Brussels, 20/10/2009
For the ETUC, European financial ministers are missing the key point: The economy is not going through a temporary downturn but is facing instead a prolonged weakness of demand and economic activity because of excessive private sector debt loads. Therefore, the real issue right now is not how to withdraw fiscal stimulus but how to maintain and significantly improve fiscal stimulus so as to help the private sector in reducing its debts, without at the same time causing a protracted slump in economic activity.
To do so, the ETUC proposes a three pillar approach :
- A reversed stability pact to prevent individual countries from running prematurely and all at the same time to a disastrous fiscal policy exit.
- Transform temporary stimulus into investment stimulus. The ETUC is asking for an additional and annual fiscal stimulus of 1% of GDP for the next three years to be invested in the ‘greening’ of the European economy.
- Social and distributive justice is the real fiscal exit strategy. Those who caused the crisis and profited from speculation and ‘casino capitalism’ now have to take up their responsibility. If finance ministers are serious about the sustainability of public finances, they urgently need to stop tax competition inside Europe. In this way, highly mobile and lowly taxed incomes can be forced to contribute significantly to the consolidation of public finances without endangering the dynamics of aggregate demand.
Says John Monks, ETUC general secretary: ‘The crisis and mass unemployment will not go away by themselves. If ECOFIN ministers limit themselves to fiscal exit strategies while hoping recovery will be automatic, they are putting the cart before the horse. With a financial transactions tax, Europe can finance the major part of the 130 billion European investment plan the ETUC is asking for’.
Link to the ETUC policy statement: www.etuc.org/a/6588