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Return of austerity

On 17 January the European Parliament approved the reform of the Stability Pact. The revised rules strengthen budgetary rigour and reopen the doors to the austerity model that we have known in the past decade. The new concert does not amount to the harsh adjustment of 2010, but it is the return of the orthodoxy of Economic and Monetary Union. It is well known that this Maastricht Treaty sets the ceilings for public deficit and public debt at 3% and 60% of gross domestic product respectively. In particular, Member States shall be required to comply firmly with the deficit ceiling order.

Given the large size of the public debt of many States, it is not possible to fall to the 60% limit, even in the medium term. For six states, public debt is above 100% of GDP and three more than 70%. The strong adjustment of the previous decade has caused the debt to be weighed mainly by the states of southern Europe (Greece, Italy, the French State, Portugal and the Spanish State). On the other hand, at present eleven countries exceed the deficit ceiling. This new order for the adjustment of public accounts can lead to a budgetary reduction of EUR 100 billion between the Member States of the European Union, according to the European Federation of Trade Unions. The reformed austerity of the public budget will bring with it a setback in the living conditions of the majority and in social cohesion in the short term.

The return of austerity after the exception of the pandemic relocates the European Union on the axes of the traditional neoliberal model

The return of austerity following the exception of the pandemic relocates the European Union along the lines of the traditional neoliberal model. On the pretext of the fight against inflation, the European Central Bank has in the last two years adopted inmoderate interest rate increases. The result of this increase was not a humiliation of inflation, but a multiplication of bank profits. Well, this behaviour has been the first step towards a rigorous economic policy. Time and again, Germany, trapped in the culture of austerity and mistrust towards its southern partners, has been the main agent of return to the old strategy. It is clear that the traumatic experience of the great recession of the past decade and the flexibility mechanisms contained in the new pact will provide some breathing space.

However, following the impetus of the Next Generation funds, a certain dynamic of cooperation between the Member States was identified which does not appear to have continuity. Again and again it is competition between states that is dominating. If we add to this competition the return of neoliberal orthodoxy, the usual territorial and social uncertainties and unbalances in the European Union will only increase. The road to ecological transition will not be easy either if priorities are shifted towards taxation. In addition to the problems of institutional construction, if we take into account the powerful pressure of large companies and lobbies on the European institutions, such as the extension of the use of glyphosate and other pesticides, it is clear that we will continue to chain an obsolete and unfair economic area. A thorough and fair reform of the tax system in the short and medium term is essential to avoid setbacks in social protection, redistribution of income and ecological transition.

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