European perspectives in the fight against the economic and financial crisis

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European perspectives in the fight against the
economic and financial crisis  

• Conference Forum Social Euriopem and GUE/NLHow
  to tackle the financial and economic
  crisis?March 19, 2009 in the European
  Parliament, Brussels
• Jörg Huffschmid, SudwaldeHuffschmid_at_uni-bremen.de
  

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Seven crises in the EU

• Four new crises
• 1. Recession Depression?
• 2. Financial crisis Crash of the financial
  system ?
• 3. Crisis of the car industry collapse of a
  global player?
• 4. Crisis in Eastern Europe Sovereign
  default?
• Three continuing crises
• Continuing ecological crisis
• Continuing social polarisation
• Falling political cohesion

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Structure of the presentation

• The character of the crisis as crisis of the
  finance driven development model
• The role of the EU
• How to rtackle the crises

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• The crisis of the finance driven development model

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Finance-led capitalism a conceptualisation
a.
Developing Capitalism
Entrepreneurs
Savings

Bottleneck

finance

Productive
Credit
creation
Investors
Financial
markets
are
driven
by
enterprises
who
need
money
to
finance
their
investments
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Finance-led capitalism a conceptualisation
capitalism
b. Mature
Bottleneck
profitable
Productive
Investors
Rich individuals
use
of
money
Corporations
Banks
Financial
markets are driven by firms
and
individuals who have much
money
and
search
for
profitable
investment opportunities

which
become
increasingly
rare.
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Finance-led capitalism a conceptualisation
c.
Finance
-
led capitalism
Productive
Investment
Savers

Mergers

acquisitions
Rich individuals
Corporations Banks
Speculation
Privatisation
Financial
investors
FDI
...and manage
them with numerous strategies
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Strategies of financial investors
Financial Investor
Speculation
Pressure upon firms
Pressure upüon governments
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Strategies of financial investors
Financial Investor
Speculation
Pressure upon Firms Shareholder value
Pressure upüon governments
Financial crisis
precarisation
Privatissation
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Finance-led capitalism a conceptualisationGrowth
in the EU15 and in the USA 1960-2005
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Recession and financial crisis two effects of
redistribution
More financial assets
Financial bubble
Financial crisis
Depression?
Redistribution
Depression ?
Lower private consumption
Weak investment
Recession
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2. The role of the EU

• Deregulation
• Macroeconomic discipline
• Rejection of institutional coordination
  (economic government)
• The Lisbon strategy
• The EU in the current crisis

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Different member states different framework
rules (R)
M1 Ra
M2 Rb
M3 Rc
M4 Rd
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Positive integration Competition within a common
framework of rules
M1
M2
R (common rules for M1-M4)
M3
M4
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Negative integration Competition of rules
M1 Ra
M2 Rb
M3 Rc
M4 Rd
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Deregulation the main steps

• Single European Market (1985)
• Single European Act (1987)
• Financial Services Action Programme (1999-2005)
• Services Directive (2007)
• Labour market flexicurity strategy
• Health care patient mobility

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Macro-economic discipline

• Monetary policy
• exclusive focus on price stability no
  responsibility for growth and employment
• Complete independence from democratic discussions
  and decisions
• Fiscal policies
• exclusive focus on balanced budgets
• The EU-Budget
• - too small for efficient policies (1 of EU-27
  GDP)

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Main Objective Competitiveness
Macro-economic discipline
Structural reforms
Modernisation of social systems and policies
The Lisbon Strategy
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European (non)policy against the crisis

• Nov./Dec. 2008 European Recovery Programme
• 200 Mrd. Stimulus announced (1,2 of
  GDP-EU27) but
• This is the total of member state measures (tax
  reductions,Investment)
• There is not programme on EU level
• No increase of the European budget
• 2009 und 2010 increase of EIB loans by 15 bn.,
  i.e. 0,09 GDP of EU27
• February 2009 Defizit procedures against six
  members
• March 10, 2009, Ecofin-meeting
• - No further stimulus packages envisaged
• - Summit should discuss return to balaced
  budgets
• - Option für the reduction of VAT

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3. The fight against the crisis and for a new
development model

• Democratic transformation of finance
• Strong stimulus as start of restructuring
• Fight against layoffs and for better work
• Fight against povery and for social minimum
  standards
• A strong and democratic public sector

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Democratic transformation of finance
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Strong stimulus and restructuring
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Fight against layoffs and for good work
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Fight against poverty and for social solidarity
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A strong and democratic public sector
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Services of General Economic Interest
Current Treaty
Internal Market Competition Rules
ExceptionSGEI service
obligations
Economic policy
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Economic and social regulation in a progressive
development model
Future Reform Treaty
European perspectives Hands-off Co-operation Min
imum standards Joint projects
European perspectives Macroeconomic
control Social and environmental standards
Industrial policy
Public Services Economic non- economic
Markets
Objectives Full Employment, Solidarity, equity
Sustainability
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Finanzinvestor
Spekulation
Druck auf Unternehmen
Druck auf Regierungen
Finanzkrise
Prekarisierung
Privatisierung
Finance driven capitalism is not dead !