based on concrete proposals that aim to modify both the rules and institutions of the eurozone so as to facilitate the necessary reforms and boost growth, in particular in the long term. In the wake of the failure of the European Council in Brussels, we can no longer afford nor do we have the means to continue to work towards this ideal without fighting in parallel for a Constitution that will enable the 25-member European Union to function in a democratic and effective manner. Indeed, as far as we are concerned, this ideal does not only concern the eurozone and is one that can be realised thanks to the Constitution drawn up by the Convention, or, pending the adoption of the latter, within the framework of greater cooperation focused on the eurozone.
Part 1: Our Aim
To promote our social model throughout the eurozone
Thus far, the European project has enjoyed widespread support from the people of Europe. European integration has brought us peace and prosperity. At the start of this new century, our hopes for tomorrow have taken on a new dimension: the citizens of Europe are increasingly concerned about the quality of their employment and social welfare protection in the face of the new challenges of today's world. In order to meet with these legitimate expectations, the European Union needs to be better equipped and must review the current domination of social issues by market considerations and of employment by monetarism. Far from affecting the quality of the employment on offer, social services and welfare protection as well as the regulation of the market and monetary policy must help achieve social aims. As such, a voluntarist macroeconomic policy is indispensable:
for the creation of an environment that is favourable to growth;
for remedying the side-effects of poorly regulated competition (dumping);
for coordinating the necessary investment spending (in education, training, research and development) so as to ensure long-term growth.
The eurozone is now a uniform economic and monetary zone governed by a monetary policy, but which is lacking in any real economic or employment coordination and in those elements of social policy that are necessary in terms of their budgetary and fiscal consequences. This situation is dangerous and must be remedied in order to ensure the euro itself is viable and that the eurozone can take on its intended role as a force for momentum within the European Union. As such, with a view to striking the right balance between monetary, economic and social concerns, we feel that the time has come to strengthen the part played by economic governance, first and foremost inside the eurozone. Cooperation within the eurozone is indeed already stronger today, but must also be opened up to those Member States that have not yet adopted the euro. From the 1st of May 2004, a majority of the Member States within the Council will be non-eurozone countries. We should not shy away from making use of the reinforced cooperation mechanisms outlined in the Treaty.
In this text, we present those elements needed to reform both the rules and institutions of the eurozone so as to regain the confidence of the citizens of Europe in the European project by fostering long-term growth and employment and promoting social justice.
I. IMPLEMENTING THE LISBON AND GOTEBORG STRATEGIES
The overarching aim of the European socialists is to place the social dimension at the very heart of the European project. Currently, however, the EU's economic aims are overshadowing those issues that touch on social welfare, employment and sustainable development. And yet in June 2000, the European Council adopted the Lisbon Strategy, the aim of which is to make the European Union "the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion” by 2010. One year later at its Göteborg Summit, the European Council "agreed on a strategy for sustainable development and added an environmental dimension to the Lisbon process". This twofold strategy (known as "Lis-borg") cannot be implemented by the market alone. It will require a high level of public-sector investment, leading to the question of how such investment is to be financed over the medium term. To date, the Member States have not adopted the coordination needed to implement this strategy. We would like to make a number of concrete suggestions that should enable the eurozone, via greater cooperation, to reach the joint objectives of the Lisborg strategy sooner and with greater efficiency. The Lisborg strategy should be put to use to encourage the eurozone to actively get behind full employment, growth and the investment needed to sustain this, structural reform of the social sector (pensions, health) and sustainable development.
1.1 Macroeconomic strategies for employment
At the moment, the individual Member States are still responsible for their own labour markets. As a result, the latter are highly disparate. The European Union has only limited influence in this respect, party because it relies on weak instruments (essentially the European employment strategy) and partly because the ECB's monetary policy is based on an orthodox monetarist philosophy focused on price stability and which does not take account of the employment rate. In fact, in its desperate attempts to achieve NAIRU Non Accelerating Inflation Rate of Unemployment it has even been shown to be counterproductive!
