Kairos Hearing 1994.
Responses by the representatives of the EU Parliament:
I would now like to invite the members of the European Parliament to join me behind this table, and I am happy that they are willing to be here, Mr. Delcroix and Mr. Wolf and Mrs. de la Graete. I ask Mr. Delcroix from the Committee of Economic and Monetary Affairs to open the floor.
Ten minutes is obviously too short a time and I'm going to have to be selective in my answers. I'm used to arguing my case in three phases: situation, objectives and ways of putting things into practice to achieve goals. What I have read in your questions and what I have heard just now tells me that we can be agreed on the situation as it is described. On the objectives we should be concentrating on and which especially concern the problems of unemployment and housing, we can also agree. Perhaps we can differ on the means of achieving our goals. To have a global vision and to act locally for Europe, is to act on a European level, at least at the European Parliament, and I think I have detected in a certain number of speeches the temptation to retreat into the member states, and therefore to reform into cliques, which is effectively a certain tendency right now.
So in general points, to focus the topic, we have to recognise that the Europe of the Twelve, soon to be the Sixteen, still occupies a privileged position on the planet, founded on democracy, the development of individual and collective freedom, on human rights and in particular the rights of minorities. Those fifty years of peace — because Europe, the heart of Europe, has lived in peace for fifty years — fifty years of wealth creation as well, without comparison in the past, have made this one of the quickest-moving periods in its history, even though this wealth, we must acknowledge, and you are here to bear witness to the fact, has been very unequally shared out and even though we can now see that a number of the rich are getting richer while the poor are becoming poorer, and that in our own countries we have 18 million people unemployed, on their way, Jacques Delors says, to becoming twenty or maybe 23 million, and 50 million living in poverty, which is weakening the European social model further and further. Today this social model based on solidarity, which the workers have fought to build over fifty years, is under threat from both inside and outside by what is called the liberal current, economic liberalism, and its solution, the solution of liberalism, it is the free market without restrictions, combined with ever lower taxes, thus less solidarity, ever decreasing salaries, the deregulation of working conditions in order to reduce budget deficits, in fact a generalisation of the Thatcherite model which we saw in operation in our neighbouring country.
The priority is employment and housing, it is a challenge for our society and there will be no security for people, either individually or collectively, if there are no more consumers, if there is no more private or public investment, if there is no balancing of public finances. And so now we need more solidarity, in particular workers' solidarity. I was pleased to hear just now the representative of the trade unions, whose voice, we unfortunately have to recognise, is still very quiet at a European level, we can come back to this.
What is happening at a European level, and I mean at a European level, is a kind of enormous treachery organised by those who are trying, day after day, to crush the workers, to crush the people, demanding more and more sacrifices and effort from them, by using two words which we could perhaps expand upon. On one hand, there is the word "globalisation", because when you look at things closely, the European economy isn't as global as we like to believe. We always say that trade on a European level is first and foremost intercommunity trade, and consequently there are corrections to be made. Secondly, there is the word "competitiveness". There are two different definitions for the word "competitiveness": either to produce at less cost in order to sell at less cost, or the other, which is to play the quality card by finding new and cheaper processes for using energy and primary materials, and by playing the card of a highly-skilled workforce, by investing in employees' training during their entire lives.
And so one of the fundamental questions which you are asking really concerns the social consequences of a monetary Europe, governed exclusively by interest rates and by the criteria of economic union. I have here a text from the 8th of February 1994, so it's very recent, which says this — in fact it's the text of the General Directorate of European Parliamentary Studies, Department of Social and Environmental Affairs, which is concerned with the social consequences of economic and monetary union — and I'll just take one sentence. But you'll tell me that by taking one sentence one can make a text mean something entirely different from what it intends to say: in any case you have every possibility to consult the text, the reference is PE 207/65, I do give my sources. It says, quite simply, "The effect of combined rigorous budgeting and monetarist policies which are necessary to fulfill the criteria demanded for economic convergence, is, in the short term, going to exacerbate unemployment and therefore send demands for social lending sky high precisely at a time of steep drops in revenue, and in such a crisis, there will be strong pressure to reduce the quality and the breadth of social protection" (8th February 1994). In fact, it is based on a study commissioned to be done by Birmingham University's Department of Social Economics, and by London University. It seems to me very important to fully understand what that means: that in effect there is consumption on one side, investment on the other and also public finance, and that everything is being sucked in — I was trained as a physicist — into a sort of economic black hole over Europe, at the centre of which are the 18 million unemployed and the 50 million people living in poverty.
