The European economic policies. The need for a change
Dra.Barbara G.V. Lattanzi
La Sapienza University - Roma
Since some years, the yearly Economic Planning of the Eurozone countries are submitted to the trial of the European Commission, that can penalize countries who exceed their expenses overrunning the European Fiscal Stability Treaty’s standards. The treaty, including the Fiscal Compact rules, (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, also known as TSCG) was signed in 2012 by most Europen Union states. The plan was proposed by Germany, as a security for the stability of the Euro currency. Angela Merkel pressed and negotiated with other countries for the approval of the Fiscal Compact chapter that binds countries to strict parameters for their expense planning. Fines apply to those countries who exceed the 3% deficit/Gross domestic product and 60% debt/ Gross domestic product. According to the treaty, countries should decrease yearly the last parameter (debt/GDP ratio). Constitutional laws were approved in some countries, forcing the governments to respect the EU standards. Among them, Italy enacted a balance budget amendment in 2012 changing some articles of the Republican Constitution. Similar laws are introduced now and over the years in many extra European countries.
The strict parameters that force countries to decrease their expense budget result from a neo-liberist approach to political economy and, concerning the Eurozone, an ordoliberal monetarism to keep the currency’s value stable, avoiding inflation and devaluation. All this leads to a progressive reduction of welfare and public intervention and eventually, to an irreversible financial recession, with low income (working poors), high unemployment and underemployement. Together with it and according to the liberist turn that disfigures European history and culture, most countries decreased the fiscal tax progressivity. Italy reduced income brackets and rates from 72% to 43% for the highest rate. At the same time the labor regulations have changed, introducing various forms of low salary precariousness, all this resulting in a shrinkage of the aggregate domestic demand and, as an effect, in a structural recession. In addition, the reduction of the pension contribution and tax revenue, as an effect of the loss of jobs and decreased salaries, pushed to lower the spending on retirement pensions, throwing a good part of the population into the abyss of misery. As the Italian Institute for Statistics (ISTAT) issued the financial data in June 2018, the amount of people in absolute poverty turned out to be almost 10% of the national population. The constraint on reducing expenditure to respect the balance with the gross domestic product, which is decreasing in accord with the political economic trend, works out as a vicious circle and a spiral towards the irreversible crisis and social economic failure.
Neo-Keynesian and social democratic complains started soon after the Maastricht treaty in 1992, and grew after the introduction of the Euro currency and the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union. Many prestigious economists and social scientist (including Stiglitz and Krugman, among others) harshly criticized the parameters and ordoliberalist approach, warning the European Union and its political leaders against the risks of the eventual recession and increase of poverty, as an effect of the deflective economical reforms. For now, and after the Greek experience, we must admit that they were right. As most people recognize the fatal mistakes and push for a change, the European Union and its highest institutions don’t seem to be aware of this. At least, until the next European elections that will take place during the springtime 2019, which will possibly lead the political economic trend to a radical change.
The strict parameters that force countries to decrease their expense budget result from a neo-liberist approach to political economy and, concerning the Eurozone, an ordoliberal monetarism to keep the currency’s value stable, avoiding inflation and devaluation. All this leads to a progressive reduction of welfare and public intervention and eventually, to an irreversible financial recession, with low income (working poors), high unemployment and underemployement. Together with it and according to the liberist turn that disfigures European history and culture, most countries decreased the fiscal tax progressivity. Italy reduced income brackets and rates from 72% to 43% for the highest rate. At the same time the labor regulations have changed, introducing various forms of low salary precariousness, all this resulting in a shrinkage of the aggregate domestic demand and, as an effect, in a structural recession. In addition, the reduction of the pension contribution and tax revenue, as an effect of the loss of jobs and decreased salaries, pushed to lower the spending on retirement pensions, throwing a good part of the population into the abyss of misery. As the Italian Institute for Statistics (ISTAT) issued the financial data in June 2018, the amount of people in absolute poverty turned out to be almost 10% of the national population. The constraint on reducing expenditure to respect the balance with the gross domestic product, which is decreasing in accord with the political economic trend, works out as a vicious circle and a spiral towards the irreversible crisis and social economic failure.
Neo-Keynesian and social democratic complains started soon after the Maastricht treaty in 1992, and grew after the introduction of the Euro currency and the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union. Many prestigious economists and social scientist (including Stiglitz and Krugman, among others) harshly criticized the parameters and ordoliberalist approach, warning the European Union and its political leaders against the risks of the eventual recession and increase of poverty, as an effect of the deflective economical reforms. For now, and after the Greek experience, we must admit that they were right. As most people recognize the fatal mistakes and push for a change, the European Union and its highest institutions don’t seem to be aware of this. At least, until the next European elections that will take place during the springtime 2019, which will possibly lead the political economic trend to a radical change.