Although the Constitution has not instilled true economic and social governance, it has opened up possibilities for strengthening the coordination needed for this. It is our view that the eurozone must tackle this issue by implementing a concerted policy for growth and a high level of good jobs. For this, we would suggest that the Eurogroup, after consulting employers and trade unions alike, should strive towards the following objectives:
to promote public-sector investment in those areas likely to generate long-term growth;
to initiate a permanent dialogue with the ECB so as to encourage the latter to promote growth and employment where necessary - these being its secondary aims in accordance with the Treaties;
to promote workforce mobility so as to create a labour market for the eurozone;
to approximate applicable employment rights legislation so as to promote the creation of quality, long-term jobs;
to adopt a concerted lifelong education and training policy;
to define and financing a transeuropean networks.
1.2 Social welfare protection
The Lisbon Strategy provides for the introduction of a new political instrument called the "open coordination method" (OCM). We are determined that use of this instrument must be intensified and extended so as to enable objectives to be set and the most appropriate means to achieving these to be chosen jointly through greater social dialogue to accompany macroeconomic management. The OCM should help meet the following challenges in particular:
reforming the pension system and modernising social welfare protection systems, above all in the field of health; in view of the ageing population in particular we would argue that older people should be brought onto the labour market on a voluntary basis and with freedom of choice;
progressively aligning salaries The Treaties do not permit the European Union to legislate on salaries (Article 137.5 TEC) and introducing a minimum wage, calculated in accordance with the standard of living and GDP of the Member States, as well as the right to a minimum income indexed to the minimum wage;
minimising unemployment;
eradicating poverty and exclusion.
1.3 Community taxation policy
Taxation is an essential element in redistribution of wealth and social justice. And yet, the current, dominant neo-liberal philosophy is endeavouring to push through widespread tax cuts and promote indirect levies. The Member States need to protect their income from downward pressure from outside by adopting a joint strategy. This is the only solution to the fiscal dumping seen today, even within the eurozone itself, and which is both damaging employment and threatening the viability of social welfare protection.
In order to be able to participate in the eurozone, the Member States must adhere to budgetary control measures and budgetary revenue coordination. Should the current stalemate continue once the number of Member States has increased to 25, the eurozone will be bound to apply greater harmonisation. This could be achieved by introducing a bracket within which the Member States would define the level of the taxes linked to the Lisbon Strategy.
However, the Spinelli Group would advocate a system based on transferring all or part of one area of national taxation, e.g. corporate tax, energy tax or savings tax. This would provide an essential factor in economic cohesion for the single market, would boost its competitiveness by placing the focus firmly back onto the activity and dynamism of business and would protect national public finances from unfair dumping between the Member States. Last but not least, it would create a basis for own resources (a European tax) and more effective implementation of these. In order to sustain current levels of taxation within the Member States, this European tax would be taken from national revenue in place of the current contributions made as a percentage of GDP.
Public-sector investment
One of the weaknesses of the eurozone is that it has settled for a follow-my-leader approach with an economy that mimics the United states and even Japan. A policy of concerted public-sector investment is needed in order to promote:
innovation, research and development in particular in the new technologies (nano-technologies, etc.) and biotechnology;
lifelong education and training (universities, teaching and professional training);
the creation of trans-European transport infrastructures and public transport that protect the environment and adhere to the principles governing services of general interest.
A plan of action could be drawn up establishing a public-sector investment rate of 3% of GDP to be invested by all of the Member States of the eurozone and that would create cross-border synergies, in particular at regional level. In line with our proposed reform of the Stability Pact (cf 2.1 Taking the Economy into Account) such measures could be promoted by introducing a “golden rule” that would exclude from the calculation of annual deficit specific areas of spending linked to growth potential.
A common public-sector investment policy of this ilk could be applied to further sectors, such as energy (hydrogen, etc.), including renewable energy sources, environment protection (innovation in the field of sustainable transport, etc.) or structural reform that would help temper the asymmetric shocks experienced within the eurozone.
Lastly, we believe that once the eurozone has been given an autonomous budget, it should set up investment plans in these key sectors in growth potential.
An autonomous budget for the eurozone
Irrespective of whether a European tax is introduced to finance the EU budget, the eurozone needs its own, specific budget. This "eurozone" budget would be financed on the basis of own resources and would be coupled with borrowing power and a policy promoting use of the international capital markets to fund joint investment projects. This would enable the eurozone to finance those sectors that are critical for its own growth potential:
through European public-sector investment in those sectors listed under the above point and in particular innovation, research and development;
via a trans-European networks that would optimise economic and territorial cohesion within the zone.
