Facts about the Competitiveness Pact

Attac Germany

The political elites of Europe are planning another attack on social justice and democracy: with the Competitiveness Pact, as Angela Merkel called it during the World economic Forum at Davos, a new instrument is on the agenda in order to enforce drastic measures for social cutbacks and liberalization. By means of bilateral agreements with the European Commission, the Euro-countries and other EU-nations should commit themselves to economic-political reforms, in order to increase competitiveness. After the fiscal pact has come into effect at the beginning of the year, now a new instrument of neoliberalism, that is effective within the whole euro zone, should be introduced with the Competitiveness Pact (in official documents: Convergence and Competitiveness Instrument).

Realization and contents of the agreements

At the summit of December 2012 the European Council decided the next reform steps towards a “genuine Economic and Monetary Union”. According to that two ideas should be pursued within the area of economic policy in the first half of 2013: mechanisms for a preliminary coordination of economic political reforms and the bilateral reform agreements addressed here (Competitiveness Pact).

In January 2013 Andrea Merkel used her speech at the Economic Forum at Davos, to raise the concepts of the federal government in regard to the formation of the new contractual agreements in the debate. The member states should commit themselves every year to reforms in areas, where competitiveness is not yet up to the “necessary level”. Examples mentioned were the decrease of labor costs and the efficiency of administration. At the same time she made it clear, that the point is not to create a balance of competitiveness within the euro zone “somewhere in the middle”, but to be orientated by “the best” and make the Monetary Union more competitive on the whole.

In March the Commission presented a concept for the pact, which should be passed at the EU-Summit in June. The following procedure has been planned for the realization of the agreements:

  • The national governments of the euro zone propose reform programs for their countries based on the recommendations of the European Commission. These should then be confirmed by the Economic and Financial Affairs Council.
  • Subsequently the respective country concludes an agreement about the reforms with the Commission and thus commits itself to its implementation.
  • The states should be induced to signing the agreement and implementing the reforms by means of a system of financial incentives.

As the contents of the agreements are always designed against the background of competitiveness, it is obvious what it will be about: cutbacks on wages and employees’ rights, lower corporate taxes and liberalization of the markets. The pressure will be increased on governments which do not agree with this course. No later than during an economic decline, the financial incentives will constrain them to sign the agreements. Whereas neoliberal governments will be strengthened, as they can partly shift the responsibility to Brussels, when it comes to unpopular measures.

The pact does not resolve the crisis

The pact is a systematic continuance of the neoliberal crisis policy of the past years. This policy is based on an underlying deliberate misinterpretation of the crisis, according to which two factors are primarily responsible for the high level of debt and instability: national wastefulness and inefficiency as well as insufficient competitiveness. However, the fact that the level of debt has escalated owing to the tax dumping of the past ten years and the gigantic bailout of the banks, is intentionally concealed. With good reason, as thus a policy of social cutbacks, wage cuts, the deregulation and power shift from the parliaments to the EU-institutions can be justified. Precisely this policy has been furthered with the fiscal pact, sixpack, ESM etc. By introducing the competitiveness pact it should be intensified.

The bank bailouts were a result of excessive, highly speculative processes on the international deregulated financial markets. The logical consequence would be a policy of reducing the power of the financial markets by regulation, taxation and prohibitions. However, exactly this is not part of the EU crisis policy. Instead, the costs of the crisis are passed down through cutback programs. Combating the debt by means of higher taxation of the profiteers of the deregulated financial markets is being consistently waived. Thus the fiscal pact explicitly determines that the consolidation has to be effected by means of expenditure cuts and not by revenue increases. This is a distinct manifestation of the current power relations in Europe.

Now in the next step a pact should be introduced, which increases the competitiveness of the euro zone. However, the interpretation of the crisis by the federal government and the Troika of ECB, EU-Commission and IMF does not take into consideration, that the high current account deficits of the southern European countries are primarily a result of the domestic export zeal. The foundation for the German export strength was laid with the Agenda 2010, which nowadays is regarded as a silver bullet by neoliberal circles. The German competitiveness is being paid for by low wages, low social standards and low corporate taxes. The winner is not, as often claimed, Germany. The winners are German exporting companies. The pact is aimed at Europeanizing the “Model Germany”. Instead of minimum standards, which equalize the differences within the competitiveness, an instrument is being created, which assists the neoliberals to establish the “painful, but necessary reforms”, even against the will of parliamentarians and the population.

The pact as a crowbar for social opposition

The contents of the agreements will hardly afford surprises and will resemble the range of reforms in the experimental laboratories of the Troika in Southern Europe and Ireland. It is already clear, that wage cuts, cuts in the collective bargaining law, the pension schemes and social welfare systems will determine the contents of the agreements. The economic and social impacts of this policy are being accepted consciously and should be legitimized by minor compensation payments. A new budget should be established within the euro zone for this purpose.

So it is no secret also for the political elites that this policy will lead to social dislocations. Mass unemployment, homelessness, high suicide rates and collapsing health care systems are already today an obvious consequence in Spain, Greece and Portugal.

The absence of success and the social consequences of the neoliberal crisis policy are becoming more and more apparent. Therefore it is getting more difficult to be enforced in a democratic way. As a reaction to this development, increasing power is granted to those EU-institutions, which are not legitimized by elections and are not accountable to any population. While the European executive takes the helm, the national parliaments of the member states are continuously marginalized. This power shift considerably weakens the opposition against the neoliberal doctrine. Sociopolitical distributional conflicts are predetermined in favor of the capital fractions. The pact serves as a lubricant for the nationally administrated redistribution machinery.

Enforcing conflicts, attacking the neoliberal hegemony!

It is now essential to fight the implementation of the competitiveness pact with joined forces. The EU-crisis policy has been delegitimized by its economic failure and the destruction of social standards. Attac demands an immediate renunciation of this policy! We stand up for

  • the reversal of all cutback measures of the past years
  • a strict regulation and taxation of the financial markets
  • capital levies and wealth taxes coordinated at European level
  • a consequent democratization of all decision-making levels within the EU

We prompt resistance against the neoliberal, authoritarian conversion of the EU. The Blockupy – action days in Frankfurt, the alternative summit Alter Summit in Athens and the protests at the EU-Summit in June in Brussels are only some of many opportunities, where we offensively demand these alternatives to the existing crisis management!

This post is also available in: French, German, Spanish

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