Conversely, and this is what is important, Emmanuel Gazeau in the 27th May 1994 issue of Agence Europe, wrote — I've got the text here — "Those who have prematurely buried the monetary union are mistaken". He recalls the interview with Jacques Delors in the newspaper Le Point where he says, and I quote, "Even I am astonished by the resurgence of credibility surrounding the project of economic and monetary union. Even just six months ago, you would have found few specialists, ministers, economists who would have bet even a few ecus on achieving a single currency. And yet a few days ago, at least five countries had very similar interest rates, which indicates that these countries are theoretically in a monetary union".
Herein lies the contradiction with what we were saying earlier, and it is in this context that we should examine the latest declarations of Mr. Tietmeyer, the representative of the Bundesbank, on the need for a pause for thought in the process of monetary Union. It's a good question, in fact, for the next economic and monetary Commission. We must avoid the final phase being put into effect without taking notice of the economic reality because it could lead to inflation or the collapse of economic and monetary union.
There we have two elements to add to the debate, it seems to me, on the issues which concern you. And in fact, it appears that the whole problem we are faced with now is linked with a lack of political will. I'd like to say that too often things are defined in terms of criteria, and that what is missing is political will in various instances — we can understand the difficulties — whether they be with the Commission, the Council or the European Parliament. We can also examine the general tendencies of these different structures, and where priorities lie, even if the most important groups may hold distinct shades of opinion. What is the general tendency of these structures, and what sort of solutions are they seeking? To take as opposite examples, I'll say that nobody has ever shed doubt on the economic union of Belgium and Luxembourg, which have a single currency although the standard of living of their inhabitants, the income of their inhabitants, their unemployment rates, are radically different. Similarly, the solution found by Germany of how to achieve reunification has never focused on problems of convergence criteria, no more than has the United States which, while also having a single currency, is very diverse and has radically different levels of economic development over its fifty states. So, it is the speed with which we are going to achieve this which is terribly important, and by leaving the path free and announcing years in advance what we are planning, we are giving extremely valuable ammunition to those who want to fight the system. No monetary reform has ever been passed like that, reforms have always been made discreetly, and brought in brutally in a matter of a week-end in order to prevent speculation.
And so I will finish on that note, fully realising I haven't answered all your questions, and maybe even having thrown some questions back at you. I personally believe that there is no political will to solve the problem, at least not a collective political will. There is the will of certain very sincere individuals. I'm not going to underplay the trade unions or those who are victims of the system with which we are lumbered at present, and it is not through institutional structures that we can expect a solution.
The next speaker is Frieder Otto Wolf, member of the Committee of Social Affairs.
Frieder Otto Wolf:
Thank you. In Germany we have practical experience with a poorly functioning economic and monetary union. We have seen the devastating effects of this with our own eyes. I do not want to wax lyrical like a politician, but respond to your questions concretely. A piece of information to start with: I do not think that there is any turning back today. The alternatives of J. M. Keynes are inaccessible; we need new alternatives now, which are still to be invented. Rather than going into details, however, I would like to answer your questions directly. I won't repeat them, in the interests of time.
1. (II.A.1): On the issue of the international economic order. It is necessary to set up an economic and ecological council in the United Nations to replace the undemocratic G7 summits. It would operate on the basis of the principle "one nation — one vote" and the representation of macroregions, including the representation of China and the Confederation of Independent States (CIS), and would be open for NGOs, open for globally responsible experts like the World Watch Institute or the Club of Rome, open for specialist organisations and UN consultation processes, and open for macroregional monetary units to be set up in the different macroregions. This economic and ecological council must be supported by a new international finance organisation, to replace the present international finance institutions. We need to go back to the functions desired in 1971. We need a world trade organisation. We need a sustainable development programme with its own trade organisations, regional organisations, independent assessment groups. We need a world monetary system with a world bank council to coordinate national banks and with bank supervisory functions. We need macroregional payment zones on the principle of reciprocity and the monitoring of capital movements. That could happen via trilateral talks. The European Union must be built into the Bretton Woods institutions. Then we will need a gentleman's agreement on a global scale.
2. (A.2): On the central banking system. Solidarity must be achieved with global consultation. Here too the principles of justice and transparency must prevail. I believe that we must oppose traditional opinions here. Work must be possible independently of governments. At the same time, there must be mutual ties through legal obligations. Social and ecological goals must be pursued: sustainability, financial stability, full employment and social cohesion. Those are the four basic values. Then a public gallery must be introduced in these institutions to enable discussion.