Finally, direct investment from the eurozone would provide a partial solution to the government deficit problem created by the Stability Pact: it would provide relief by shifting some of the burden onto a new facet of Community spending.
1.6 The eurozone must encourage the European Union to act
Through its own endeavours, the eurozone could become a true driving force for the European Union as a whole.
The eurozone could support the creation of European funding policies that would promote both the Lisborg strategy and economic, social and territorial cohesion. These policies could involve:
a European policy for transeuropean networks financed by the European Investment Bank (EIB), which would see its budget increased;
a reform of the European Investment Fund to create a European Sustainable Investment Fund that would focus on sustainable development;
financing "on the field" of the objectives of the Lisborg strategy, in particular through the structural funds;
the creation of a "Marshall Plan" to help the new Member States.
II. THE RULES APPLICABLE TO THE EUROZONE - REFORMING THE STABILITY AND GROWTH PACT
The European Union has at its disposal a series of macroeconomic policy procedures, notably the Broad Economic Policy Guidelines (BEPG), the Lisbon Strategy and the joint report on the European Employment Strategy (EES). For its part, the eurozone has one essential instrument for coordination: the Stability and Growth Pact (SGP). However, there is a yawning gap between the clout of the European Union in terms of monetary policy, which is the exclusive responsibility of the European Central Bank, and the lacking power and inefficient mechanisms available to the EU in terms of macroeconomic policy. Furthermore, these mechanisms have as yet not been harmonised such that macroeconomic policy objectives are being pursued in highly disparate manners across Europe based on diverging, and in some cases even contradictory, policies.
The decision taken by the ECOFIN Council on 25 November of last year called into question the very existence of the SGP. France and Germany had failed to adhere to the rule according to which the government deficit of the eurozone countries must not rise above 3% and yet succeeded in convincing the majority of their EU partners not to resort to the sanctions procedure. Under such conditions, the crisis faced by the Pact is threefold:
it is not credible: it was unable to prevent 2 of the Member States from breaching this rule without falling victim to sanctions imposed by the other countries;
it is not equal: the large and smaller countries do not receive the same treatment;
it is not legitimate: the markets did not react to this crisis.
We would like the era of this particular SGP, which sets down strict criteria then proceeds to "tote up points" afterwards, to come to a close. However, we do believe that the eurozone needs a pact for stability AND growth that will set down rules for collective development. We must not forget that the need for stability is not limited exclusively to stable prices but must also encompass stable employment. As such, we need:
to remedy the worrying levels of debt of the Member States and their tendency towards budgetary laxness;
a policy based on a combination of the ECB's monetary policy and a series of budgetary policies that will have an impact on inflation and interest rates and as such be crucial in guaranteeing growth in the eurozone.
We would suggest that the SGP should be reworked, giving it back its raison d'etre. The task that falls to budgetary policy is twofold: not only must it guarantee stability, rather it must also boost and sustain growth. For the time being, however, the "growth" dimension of the SGP is being grossly neglected. We would appeal for greater synergy between the SGP and the Lisborg strategy.
2.1 Taking the macroeconomic situation into account: supporting the investment needed to implement the Lisborg strategy
Adapting to the macroeconomic situation
The first lesson we have taken from the current crisis of the Stability and Growth Pact is the acceptance that its principles do not tally with the macroeconomic situation at any given time. For example, the 3% government deficit rule is easy to implement during periods of growth, but difficult to attain during periods of recession. Therefore, we feel that, where the Commission deems that economic indicators justify this, it should be possible for the Member States to exceed the 3% threshold slightly. The strict application of the 3% rule should also be reconsidered in terms of the sustainability of the debt of each individual Member State and the 60% GDP criterion.
Finally, a new mechanism should be introduced to ensure that the 3% target does not diminish Member State investment policies intended to promote growth and employment. For this, we feel that a "golden rule" must be applied.
Introducing a golden rule for investments arising from the Lisborg strategy
The dominant philosophy behind the pact is based on the notion that budgetary discipline is the only parameter that needs to be applied to ensure sound economic policy. But this has led to dwindling public-sector investment across the eurozone over recent years (11% to 5%).
