Something has to change. The Covid-19 pandemic, like the financial crisis just over a decade ago, has pitilessly exposed the weaknesses of European cohesion in the EU. This comes at a time of growing nationalism, especially among the great powers, which are becoming increasingly reckless in pursuit of their interests in the global context. The EU, in its current configuration, has yet to properly adjust itself to this situation. Furthermore, signs of disintegration such as Brexit and the rejection of basic European values by the governments of Hungary, Poland and Romania, are unmistakeable.
Thus, European cohesion is under threat but at the same time urgently needed. And not only politically, but also economically. After all, the global pandemic has affected our main export markets every bit as much as our domestic economies. Without stabilisation, a massive loss of prosperity looms. A collective approach to tackling the Covid-19 crisis in the EU with an economic stimulus package, as the German and French governments are proposing, is a bold step in the right direction, but it is fiercely contested.
The task at hand is not only to cope with a severe crisis in the short term, but also to make the EU more resilient and dynamic over the long haul. But that is feasible only if the people of Europe feel that, amidst today’s perilous political turbulence, the EU really belongs to them and is on their side, when it comes to the crunch. At present this appears to be only a distant goal.
In many political narratives these days the EU is depicted as either a bureaucratic monster, a bazaar, an institution for facilitating financial transfers to profligate Southern member states at the expense of thrifty Northern member states or a promoter of cuts to the welfare state. Evidence can be always be found for one of these points or another. And although, at their core, these reproaches are far removed from reality, they do underline the urgent need for reform. What’s more, European citizens find the EU abstract and remote from their everyday experience – and one day there may be nobody left who wants to stick up for it.
The EU as a Community of Protection and Solidarity
The job of the SPD is to strive for a political and economic restart for Europe. Part and parcel of this task is to renew social democracy in Europe together with our European partners. This includes the creation of a European civil society that takes on board and discusses topics that affect people’s lives from a European perspective. In this endeavour, European, national and cross-border regional discourses should engender reciprocal inspiration.
In the past there has been a tendency, during periods of crisis, to withdraw into the shell of national sovereignty, because this appears to promise protection. This happened during the financial crisis, and in the current crisis one of the first reactions was to close borders and to trust in national measures. This is based on a false understanding of contemporary reality.
If we don’t want to turn our backs on the economic benefits of the global division of labour and the gains in freedom from our extensive freedom to travel, we must be mindful of the fact that crises which can spread rapidly throughout the world can arise at any time. As was seen during the financial crisis and now in the Covid-19 pandemic, national measures alone are simply not enough to cope with modern crises of global origin and global spread. This is why a renewed movement towards Europe is so important: the SPD regards the EU as a community of protection and solidarity, which boosts resilience across the board in times of crisis.
Solidarity is the SPD’s guiding principle in its proposals for transformation of the EU. The objective is a build a democratic community based on solidarity that provides a framework for the European market which ensures it is anchored in individual, social and environmental rights. This will have consequences for global trade. Access to this market should be available only to those in compliance with global environmental and social minimum standards and fundamental citizens’ rights. Furthermore, against the background of creeping nationalist tendencies in some states, the EU should function as guarantor of democracy, the rule of law and the separation of powers, including within its member states.
Such an EU must see itself as a political and economic unit. This has political consequences that bind the EU’s member states closer together. To this end, we must forge ahead with democratisation at the EU level. This will, above all, have economic consequences. The EU must establish itself as a mature internal market. This has long been the case when it comes to trade and freedom of establishment. But work still needs to be done on the economic framework, and it is exactly this that has repeatedly put pressure on reciprocal solidarity.
A Paradigm Shift in European Fiscal Policy
It is precisely the role of monetary policy – the only policy area that by design functions on a European scale – that has been marginalised as a result of the highly controversial ruling of Germany’s Constitutional Court. At least in Germany it is disputed whether the European Central Bank (ECB) can exercise the same rights as the central banks of non-European industrialised countries. In particular, its role as lender of last resort is under debate. But that is an essential function of a central bank. It is in this capacity that it guarantees the monetary stability of the currency area in periods of crisis. This includes not least the defence against speculative attacks on government bonds, which – as the example of Greece has clearly shown – can bring a country to its knees, first financially and then socially. We advocate legally enshrining the ECB’s protective function in order to afford the people of Europe more economic security in an insecure global environment.
Fiscal policy represents a serious gap in Europe’s economic-policy architecture. It not only plays a decisive role in periods of crisis, when the economy has to be stabilised by higher spending or lower taxes in an effort to safeguard employment. It also has a key function as a driver of technological progress, not least in combating climate change and thus ensuring future prosperity and decent work. But the EU’s multiplicity has meant, up to now, that there has been no overarching EU fiscal policy from a European standpoint. That was once again made painfully clear at the outset of the Covid-19 crisis, when countries initially turned to national solutions. Only the German government’s proposal to try to help out the hardest hit countries by deploying the budget of the European Commission was able to break the deadlock.
The SPD favours a paradigm shift in European fiscal policy. The European Commission must be enabled, under European Parliament supervision, to implement a pan-European fiscal policy. It should be financed through member state contributions, its own taxation and borrowing on the capital markets. This would open up new options to create economic stability and higher prosperity. A European fiscal policy would achieve greater stability. It would promote the development of European public goods in the areas of mobility, climate change and education. It would also facilitate the emergence of potential industrial champions through a strategic industrial policy in the large internal market. It is only within the framework of an expanded European fiscal policy that national debt rules would make sense which must, in turn, be constructed in an economically feasible way.
Europe-wide Standards in Social Security and Tax Systems
Social security and fair taxation constitute an important area for reform. Both social policy and tax policy remain national competences. Europe’s strength lies in its diversity. Thus, there can be no question of monolithic solutions in the design of tax and social security systems. But especially when it comes to preserving diversity, there must be clear agreements within a common and therefore seamless internal market that rule out ruinous competition and protect social and taxation systems from being played off against one another. Companies and individuals that systematically avoid paying into social security and tax systems violate the principle of European solidarity. European minimum wages, minimum social standards, minimum taxation and harmonisation of tax bases are important milestones on the path to a prosperity that benefits all Europeans.
The SPD therefore advocates a policy that puts social security and fairness on an equal footing with freedom of trade and establishment in the EU. The EU is more than an internal market. It is also a community of values, in which solidarity is one of the greatest goods.
(Translated from the German)
Norbert Walter-Borjans is Leader of the Social Democratic Party of Germany (SPD).
Prof. Dr. Gustav Horn is Professor of Economics at the University of Duisburg-Essen and Member of the SPD Executive Committee.
The views expressed in this article are not necessarily those of Friedrich-Ebert-Stiftung.