1. The European Union has entered a process of great change. On the one hand, the Covid syndemic has changed our lives and, on the other, the European ruling classes have tackled this crisis in very different ways from the 2008 sovereign debt crisis.
This issue of Quistioni aims to contribute to the understanding of these transformations, sharing analyses and proposals to facilitate the debate that the Party of the European Left and the whole Left must have to elaborate a political proposal that is up to the new phase.
2. The changes in the policies of the Ecb and the governance of the EU, will find a significant point of debate in the Conference launched on 9 May 2021 and ending in the spring of 2022 – during the French presidency of the EU – which, among other things, will be an important stage for Macron, who is engaged in the French presidential elections.
3. This conference, which will take place in the context of Covid, was, however, conceived before the pandemic started. The idea of the Conference was born during 2019, when the President of the European Commission put forward the proposal to organise a Conference on the future of Europe. The European Parliament on 15 January 2020, adopted this proposal with the following document (https://www.europarl.europa.eu/doceo/document/TA-9-2020-0010_IT.html).
4. The clarification on the timing of the birth of the rethinking of the European Union before the Covid pandemic is not just a nitpicking due to chronological neurosis. The point is relevant on an analytical level because it indicates that the European ruling elite had the need to rethink the European Union before Covid. The pandemic accentuated this need but did not create it, it existed before.
5. It is therefore a question of understanding why the European ruling leaders thought it necessary – unanimously – to rethink the European Union, which had been such an effective instrument to implement austerity policies and to bend any attempt to question the ordoliberal orthodoxy from the left. My opinion is that the point of origin of this necessity is the crisis of neo-liberal globalisation that matured in the second half of the last decade and that has seen in the Trump presidency an emblematic, though not a triggering, element.
6. The crisis of globalisation – and the collateral crisis of neo-liberal ideology in favour of the revival of national themes – is a structural phenomenon that has its roots in the intensification of global competition in the context of the climate crisis. In this context, there is a particularly aggressive role for the US, which continues under Biden and is mainly due to two elements.
The first is that China’s development as a full-fledged economic superpower brings with it the growth of China as a military and financial superpower. This new role of China calls into question the US’s global rentier position – just think of the advantages of the dollar as an international reserve currency – and thus the fact that the US can live comfortably beyond its means.
The second is the climate and environmental crisis, which raises the issue of the scarcity of natural resources and the competition for raw materials, drinking water, arable land and so on. The US does not want to give up the possibility of exercising its power of “resource grabbing” on a global scale.
7. The intertwining of the above elements makes it clear that a strong and sustained capitalist development based on a continuous increase in resource consumption on a global scale is not possible. Hence the crisis of globalisation and a tendency to change capitalist accumulation based on competing regional macro-areas. To emphasise this is not to say that we have gone “from black to white”, from a perfect global market to the renationalisation of economies. It is a process, a variation of specific weights in global dynamics. A variation of weights, but one so significant as to changes the framework. As Hegel would have said, “Purely quantitative variations determine qualitative variations”.
8. This tendency to reorganise capitalist accumulation around regional macro-areas has accelerated dramatically with the Covid pandemic, which has in turn cornered the European ruling leaders, unable to cope with the pandemic and totally unprepared for it. For a major economic and industrial superpower like Europe, not having masks for doctors and chemical reagents for analysis is a setback that undermines the credibility of the ruling leaders. Governments that do not know how to guarantee the security of their population are not doomed to last. Moreover, Hobbes emphasised in Leviathan that one of the tasks of the sovereign, in addition to guaranteeing peace and protection, was to guarantee health security for the people (salus populi suprema lex).
9. The convergence of economic and health factors prompted the European ruling leaders to take a quantum leap that was first highlighted by the Franco-German summit on 18 May 2020 and then, on 18 June 2020, by the European Parliament resolution (https://www.europarl.europa.eu/doceo/document/TA-9-2020-0153_IT.html). It stated that “10 years after the entry into force of the Lisbon Treaty, 70 years after the Schuman Declaration and in the context of the Covid-19 pandemic, the time has come to rethink the European Union”. The resolution goes on to say that “the number of major crises the Union has experienced demonstrates the need for institutional and political reforms in many areas of governance”. Moreover, this way of proceeding “by crisis” is not new, since Jean Monnet, the first president of the European Coal and Steel Community, claimed that “Europe will be shaped by its crises and will be the sum of the solutions found to resolve these crises”.