3. (A.3): There has to be a revolutionary reform of agricultural policy with emphasis on ecology. Small farms must be supported. Regionalisation must be restored in trade and production, and cooperatives must be encouraged. Consumer organisations must work for the improvement of consumer behaviour. Small farmers must be built into development strategies. The economy must be organised regionally as is possible in the US in cooperation with the banks. Codes of behaviour must be introduced for banks and other responsible bodies in this field. The banks and similar institutions must all be monitored. There must be a coverage rate for certain financial instruments. Often it will be necessary to prescribe restrictions on capital movements or at least rules ensuring transparency.
Now to the questions of Part B: it is necessary to tax tax havens (B.2). Probably they cannot be closed because they would only go underground. There have to be trilateral gentleman's agreements between the US, Japan and Europe in order to sustain such a policy.
On the next questions (B.3 and B.4): it is necessary to abolish bank secrecy. Laundered money must be denounced as it comes from bribery and corruption. Finally, there should be taxes on derivatives. Tax exemptions cannot go as far as they do now for shares. There must also be reserves available of a non-speculative nature.
Then question 5. Statutory regulations are necessary for Mobuthu and Marcos cases. Democratically elected governments must be able to seize money confiscated in this way.
6. The International Court of Justice should be in a position to conduct transnational trials against corrupt dictators who squander their countries' resources. It must be possible for the countries concerned to seize flight capital. Then there should be a global unit of account on the principle of sustainable development.
8. It is necessary to simplify taxation systems. Money should be taxable at source as happens for German wage earners. The state can intervene there directly. I think this would make it easier to simplify taxation.
9. It is necessary to raise inheritance tax to the French level so that real estate has a genuine value. Income tax must be cut with inverted progression. Small incomes on the poverty line must be exempt from tax plus 15%.
10 and 11. Our present ties between the state and the organisation must be cut. Transparency and oversight of mergers must be improved. Advertising and media policy must be organised such that a public gallery is introduced into supervisory councils. Transnational unions and consumer associations should likewise have a say. Globally and macroeconomically, a supervisory agency should be set up which would also publish findings.
I'm now up to question 12: a European works council should be set up for European companies. Transnational companies should be forced to establish works councils if they want to be active in the Single European Market.
13. Ethical banking should be able to claim a share. A controlling or monopoly position of the banks in companies should be subject to regulation.
15. I believe that the most important measures would be the extension of new nationality according to the Maastricht Treaty. All migrant workers in the European Union should be accepted, even those with illegal status at present. All protective and participatory rights should be extended to these persons. There organisations should have access to the media and they should have a right to appeal against violence and discrimination.
Thank you very much, Mr. Wolf, for dealing with the questions so precisely. Now the floor is to Mrs. Brigitte Ernst de la Graete.
Brigitte Ernst de la Graete:
I worked for five years in the European Parliament. I would like to say that it was a little difficult for me to come here because I was not re-elected. I worked among the Green parties, and I had asked Frieder Wolf, who has only just been elected and who is going to the European Parliament, to replace me. But in the end I think this format is a good one. You have the person who is going to take over the reins as well as the person who has spent five years trying to develop green solidarity in the heart of this Parliament. I would like to say I'm not the only one in this position, because two people here have gone through the same electoral education, Mr. Claude Delcroix and myself. He was originally a member of the Socialist Party and he also lost his seat. That's why we have been able to say that in these elections, unfortunately for us, there has been a victory of selfishness over solidarity and I believe that should motivate you all the more to try to spread the word in the future, because, believe me, there is still a lot of work to be done.
So, referring to the questions that have been asked, I think that Frieder has already told you a lot. I am going to try to limit myself a bit. I ought to tell you before I start that I'm no financial expert even if it is very important. After working for those five years, I went from the social side to the economic side and particularly international trade, and now I believe there is still a little way to go, the people who fight together on a field of solidarity must effectively confront the spheres of high finance, even if a priori, we are not used to these things. But if we want to carry out this political mission of solidarity and democratic control, it is on this front that we have to work, and I can tell you that among the routes to reconversion which I envisage, there is notably the construction of a network, or possibly an initiative to invest ethically and in a spirit of solidarity. I think it is one sector in which we really must start now developing more possibilities.
So, the point I wanted to make, is that there are two important observations to make about the current state of Europe. The first is to look into the present situation: the gap between the rich and poor regions is ever widening, despite structural funding policies put into place, especially at community level. On the other hand, there is a second gap which is increasing in Europe between the well-educated, well-paid elites which are fully integrated one way or an other in the economic system, and the people who are excluded from the economic system and who unfortunately as a consequence are excluded from the social system.
