Fiscal Compact Treaty(my Left Tribune Article)

It is no surprise to look around Europe and see a cohort of right-wing and conservative governments seated around the European Council after reading the fiscal compact. This is because the measures contain in the fiscal compact seek to make progressive economics illegal in Europe forever.

The fiscal compact seeks to force countries into a fiscal straitjacket by maintaining a balanced or surplus budget by limiting their deficit to 0.5% of gross domestic product. What Ireland’s finical problems have told us that the “if I have, I spend it” attitude that enforces pro-cyclical economics is deeply flawed. It is the consensus of the Left that austerity does not work. It acts to further supress the economy and limits the opportunity for growth. We know that what is needed is an investment lead recovery; it’s the best and fairest way of returning to economic prosperity.

We on the left know that expenditure cuts disproportionately hit low income earners. It is important to remember that we are where we are due to neoliberal policies and the right in Europe want us to give them another chance. Despite knowing that investment is fairer on society than austerity it also makes more economic sense too. At the moment consumer confidence is low and no matter how much the government call on people to spend to help stimulate the economy, it is unreasonable to expect them to do so whilst they are experiencing increasing financial burdens with the constant fear of losing their job. That’s where a sensible government needs to step in and spend countercyclical to kick start the economy. You can’t cut your way out of a recession, but you can certainly grow your way out.

There for the name ‘Growth and Stability Pact’ is hugely misleading, as this is the exact opposite of what this treaty seeks to have implemented across Europe. The imposed debt ceiling will mean that as countries’ economies go into decline they’ll be legally obliged to reduce their deficit, ie impose austerity. In the aftermath to the Euro crisis we were told that it was impractical to have a monetary union without a fiscal union.  It now is being sold by European leaders, including Enda Kenny and  the Irish Government, as a measure to stop governments going wild with spending as the Irish Government did from 1997 onwards. This is not the case at all, that was pro-cyclical spending the kind of economic policy this Fiscal Compact would see institutionalised. In the aftermath to the Euro crisis we were told that it was impractical to have a monetary union without a fiscal union. Minister of State for Europe, Lucinda Creighton was quick to defend such a move with the promise of Eurobonds and support in the form of stimulus from Europe. None of this has come to fruition due to unwillingness by the German government look after its own self-interest.

They are instead making it illegal to pursue countercyclical economic policies though an imposed debt ceiling linked to GDP. So basically when the economy is in recession the government will not be allowed to stimulate to compensate for a fluctuating economy.

We are now also being told by Michael Noonan and Brian Hayes that is necessary for Ireland to approve this treaty to avail of bailout funds in the future. As a member state of the International Monetary Fund though we are not solely reliant on the European Commission and European Central Bank to lend us money in desperate times. These are after all the intuitions which contributed to Ireland’s banking sector collapse and now are willing to see the Irish people burdened to protect their vested interests. Another piece of propaganda is the selling of the vote as a referendum on our Euro membership. Nonsense once again. There is an obvious need to solve the Euro debt crisis, no one is denying that, but we are saying there is a better way. A way the left should be advocating that includes economic stimulus, Eurobonds and a financial transaction tax as part of a new progressive European agenda. It’s the common sense approach. Neoliberalism has failed, why are we so insistent on letting it guide us out of this crisis.

The entire treaty is based on the right’s opinion that the only way to achieve economic growth is to inflict austerity in the hopes it might create the conditions necessary. Ridiculous if you consider austerity will damage the economy beyond repair whilst hurting the most vulnerable in society. We are not just being asked to give neoliberalism another chance, but to enshrine it into European law and actually make a Keynesian and expansionary alternative unconstitutional.  We ought to tell them no.