10. The ordoliberal EU, founded on Maastricht and Lisbon, is thus coming to terms with the limits of its approach. The decision to suspend the validity of the articles of the treaties on state aid to companies and public spending shows the depth of the problems. Thus, on 10 March 2021, the signing of the inter-institutional agreement by Ursula von der Leyen, David Sassoli and Antonio Costa – representing the Commission, the Parliament and the Council of the EU – marks the formal start of the path of the Conference on the Future of Europe. We will see what the outcome of those debates will be, and it will be important for us to be able to take the field with a proposal. Here I think it is useful to identify several trends that emerge, albeit embryonically, both in the choices already made and in the proposals put forward.
11. This step was managed with a strong concentration of decisions that, starting with Franco-German leadership, saw the Ecb and the Commission as the main operational instruments. Significant resources were made available through a centralisation of political decisions. The spending guidelines of the Next Generation EU have been decided centrally in a highly binding way, are destined to remain unchangeable in the coming years, and have completely bypassed the powers of national parliaments and the European Parliament. This centralisation based on the strict control of additional expenditure has not yet resulted in new rules but is based on the suspension of some of the old rules (ban on state aid and budget deficits) and the concrete modification of governance mechanisms. Instead of procedures based on unanimity, there has been a shift to very strong bargaining. The strategic direction was given by the European Union’s leadership group, which was united around the Franco-German axis, the Ecb and the Commission, and this leadership group engaged in economic bargaining with various countries that exchanged their assent to the plan in exchange for the granting of resources. The result is a much more flexible governance than the previous one. It is precisely in the bargaining made possible by the suspension of the rules that governance has been able to bring about centralisation and the assumption of a precise political direction.
12. The Ecb’s role has been very important in making a large amount of money available to banks, at no cost, to support financial markets, businesses and to give the most indebted states room for manoeuvre. Without reaching the quantitative levels of the Federal Reserve, the Ecb has moved in the same direction and today is in fact the guarantor of the sustainability of public debts. This is a fully political role, in which resources are made available to states to the extent that governments commit to following the path decided at central level. The Italian case is emblematic from this point of view, where the granting of a significant number of resources takes place with the country’s commissioner through the presidency of Mario Draghi, one of the main exponents of the European oligarchy, who has taken spending measures that cannot be substantially changed in the next decade and that are totally aimed at strengthening the private production sector, without allocating almost anything for welfare. Nor should we underestimate the fact that Enrico Letta, the highest-ranking Italian politician in the Trilateral Commission, has taken over as secretary of the Democratic Party. The Ecb therefore plays a decisive role in the political guidance of a process that goes far beyond the standards of official ordoliberalism.
13. The European Union has clearly chosen the path of environmental reconversion and digitalisation of production and the economy. It also considers it necessary to encourage the formation of European multinationals capable of competing at global level for economic and technological leadership in the various sectors. Here we have a clear choice of political intervention in the economy that is not primarily aimed at satisfying social needs but rather at strengthening the European industrial structure. This is all with a view to making European industry more competitive on the global market, in a context in which the climate crisis makes it necessary to carry out a huge restructuring that private individuals could not face without state support. Just think of the shameful way in which the European Commission has dealt with the issue of vaccine patents against Covid. The governance of this restructuring process is entrusted in part to legislation and above all to the selective use of finance, the true cockpit of capitalism. This public intervention in the economy is accompanied by the choice of making the labour market even more deregulated to encourage restructuring and thus the expulsion of labour from sectors considered obsolete, while guaranteeing some form of individual monetary protection.
14. In this context, the Ecb’s stated aim is to develop the environmental and digital transition to build a “liquid and deep” European capital market. It is very interesting to read what the leading figures of the Ecb are saying, starting with its president Christine Lagarde, because they outline the strategic design of European capitalism. Lagarde said on 6 May this year at an official meeting in Frankfurt: “I borrow an example from the history of the United States. The economic and financial integration of the United States at the end of the 19th century owes much to the new technology of the railways. With a local banking system that was fragmented, the huge amount of financing needed for this project was only mobilised through the capital markets, particularly in the form of railway bonds. This, in turn, laid the foundation for the development of the US financial system. The railways ended up connecting not only the most distant corners of the Union, but also its capital markets.
If you allow me the analogy, I see some similarities between this period in US history and today’s EU transition to a sustainable economy, underpinned by the growth of sustainable finance.
