European citizens vis-a-vis financial integration machine: findings for the Citizens Manifesto

European citizens vis-a-vis financial integration machine
Citizens’ consultation for the Citizens ManifestoThursday April 25th 2013, 14:00-17:30
European Information Centre, Representation of the European Commission in Slovakia, Bratislava

Since the economic crisis began, governments have introduced austerity measures and accepted tighter financial integration in the European Union. Many of these steps have far-reaching consequences for the everyday life of European citizens as well as for the shape of Europe. Yet in most countries, large parts of the population have expressed reluctance towards new economic policies and disagreement with the fact that there is very little public consultation over topics of vital importance.Indeed, the long-standing issue of EU’s ‘democratic deficit’ is now back on stage. Latest developments, where polices are bulldozed through the European Council, have overshadowed the gains achieved by the Lisbon Treaty, which increased the power of the European Parliament and promised to give the citizens a greater say in European affairs.Participants included academics from local universities and the Slovak Academy of Sciences, as well as local activists.We discussed three separate topics: fiscal integration: (including austerity vs. pro-growth policies), banking union (including the role of the banking sector in economic development), and the power of EU bodies to set the integration agenda.

Findings

Table Discussions: Issues Discussed and Key Proposals Put Forth

The proposals numbered below were elaborated through discussions using the World Café methodology and reflect the positions of the majority of participants to the citizens’ consultation, even though ideas and positions were diverse and sometimes in disagreement. Some of the proposals raised during different discussions were merged here for the purpose of clarity. If you’d like to react to or comment a proposal or put forward other ideas, please use the “comment” box at the bottom of the page. 

Fiscal integration Panel:Monika Martiskova (European Alternatives), Brigita Schmognerova (former Minister of Finance and former Vice-President of the European Bank for Reconstruction and Development), Zsolt Gal (Comenius University Bratislava)The key question was the participation of the citizens in the fiscal integration of the EU. At the beginning the experts introduced their position towards fiscal integration in the EU. Then they discussed the reasons for fiscal integration in Europe. Brigita Schmognerova, former minister of finance (1998-2002) said it is not only about fiscal  integration. The fiscal integration in the shape of common, strictly enforced deficit targets itself won´t help to solve the problems in the EU countries, much broader policies are needed.  The austerity measures are not the way out of the crisis. Zsolt Gal,Commenius university in Bratislava, the second expert invited, said that economic theory about optimum currency areas does not really fit to EMU. However, the europroject should be continued and the only way is the fiscal integration. Both participants agreed that fiscal integration is necessary step after the creation of monetary union. Finally the panel participants and attendees discussed the roots of crisis, with the emphasis on the bailouts in Greece, Ireland, Portugal and Cyprus.

1. End austerity policies: there is a strong consensus among academic economists that strong fiscal cuts are stifling growth. This is now supported even by some former institutional austerity hawks, such as the IMF. The EU needs to review spending cuts in the countries that are being bailed out as well as in the core countries.2. Rebalance growth in the eurozone: again, many economists agree that key to getting out of the crisis is a balanced growth in the eurozone. This means stimulating demand in the „core“ countries, especially Germany. This entails either looser fiscal policies or regulatory measures, such as adopting a relatively high minimum wage.3. Change European Commission’s macroeconomic imbalances procedure. The procedure has been widely criticized for actualy supporting rather than working against imbalances. For example, the rules allow larger current account surpluses than deficits. The procedure should be reformed.

4. Fiscal harmonization needs to be followed by tax harmonization. Measures to harmonize taxes are much more needed than the currently proposed „fiscal harmonization“. The current system of taxation allows multinational to use loopholes provided by the complexity of jurisdictions they operate in. There is currently a momentum for vastly increasing transparency. The Withholding Tax Directive will most likely be amended to widen the type of assets as well as countries covered by automatic information exchange. The European Commission has proposed new measures to harmonize information gathering to prevent VAT frauds and there have been major advances recently in pushing for country-by-country reporting. The momentum should be kept and this should be seen as one of the main tasks of Europe’s civil society.

5. Support a broad debate on the future of banking and the financial services industry. Banking had changed dramatically in approximately the twenty years‘ run up to the crisis (starting in 1980s/ deregulation moves such as London’s Bing Bang in 1986, removal of capital controls and general acceptance of eurocurrency markets by authorities). Today’s banks don’t „borrow short {from small savers) and lend long (to businesses)“. In many countries, their balance sheets tend to be dominated by mortgage loans and even consumer credit and speculative trading accounts for a large part of their profits. The correction has started, the financial sector has shed millions of jobs worldwide since the beginning of the crisis in 2008. Yet governments in Europe continue to pump what is by now trillions of euros into the banking sector through subsidies, loans and bailouts. There is some danger that the banking union will in fact simply help to preserve many aspects of the old, broken model, and this should be avoided.6. Reform rating agencies. The European Commission’s proposals to curb the power of rating agencies have long been derailed by the member states. However, steps such as mandatory rotation of rating agencies or even potentially the creation of a European rating agencies should be supported.7. Give more publicity to ECOSOC’s documents and proposals. EU’s Economic and Social Committee is an important gathering representing diverse stakeholders (employers, employees, professional groups) yet their detailed reports and proposals get almost no publicity. Moves to improve this could include comulsory highlighting of ECOSOC’s opinion in the Council’s and Parliament’s communication with the public on legislative proposals.

8. The European Council should start acting more like a political leader of the EU.This should be reflected in its communication. Instead of writing brief communiques, the Council should issue more political statements that clearly outline what needs to be done, and providing arguments for their decisions. This should serve to bind the leaders to their agreed actions on their home stages.