The second observation I would like to make is that there are, it seems to me, two phenomena which have resulted from the policies that Europe has been following for the last thirty years. Firstly, a process of economic concentration, and I believe it's essential to know that. We talk a lot about globalisation and the threat which the Third World poses to our economies, by the fact that they have such lower wage costs than ours. A trade union study board in my country did a survey on the phenomenon of business globalisation there, and it ought to be known that according to the results of this study two thirds of globalisation is towards rich countries, essentially the countries of the EFTA, of the European Union plus the other countries of Europe. Which therefore means that the phenomenon of globalisation is essentially a phenomenon of concentration of the means of production in regions which are already the most developed, which already have more facilities, and a better equipped infrastructure which allows them to invest still further and then, thanks to their infrastructure, particular their transport infrastructure, they globalise consumption and allow the regions beyond Europe to consume their goods.
The second thing is that there is a great contradiction, it seems to me, between the phenomenon of concentration, which is caused by the free movement of the means of production, and European aid policy towards the under-developed countries. It seems in fact that, by encouraging free trade, it means you prevent under-developed regions from controlling their own economic development using their own resources. We have just burdened them with terrible competition, which means that even if we give them a little money through structural finance, they will never even get off the ground.
So, what solutions can we suggest here? As I said, I am not going to give you really elaborate solutions, I believe they are just directions we have to pursue, concentrate on and work on. I think the first thing concerning the monetary system, is to say that rather than simply creating a mechanism by which we will be able to judge the economic performance of different economies, we should look at the problem from the other way round and say, "but wouldn't it be better to give priority to...?" I believe that is essential, it's not so much saying that we've got to revolutionise the system, but realise that politics must change its priorities and invest the few financial resources it still has, and its human resources, in other priorities.
So, rather than talking about monetary convergence criteria, on which one can judge inflation rates, national debt, etc, wouldn't it be better to establish divergence criteria which would allow us to see which cases the authorities should intervene in in order to help. And we could see in these divergence criteria the balance of payments of a region, which would allow us to evaluate its degree of economic autonomy, the level of private debt of the population, the state of the environment in the region, the unemployment rate, and of course, where it is to be found on the scale of regional GNP per capita established by the European Community. So that would be the first thing, it would be an indicator which would tell us, definitively, when there should be intervention in the sense of solidarity.
As for debt, I think it is a major problem for us at home as well, because at the moment, the essence of political power has been damaged by the fact that the public authorities have to repay a debt which is extremely high, and I think the logic used when referring to the Third World should be applied to our own countries, because in the present state of affairs, the debt phenomenon is a phenomenon of inverse social redistribution, the opposite of taxation.
It means that there are 5 million people on average and low income in our country who are paying for the 50.000 richest individuals who do have the possibility to make savings, and therefore hold the key to the Belgian debt. Well, I don't think we can allow this, I think as a political force we should call together the 50.000 richest citizens and tell them this: "Listen, we have to draw up a new contract, we have to review the debt not only of the Third World, but our own domestic debt, because we can't allow it to continue. And while we acknowledge the rights of these citizens to a secure existence, to stability, we can't allow them to get rich on the backs of those who depend on social security which the member states are no longer in a position to give.
A third aspect is taxation. On the subject of taxation, I would like to say that there too we have a lot to do, and we must try to redevelop a new type of public-spirited taxations in the same way that we must develop a new type of people-oriented monetarism vis-a-vis those who are causing the debt. We have to get our populations to understand that, instead of using this demagogic language to constantly complain that we pay too much tax, taxation is a tool of solidarity, and that there is a genuine necessity to have public spirited taxation, both on those who are still lucky enough to be in work, those who are lucky to have savings, and also on society as a whole. That is very important on a European level. I believe that if we want to ensure this public spirited taxation, it can only be done on a European level, especially regarding property tax and tax on businesses, and that will be one of the priorities, I think, of the new Parliament.
To summarise, I will say very quickly that it also seems we must invest in a new economic sector, an economic sector which would attempt to base itself on other criteria: criteria of product quality, of course, but also the quality of companies in relation to the environment, in work relations, which means within companies themselves but also paying close attention to North-South trade. Recently I had the opportunity to meet a person who is developing a project of this type, that is, she wants the labels on products, in addition to displaying information on environmental impact, something already quite well established, and consumer safety, she wants the labels of products to also provide information on their social impact, that is, the company should show that it pays at least the minimum wage set by the state in which it is produced, that it guarantees a certain number of rights to its employees, such as sickness and invalidity benefits, or that type of thing, and alongside the consumer safety aspect, the environmental safety aspect, there would be the social aspect, ie. work security for the employees of the company too.
I'll finish there.
Thank you very much.