The transition to zero net emissions, together with a proper digital backbone, will require major investments across Europe in technology, infrastructure and networks. Fragmentation among national financial markets could limit our ability to finance future investments. But if green finance continues to emerge to finance this transition, the consequences for the European financial system could be radical.
Indeed, I believe that the green transition offers us a unique opportunity to build a truly European capital market that transcends national borders, or what I would call a green capital markets union (Cmu)”.
Lagarde goes on to say “Capital markets are also key to financing the transformation of our economies. We need investments of around 330 billion euros per year by 2030 to meet Europe’s climate and energy goals, and around 125 billion euros per year to achieve digital transformation.
While banks can and should provide a good share of this financing, capital markets can provide innovative tools to bridge the investment gap… This raises the question: how do we integrate capital markets faster? Are there market segments where there are fewer barriers and where high levels of integration can be achieved quickly, but which also encourage future-oriented project financing?
Developing European green capital markets.
In my view, European green capital markets meet all these criteria”.
I apologise for the very long quote, but it seems to me to be of some use in understanding the scope of the project to which an Ecb that is explicitly working for a “joint use of monetary and budgetary policies” is committed, overcoming the divide that characterised the past decade.
15. The response of the European ruling classes to the globalisation crisis and to the Covid syndemic is therefore not a repetition of the austerity policies with which the 2008 debt crisis was tackled and which made a decisive contribution to the birth and strengthening of fascist and racist right-wingers. Of course, a return to austerity policies is always possible. Particularly the most indebted countries that are using up more of their loans, such as Italy. What is changing, however, is the overall framework and the decisive step forward made in the process of European integration in economic and financial terms. This step seems to me irreversible and precisely concerns the basic characteristics of the capitalist accumulation model within the globalisation crisis. In debates on these issues, the German Constitutional Court is often mentioned as a guardian of German sovereignty against the Ecb and integration processes. Without wishing to underestimate this element, however, if we look at the rulings in concrete terms, we see that they represent a substantial green light for the measures taken so far by the Ecb. Filled with criticism and remarks, the rulings have, however, enabled the Ecb, in the name of monetary stability, to achieve elements of debt mutualization that were unimaginable 10 years ago.
It seems to me, therefore, that a rather clear direction has prevailed in the German and European ruling classes in dealing with the Covid syndemic. An in-depth analysis of this direction is necessary to avoid two specular risks on the left. On the one hand, the risk of portraying the situation as if it were a break, as if nothing had changed; on the other, the risk of reading the changes as if they were our strategic victories, without recognising the radically capitalist nature of this turn of events.
16. In the context of the strategic debate on our proposal for Europe, I think it is useful to highlight some areas of political initiative that should be opened immediately, because the new approach of the ruling classes gives full credence to some of our criticisms of recent years.
– First, it is clear that “the money is there”. After years of austerity, we can now see that there is significant scope for possible expenditure. The Commission is giving the money to businesses. We can open a strong battle to spend it differently. To build a European welfare state, to reduce working time, and so on.
– Secondly, it is clear that the environmental emergency is recognised and shared by all and must therefore be tackled with determination. The choice of the Ecb and the Commission to adopt a capitalist and subsidised approach to the environmental reconversion of production and the economy is not the best one. On the contrary, it is quite clear that it is too slow and inherently contradictory because it selects objectives based on the return on investment. We do not have time, and this opens the opportunity to clearly demand the preparation of a public plan for the environmental reconversion of the economy and production that focuses on the speed of reconversion and not on the market profitability of investments.
– In this situation, the issue of relaunching the public sector is objectively placed. Today the public sector is proposed in a subordinate and functional function to the private sector. There is ample opportunity to raise the issue of the public sector as a great democratic opportunity to guarantee rights and common goods, going beyond the commodity form.
– European governance today is not carried out by invoking treaties, it has become political and negotiated, but increasingly centralised and undemocratic. It is exercised by the bankers, the Commission and a few governments that have the strength and power to decide for everyone. This opens the way for a battle for the complete democratisation and parliamentarisation of Europe that values both national parliaments and the European Parliament.
– The security we need is health security, not military security. Instead of increasing military expenditure, we need to build European welfare in a Europe of peace that develops international cooperation and hospitality.
Paolo Ferrero, director of Quistioni, is vice president of the Party of the European Left. He was national secretary of the Partito della Rifondazione Comunista, Italy, and Minister for Welfare in the second Prodi government.