And yet, without questioning the logic behind stability, some investment is also needed, in particular during periods of recession and where this contributes to enhancing long-term growth potential. We would therefore advocate introducing a golden rule that would disregard certain types of justifiable expenditure when calculating the deficit of the Member States. The list of those types of investment that would fall into this category would be drawn up on an annual basis by the Eurogroup The term “Eurogroup” in this manifesto refers to those members of the ECOFIN Council from the eurozone countries (cf INSTITUTIONS). In particular, they would be recognised as essential in consolidating the long-term growth potential of the eurozone in line with the Lisborg strategy. The following areas would be promoted in particular:
lifelong education and training;
innovation and research and development (R&D);
technologies linked to sustainable development.
trans-European transport networks and investments in security and sustainability in the sector of energy.
2.2 Capping public debt: multilateral surveillance in the long term
A further of the Pact's shortcomings lies in the fact that the principles it implements do not allow for a long-term vision and cannot be adapted according to the specific situation of a Member State. Public debt is key in this respect. Where a Member State is unable to keep its public debt under control, this has damaging repercussions in the long term:
in terms of social welfare protection, i.e. when the Member State is no longer able to meet the funding needs of its own structural demands; this aspect is particularly relevant in view of the ageing population and related rise in pension and health spending;
in terms of taxation which, if it is not sustainable today, will be subject to further increases in the future.
The Spinelli Group stresses nonetheless that public debt can also be a driving factor in growth over the long term and that it must only be capped where it is not sustainable. On the other hand, the Spinelli Group would advocate a system of stricter multilateral surveillance.
Restoring sustainable public debt
The SGP assumes that for a country's budget to be well balanced, its public debt must be zero. The level currently tolerated is 60% of GDP, but the Pact's actual aim is to lower this threshold until such time as public debt is wiped out entirely. We do not believe that public debt should be eradicated, rather that it should be sustainable. Were this to be the case, the limitations placed on excessive deficit would also be more flexible.
Public debt continues to be an essential part of any investment policy able to promote growth, social justice and technological innovation. We would therefore suggest that increases in public debt which enable the objectives of the Lisborg strategy to be met should not be called into question provided they do not have a negative impact on the goal of stability. A consultation process should be initiated with a view to determining the sustainability threshold of debt in comparison to GDP. We are also in favour of taking account of public service networks as a subsidiary sustainable development criterion when assessing public debt.
Multilateral surveillance
The multilateral surveillance mechanisms implemented in the SGP focus on annual deficit and as such are based on a very short-term approach to public finances. Furthermore, the public deficit of those countries that are in considerable debt cannot be viewed in the same light as that of other countries that have sustainable debt. We would therefore advocate extending this multilateral surveillance to assessing the sustainability of public debt.
III.- STRENGTHENING THE INSTITUTIONS OF THE EUROZONE
The current crisis faced by the Stability and Growth Pact has demonstrated that rules are insufficient without credible economic institutions to implement these. The buoyancy of the American economy is thanks in part to the respect for the Federal Reserve and fruitful debate between the latter and the executive. It is therefore necessary to review the current system of eurozone institutions with the aim both of creating a recognised discretionary authority seen to be legitimate by the markets and of ensuring the eurozone is able to deal with matters that specifically affect it and to make changes to the rules according to which it operates. This issue is particularly pertinent given that subsequent to enlargement the eurozone countries will be in the minority within the EU and that this will have further consequences in terms of ensuring majority backing within the enlarged institutions for specific individual policies.
Establishing the economic and social "Eurogroup"
Of course, the criteria applicable to investment recognised as falling within the domain of general European interest in accordance with the golden rule will need to tally with the other instruments used by the EU in the sphere of economic governance. It will therefore be important to hold regular debates on the Union's macroeconomic policy and make the necessary changes on an ongoing basis. However, the task of identifying long-term and economic objectives is a highly political one that must fall to a body that has sufficient discretionary power. For example, it is not a task that could currently be carried out exclusively by the Commission, already responsible for enforcing the rule, and nor could it be entrusted to an ad hoc body. Rather, the ideal solution would be a Eurogroup comprising Ecofin (i.e. it would also look at international economic matters), Social Affairs and General Affairs. By extending the areas of responsibility of the Council of Ministers from the eurozone, it would be possible to take account of all of the relevant economic and social factors involved in the management of the macroeconomic cycle and coordinating the necessary structural reforms. In more concrete terms, the Eurogroup would be responsible for:
setting down the conditions and list of criteria for the "golden rule" of the SGP at an annual summit held in October [on the basis of a Commission proposal and after consulting the European Parliament, so as to avoid bargaining];
choosing Commission initiatives and checking their compatibility with the annual objectives in terms both of quantity and quality;
entering into an ongoing, transparent and regular dialogue with the ECB.
