A unified Eurozone cannot be maintained

18 August 2011

A unified Eurozone cannot be maintained

European governments have for months allowed the financial markets to lay down the law. In the judgement of Dennis de Jong, countries such as Spain and Italy cannot be rescued within the current Eurozone. In addition, the financial markets must be subject to restraints.

Dennis de Jong is a Member of the European Parliament for the SP.

Dennis de JongEver more people are complaining that the Eurocrisis has been exacerbated by a lack of political leadership. There’s certainly something to be said for this, but what is really lacking is democracy. Government leaders have for months allowed the financial markets to dictate to them. The voter who doesn’t want to see a federal, neoliberal Europe is seen as a hindrance. The SP wants to see leadership that tackles the speculators and reduces their influence, as well as more involvement for the general public, perhaps in the form of a further referendum on the impending decisions regarding the euro.

In recent times we have heard nothing but the same old story: the financial markets whistle, and countries like the Netherlands reach for their wallets. As soon as the speculators turn their artillery on Italy and Spain and the interest on these countries’ sovereign debts shoots up, government leaders pick up their phones. The solution of choice? The European Central Bank will buy up their loans, and peace will reign once more. For how long, nobody knows, but in the meantime the Dutch taxpayer will be running, indirectly, a risk: if Italy and Spain’s loans decline in value, the ECB will suffer a loss and in the end we will have to pay a part of this. An important decision, then, yet no voter has had his or her opinion solicited.

So it went and so it goes. On 8th August, on a popular talk show on Dutch TV, former Labour Party minister Willem Vermeend admitted that when the euro was introduced there had indeed been plans for not one but two Eurozones. Italy, however, was opposed to this and so we ended up with a single Eurozone which included the whole of southern Europe. Not one Dutch voter was ever able to participate in this decision; it was simply forced through. Unequal economies were amalgamated, and now we’re paying the price.

On 9th August former Christian Democrat Prime Minister Ruud Lubbers used a television appearance to argue in favour of taking a further step on the road to a European federation, the issuing of bonds by the European Central Bank. This would weld the economies still more firmly together, and increase the rate of interest that we in the Netherlands would pay on our loans. Because interest on ‘Eurobonds’ would be determined by the state of all of the participating European economies, we would be indirectly contributing to the southern European countries.
We are at a crossroads: should we follow Lubbers on the road to a federal Europe? Or do we accept that we cannot rescue countries such as Italy and Spain inside the Eurozone and that a splitting up of the Eurozone into a stronger and weaker section has moved a step closer? The SP would opt for the latter: in our view, we must determine our own economic policies, in close cooperation with other EU member states, of course, but without being dictated to by Brussels or Frankfurt. At the same time we want to see strict measures which would reduce the influence of the financial markets. Political decisions must be taken which respect the people and not as a reaction to the greed of speculators.

It is therefore also high time for a European action plan against speculation. A few examples of possible actions: force big corporations, which in recent times have enjoyed strongly growing profits, to invest the proceeds in the real economy, which falls ever further behind, despite the fact that there is plenty of money available. Yet major corporations would rather use this money for speculative investments, because they believe it will bring them greater returns. The same goes also for managerial level staff who use their bonuses in large part for these same speculative investments. Turn off the tap of speculative money, for example by imposing additional taxes on any profits which are not used for real investment, or by banning bonuses, and you tackle the problem at source.

Restrictions should be placed on the speed of financial transactions, which as things stand often go through in a fraction of a second, continually exaggerating the effects of changes of mood. Moderating the trade in bonds could be considered, perhaps via a ban on their sale during a specified period. A tax on financial transactions could help to reduce the influence of such transitory capital.

Splitting of bank activities also belongs in this list. The banks constantly blackmail us, because they know we can’t manage without them. This is, however, only true of traditional banking services, of savings and loans. Other activities would be missed like a boil on the neck. Whatever else, the general public should not have to pay out repeatedly to cover losses incurred through speculation.

Political leadership is needed, but only leadership that directs itself towards what the people want and is not in turn led by the nose by speculators. If government leaders are nevertheless to take further steps in the direction of a federal Europe, they should do so only after expressly consulting the people, for example via referenda. This concerns historic decisions, and these must, for once, not be taken without the participation of the citizens.

This article first appeared in Dutch on 15th August 2011 in the national daily De Volkskrant.

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