A more intelligent conversation on Europe and growth

This article was initially published on the Policy Network website on 13 November 2014.

The left is not getting any credit for the return of a growth-friendly narrative in Europe. There are entrenched reasons why its rhetoric and recommendations fail to convince

The mood has changed in Europe, but the headlines suggest that change is coming from conservative circles. The centre-right president of the European commission, Jean-Claude Juncker, has been trumpeting a €300bn  growth and investment plan for Europe, the details of which should be announced in December. Angela Merkel and her finance minister, Wolfgang Schäuble, have conceded a €10bn package for Germany from 2016 onwards. The European Central Bank’s president, Mario Draghi, is pumping fresh money into the banking and capital market sectors. The European commission signed off the Italian and French budgetary plans despite changes from the previous year’s objectives. And there is momentum around the fight against tax evasion.

Speaking in circles

This is all seemingly good news, and it comes to validate the diagnosis established by left-leaning thinkers and politicians, but also the International Monetary Fund and Draghi, that collective austerity is self-defeating. The European left is having its ‘we told you so’ moment, and there is more to come.

The problem is, however, centre-left parties are not reaping any benefit from this. The German Social Democrats are still in the doldrums, attacked on their left flanks by Die Linke, despite the fact that they were instrumental in ensuring the introduction of a minimum wage in Germany. The French Socialists are in a state of bemused self-introspection, as are, to a lesser extent, the UK and Dutch Labour parties. Meanwhile, the polls suggest, the Spanish PSOE faces a similar fate to PASOK in Greece. Even in Sweden, the Social Democrats’ accession to power seems to signal the beginning of serious troubles rather than the hope of a new start. Only Matteo Renzi’s star is shining as the Italian prime minister asserts himself as an unapologetic and enthusiastic leader.

The paradox between the centre-left’s predicaments and it apparently being on the right side of history is not new. Indeed, it has been puzzling observers since the 2008-09 financial crash. At a moment when the EU should appear as the most important vehicle to spur growth and lead on an international progressive agenda, the public is turning its back and does not seem to believe in collective action. This reflects more critical attitudes towards solidarity which are also visible at a national level in many European countries.

Comfort rhetoric

How do we explain this paradox? One hypothesis is that social democratic parties have indulged themselves a bit too much with a lazy narrative on growth and Europe, and thereby lost their appeal. Left-wing rhetoric has been overwhelmingly negative and defensive, suggesting that Europe represents a threat rather than an opportunity. Elements of the left denounce EU fiscal rules and Brussels’ reckless interference in domestic politics despite evidence that there is ample room for national flexibility. Others attack TTIP, a convenient feel-good booster, even if the new European commission has made it clear that it would not impact upon food safety, social standards and public services.

At the same time, many on the left do not shy away from calling for ‘more Europe’. They talk about a European stimulus and burden-sharing package, with proposals such as debt mutualisation and a cross-EU unemployment insurance scheme. By doing so, they appear to ignore the crisis of trust affecting the very European idea and the divergences between EU members. Moreover, this is confusing for the electorate, which is told that European rules and projects are dangerous, yet we should have more of them.

These inconsistencies can be rectified: they merely require adjustments in rhetoric. Without contesting the principles of fiscal rules and trade talks with the US, social democrats can raise the stakes politically. Renzi’s muscular exchange with the European commission in October shows the way forward.

There are, however, two rather more profound reasons to be concerned, showing that the left lacks a distinctive narrative on growth and Europe.

Beyond growth, a more explicit vision

First, ‘growth’, like ‘reform’, is an abstract concept that requires qualification. Before the crisis, social democratic circles started to claim the traditional green argument according to which we need to revise our economic thinking. Responses to climate change began to take centre stage. New ways of measuring prosperity were put forward alongside GDP growth and macroeconomic parameters such as inflation and employment. It would be unfair to claim that all of this has disappeared, but the urgency of kick-starting growth has side-lined the effort to reflect on the structural changes needed to move towards a fairer, more sustainable and less credit-driven model. The anti-austerity talk wrongly implies that we can go  back to ‘growth as usual’.

Forgetting about the long-term is particularly problematic at EU level. Centre-left governments have missed the opportunity of using the Europe 2020 strategy as the necessary long-term compass that should guide short-term decisions. To be sure, Europe 2020 is no magic bullet, and calls for tailor-made national strategies on energy transitions and revamped welfare states. However, the EU is here to help, and the left should push hard to make sure those targets are highly featured on the agenda, and that implementation efforts receive the right incentives.

European centre-left parties must help each other

A second structural reason why the left is struggling to capitalise on Europe is the variety of social democratic worlds and the difficulty of coming up with common solutions. Instead of leading by example and showing that consensus is possible within its own ranks, the European left seems paralysed by cross-border prejudices. SPD politicians do not take their PS colleagues seriously. British and Dutch Labour leaders give the impression they have little choice but singing along to David Cameron’s hymn sheet on “EU reform”. Too often French and southern European leaders wash their hands of their own responsibilities by laying the blame for every ill that afflicts their countries at Germany’s door. Many on the left are participating in the messy blame game that Europe has become.

Is it possible to stop this, display leadership and restore confidence in the EU project? For this to happen, social democrats have little choice but to leave their comfort zone. As most speakers at the recent WWWforEurope seminar organised by Policy Network acknowledged, some sort of mutual aid mechanism is needed to address economic and social divergences across Europe. Whether this takes the form of ‘contracts’, a Social Investment Pact or ad hoc political agreements – such as the joint initiative by Sigmar Gabriel and Emmanuel Macron on reforms and investment for Germany and France – the idea is to give some substance and visibility to reciprocity. More solidarity may be needed at the EU level today, but not of the centralised, unconditional and one-directional type implied behind some simplistic proposals. Efforts should be focused on developing the idea of an ‘insurance Union’, or a union of welfare states, in which national governments help each other to get institutions and policies right for future prosperity.

The left should therefore avoid getting lost in parochial, if not lost battles, and work towards a more intelligent conversation about Europe and growth. It is time to come up with a plan for how culturally diverse nations, mired in economic divergences, can make common cause for Europe’s future prosperity.

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