Continuing in the same vein, we would also suggest that a European Eurozone Council should meet annually, enabling the heads of state and government from the eurozone to assess progress towards the broad long-term objectives in the field of further cooperation.
The European Central Bank (ECB)
The ECB continues to base its monetary policy on a “Friedmannesque” philosophy that is effectively preventing the eurozone from reaching its objectives. The single currency cannot be considered solely as a factor in trade, rather must also be a driving force for growth and must support the policies undertaken. With this in mind, the ECB has a part to play in setting up a counter-cyclical mechanism adapted to the macroeconomic situation.
Establishing dialogue between the Eurogroup and the ECB
The relationship between the Member States and the ECB is unsatisfactory. The former limit their efforts to asking the ECB to improve the prevailing economic situation. The latter, on the other hand, carries out the tasks with which it is entrusted without taking the overall macroeconomic situation into account. It encourages the Member States to restrict salaries and criticises them for failing to implement the necessary structural reforms. By failing to listen to one another, these two parties have become permanently, mutually mistrustful and this is damaging the discipline needed for the policy mix. We advocate the creation of a system of transparent dialogue involving the Governor of the ECB and the Chair of the Eurogroup, so as to enable them to draw up the kind of monetary policy needed. As a consequence of this, the order of precedence of the ECB's objectives would also have to be reviewed as would the strategy pursued in order to achieve price stability.
Strengthening macroeconomic dialogue
The macroeconomic dialogue between the Member States, the Commission, the ECB and employers and trade unions, introduced by the Cologne Summit in 1999, needs to be strengthened. To begin with, a system could be set up within the Economic and Social Committee to structure the dialogue between employers and trade unions on issues of a macroeconomic nature and relating to salaries. The autonomy of both sides of the discussion at the national level would be upheld.
Refocusing the objectives of the ECB
Essentially, the ECB is responsible for maintaining price stability and boosting growth. However, an explicit order of precedence governs each of these objectives. For example, unemployment has been greatly disregarded to date in favour of combating inflation and striving for NAIRU.
We do not believe that price stability is necessarily more important than reducing unemployment. We also feel that both aims can be pursued simultaneously. For this:
the ECB would need to quell inflation and unemployment in a fair manner. The dialogue between the Eurogroup and the ECB must be such as to enable these bodies to debate the objectives of monetary policy without affecting the independence of the ECB;
we would dispute the idea that currently abounds in Europe according to which price stability can only be achieved by reducing the supply of the currency. Rather, we believe that the Member States can contribute to this goal through tax adjustments.
Exchange rates
We are also in favour of greater consultation on the exchange rate policies of Europe and America. Regular meetings should be held involving the President of the Eurogroup and the American Secretary of State for the Treasury so as to enhance relations between the ECB and the Fed and prevent either currency from bearing the brunt of excessive upward and downward movements.
1.3 Extending the debate and the parties involved
The economic and social governance of the eurozone must be transparent, be governed by public opinion, be monitored by civil society and involve employers and trade unions alike.
More specifically, we believe that the euro and the related political instruments have taken the national dimension out of some of the essential debates concerned. We would appeal to national parliaments to return these matters to their agendas. Indeed:
in the short term, the introduction of the single currency marked the end of legitimate parliamentary debate on the situation of the economy and exchange rates;
in the long term, the Stability Pact is misconstrued, suggesting that the viability of government finances is now no more than a matter of the power struggle between the Member States and the Commission.
We would encourage national parliaments to renew their vigilance and reclaim their legitimate responsibility to oversee both the sustainability of debt and the management of deficits.
Part 2: The framework of our project
The Constitution and greater cooperation
Below we set out our analysis of the room for manœuvre presented by the Constitution and the legal conditions needed to strengthen cooperation within the eurozone.
I. IN FAVOUR OF THE EUROPEAN CONSTITUTION
The European Convention did not fulfil all of our expectations in terms of economic and social governance. In particular, we are determined that the coherence of the EU's macroeconomic policy must be secured by creating a political post for a "Monsieur euro", based on the existing proposal for an EU Minister for Foreign Affairs. Better cohesion and above all a better balance between economic, employment and social welfare concerns is needed. Our institutional proposals would enable this cohesion to take place above all with a view to achieving the EU's objectives.
Nonetheless, we do believe that the draft Constitution deserves our backing in view of the progress it has made in a great many areas, including that of macroeconomic issues within the eurozone. The opportunities it has created will enable us to implement the project described above.
New objectives for the European Union
Refocusing the economic and social objectives
One of the victories of the European socialists within the Convention was to succeed in refocusing the objectives of the European Union in favour of symmetry of economic and social considerations. Henceforth, the European Union will also strive towards the following:
sustainable development based on balanced growth;
a social market economy driving towards:
full employment;
social progress;
significant improvements in the quality of the environment;
the eradication of social exclusion and discrimination;
the promotion of social justice, social welfare protection and inter-generational solidarity;
the promotion of economic, social and territorial cohesion (repeated in the article related to public services).
The inclusion into the Constitution of the Charter of Fundamental Rights, and in particular the Chapter on Solidarity, which enshrines the binding nature of specific social welfare rights (information and consultation of employees, collective negotiations, protection against unjustified dismissal, working conditions, etc.) as well as access to social security benefits and social services, entitlement to social welfare assistance, health protection and access to services of general economic interest, strengthens these objectives.
Protection of public services
Public services are not only an essential element in economic, social and territorial cohesion, rather they represent one of the crucial pillars of our social model. Access to services of general interest is a right enshrined in the Charter of Fundamental Rights and included in the Constitution. The citizens of Europe are highly dedicated to safeguarding such services. And yet, the Treaty of Nice does not grant them any special status. As such, the rules of competition place them under considerable pressure and can even cause them to be withdrawn. Article III-6 of the Constitution, however, entrusts the legislator with the task of setting down the conditions according to which public services are to be run. The EU will therefore be required to put down in writing and recognise the principles of public services and the conditions according to which they operate (universality, continuity, quality, efficiency, equality of access, proportionality, accessibility of cost and protection of users and consumers, not forgetting participation of users and democratic monitoring of the service-providers). Furthermore, the amended article stipulates that both the EU and the Member States must ensure that such services are able to operate under economic and financial conditions that enable them to fulfil their tasks.
This process has in fact already begun in the shape of the green paper drawn up by the Commission in this respect. However, only if the Constitution is adopted shall it fully succeed.
1.2 Extending the Community method
In order to promote the overall interests of the eurozone and move beyond the stalemate created by the conflicting national interests of the Member States, the roles of both the Commission and the European Parliament will need to be strengthened. In concrete terms, the Constitution does make some progress in terms of ensuring greater transparency, democracy and effectiveness of the decision-making process. It further stipulates the following with specific reference to macroeconomic policy:
in terms of capping excessive deficit, the Commission is granted the right to submit proposals in place of its current right to submit recommendations; a major element of the Community method is at stake here given that the Council is able to override recommendations by qualified majority, but can only override proposals if it is unanimous;
coordination of the Member States' employment and social welfare policies has been recognised alongside the existing coordination of their economic policies;
with respect to controlling excessive deficits and the BEPG, the Constitution grants the Commission the right to issue an initial warning to any of the Member States should the latter deviate from the objectives defined; furthermore, the Member States concerned will no longer be entitled to participate in votes held within the Council in relation to excessive deficit and the BEPG;
cooperation in terms of taxation and measures to combat fraud and illegal tax evasion shall no longer be decided on the basis of unanimity, rather via the qualified majority procedure.
1.3 Specific provisions relating to the eurozone
The Constitution officially recognises the Eurogroup and provides for two types of meeting of the ministers from the eurozone:
via the "eurozone ECOFIN" Council, which is to be reserved exclusively for the Member States of the eurozone with the aim of strengthening the coordination of their budgetary policies;
informal meetings of the eurozone ministers with a view to creating the right conditions for stronger growth and, to this end, developing ever tighter economic policy coordination;
We had hoped that the Commission would be given the right to put forward proposals on the Broad Economic Policy Guidelines (BEPG), such as for excessive deficit, but this was not possible; however, the Constitution does give the "eurozone ECOFIN" Council the possibility to adopt BEPG specifically for the eurozone and take any other measures related to economic policy guidelines that aim for more ambitious and integrated objectives; we must ensure that these eurozone BEPG are further extended to become BESPG (broad economic and social policy guidelines);
It will henceforth be possible for the eurozone to be represented within the international monetary system in a unified manner by a single delegate who will be responsible for defending the stability of the euro;
The procedure according to which the statutes of the ECB can be modified has been rendered more democratic and flexible through the involvement of the European Parliament via the codecision procedure and the application of the qualified majority procedure to voting within the Council.
II. GREATER COOPERATION WITHIN THE EUROZONE
Beyond the boundaries of the Constitution and with the aim of ensuring our project can be implemented during parliament's next legislative term, we need greater cooperation. We outline here how this can be achieved.
1.1 The eurozone as a driving force
We strongly disagree with the proposal for a "twin-speed Europe" that is currently often mooted. Indeed, should the Constitution not be adopted, this type of strategy would in fact lead to a breakdown in the gradual process of bringing the Member States ever closer together. Those in the leading group would become separated from those in the second group who would then have little choice but to turn increasingly to the United States of America. This situation would be dangerous. Further integration, within a small group as the case may be, is not a strategy aimed at separation, rather is a voluntary process open to all of the Member States of the European Union.
As such, we believe that this type of restricted integration can only be legitimately pursued by the 12 countries of the eurozone:
in terms of their relationship with the European Union as a whole; even outside the eurozone itself there is great concern that the zone should be based on monetary and economic union;
the eurozone is open to all of the EU Member States and the momentum it creates should encourage the remaining Member States to join;
the eurozone countries did not pick one another out rather were brought together on the basis of predetermined technical criteria;
the eurozone operates within the framework of the same institutions as the EU as a whole;
thanks to the single currency, it is based on heightened economic, social and even judicial cohesion as well as the desire to take part in a more integrated Community project;
the economic and social success of the eurozone will benefit the European Union as a whole.
1.2 Fulfilling the criteria for greater cooperation
Despite the considerable progress made by the Constitution in terms of those procedures applied to setting up and implementing greater cooperation, in order to meet our aims during the next parliament, we will also need to work with the criteria set down in the Treaty of Nice.
As such it will be up to the eurozone to draw up a concrete plan based on a series of draft Community acts and with the approval of the other Member States. Such acts will be applicable only to the eurozone countries, will uphold the acquis communautaire and fall within the sphere of responsibility of the European Union (use of the nomenclature applicable to legal acts of the European Union, directives, regulations and the open coordination method). Furthermore, such acts will in no case pre-empt the series of new institutional developments contained within the Constitution (power of the Commission to issue direct warnings and put forward proposals, exclusion from the right to vote in the Council, etc.).
On the other hand, it will be possible to draw up draft acts in relation to greater cooperation within the areas highlighted in the first part of this document, i.e. greater economic and budgetary policy coordination, tax harmonisation, external representation of joint positions, research and development, innovation and so on.
CONCLUSION
In this document, the Spinelli Group has endeavoured to lay out the basis for a programme of economic and social governance to be implemented by the PES. The ideas mooted are concrete, and therefore technical in nature, but will be key in resolving the daily concerns of citizens in relation to unemployment, the challenges of growing older, social welfare protection and individual quality of life.
The overarching aim must be to restore the confidence of the citizens of Europe in the European Union by proving that the latter can be placed at the service of the women and men living within its borders and that it has the means to act to preserve our social model and add new rights and protective mechanisms in the face of globalisation.
The Spinelli Group calls upon the Party of European Socialists to devise a strong election campaign based on the defence of this social model and inspired by this manifesto.
To this end, we would recommend that the PES nominate a single candidate for the presidency of the next Commission and that it adopt a single programme. The nomination for the European Socialist candidate must be made before the European Parliament elections. The Spinelli Group would suggest that this important political choice should be made by all of the members of the parties belonging to the PES. The PES Party Conference should pick out two of those put forward as candidates and the European socialist body as a whole would then vote in the final candidate by a secret ballot held on the same date across the EU.
In order to implement this programme, we must be unfaltering in our support of the draft Constitution drawn up by the European Convention and must achieve greater cooperation so as to further develop the added value of the eurozone. Only in this way can we succeed in creating a strong Europe, united both internally and on the global stage.