On Wednesday 15 September, Maria Damanaki, the Commissioner for Maritime Affairs and Fisheries, spoke to Brussels Labour. Here is the full transcript of her speech:

The European debt crisis – lessons for the left

Dear colleagues/comrades, I would like to thank you very much for giving me the opportunity to address you today. I think it is very important that we increase our cooperation inside the European socialist family. I know that the Brussels branch has been very active all this years, and has played a historic role in our political family. I thank you for it. Such collaboration is particularly important in this period when the majority of European governments are led by more conservative voices.

I agreed to speak today about the European debt crisis, a fundamental problem that we need to tackle urgently. Many in the socialist family insist that the European debt crisis is one element of a much wider issue, namely the European economic crisis. And rightly so. Look at the forest, not just the tree.

We should be careful however not to let this very valid point dilute the importance we ascribe to the debt crisis, and to the concrete responses we must take. Look also at the tree, not just the forest.

Let’s first look at the tree:

There is a debt crisis that first became apparent in Greece, but that has touched or risks touching many European countries. This much is clear. And we need to do something to tackle it. That much is clear too.

As socialists, we cannot avoid – or be perceived to avoid – addressing the problem. We need to propose a coherence socialist response. In fact we have already made significant contribution to finding a lasting solution. Most importantly, we have helped open the debate on new sources of revenue. Today, in the Commission College, we can have debates on ideas such as a transaction tax, or a bank levy. Of course these issues still stir a lot of contradiction. But a few months ago they would have been all but taboo.

So, now we are working for a socialist approach to the debt crisis, and in fact we have seen the real contribution that it can bring. Once we have done that, our argument that the debt crisis is but only one part of the wider economic crisis will gain much in credibility. But we also need acknowledge debt as a social issue in its own right. So I would go even further, and say that fiscal consolidation is among the conditions that underpin social justice. They may involve painful changes that will require a great deal of sacrifice from the European people. But unfortunately the cost of inaction would be greater than the cost of action. My country, Greece, is experiencing this reality the hard way. The fiscal consolidation and discipline failure to maintain a solid budget, translates today into harder times for everyone, and worst of all for the weaker layers of society.

So let’s now look at the forest:

If we stop at dept problem – and that is what many conservative voices are doing – we miss the bigger picture. We miss the impact that our policies will have on growth, jobs, social equality. We miss the fact that these elements are part and parcel of a sustainable economic policy. That they also contribute to fiscal balance.

I do believe that the socialist approach is more sustainable, and more thorough. I am firmly opposed to the assumption that good economic management is the conservatives’ playground. It is not. The crisis proves so. This crisis and our response comfort me in the conviction that the left has a constructive and more sustainable economic model to propose.
If we go back to the root of the crisis, we will find in fact that it has a lot to do with wild and uncontrolled deregulation, and with the abuse of market freedoms. I am not advocating curbing market freedoms. I am only advocating that we take them for what they are: freedoms from which derive a number of obligations. Obligations for the state, obligations for society, obligations for the individual. I cannot help but notice that those obligations have been forgotten, somewhere down the line, and we are now paying the price for that.
Thankfully, the tide is starting to turn.

We adopted today in the Commission a series of measures aimed at addressing certain systemic deficiencies of the financial markets. One concerns the reform of the over-the-counter derivatives markets to make them more transparent. The second aims at regulating short-selling at the EU level. This includes the possibility to ban short selling on sovereign debt at EU level in case of emergency, for instance when the debt of a Member State is under attack from the markets. A few moths ago the idea that there were any systemic deficiencies in the financial markets raised more than one eyebrow.

The left can still contribute to curbing the influence of speculators and regulate the work of rating agencies. My country has experienced first-hand the dangerous implications of the unchecked power that they had accumulated. It is undeniable that the problems in Greece derive largely from several structural problems that the current government is tackling with a lot of courage. But that speculators and rating agencies have worsened significantly an existing problem is equally undeniable.

Last but not least, we urgently need to improve the economic governance at European level. How this relates to the Eurozone in particular or to the EU as a whole is a matter that is being debated and that I wouldn’t want address in detail at this stage. What is important is that Europe develops the tools to match the strength and depth of its financial policies, with equally efficient economic policy. Here too, I think that the European left is a catalyst for change. Here too, I think that our approach can be more balanced and constructive than the conservative one.

We live in a time of change. Not just in Greece, not just in Europe, but throughout the world. New mechanisms, new regulations, new checks and balances are finally being discussed and put in place. But in order for them to achieve their true potential in today’s globalised world, such measures should not be limited to Europe alone. I strongly believe that we should engage with our partners internationally – with President Obama, with developing countries, with emerging economies – in order to coordinate our responses, and to ensure that they are socially oriented. Only in that way will they be truly effective, for the benefit of Europe, for the benefit of development, for everyone’s benefit.

Let me say now a couple more words on Greece, to bring you up to date, and hopefully dispel some of the myths that have developed.
Greece has been suffering from structural deficiencies for the last 50 years and more. The previous conservative government, in power from 2004 until September of last year, not only had it systematically failed to do anything about it, but on the contrary handed-over to the current socialist government a national economy almost dead-on-arrival. Following a wave of systematic speculative attacks on Greek bonds, the financial markets decided to stop lending money to Greece in March 2010. A default of the country was on the cards. The country’s dilemma was clear: to fix its debt problem, or to go bankrupt. Thankfully, we chose the first option, thanks to Papandreou and his government. The alternative would have meant problems of a whole new magnitude, and disastrous consequences for the poorest.

But unfortunately this also means that every Greek citizen – rich or poor – is called to make important sacrifices. And in that context, those that are hit the hardest are the poor. Even if the government tries no protective measure could totally prevent the poor from baring the brunt of the reforms.

In May 2010 the Greek government agreed with the European Commission, the European Central Bank and the International Monetary Fund to implement a comprehensive Economic Adjustment Programme in exchange of receiving financial relief in the form of 110 billion euro. The big priority of the programme is to address the excessive budget deficit. For this purpose, an extensive fiscal consolidation is under way.

I can assure you that the economic adjustment programme is very tough for my Greek fellow countrymen and women. It means deep cuts in salaries and pensions, more flexible labour laws, higher indirect taxes, and inevitably, a period of falling demand, likely to result in more lay-offs, higher unemployment and negative growth prospects.

However, fiscal consolidation is only half the solution that Greece needs to stand on her feet again in the long run. The other half is the badly needed and long overdue structural reforms, that successive Greek governments have conveniently chosen to ignore – either because of lack of vision and courage, or by fear of upsetting vested interests, or simply because of lack of understanding of the economic realities. Courageous and ambitious reforms are required to increase the competitiveness of that country and to achieve sustainable growth and prosperity. If the reforms are not undertaken, Greece will face again the same or an even worse debt crisis. This time around, it might not be able to avoid default. If instead reforms are undertaken, the management of the debt will become easier and Greece will be able to go out to the market and borrow at better rates. Even if the debt were to magically disappear overnight, structural reforms would still be needed. Striving for competitiveness and efficiency should be a continuous endeavour of all governments.
Some might be tempted to use the Greek response to the crisis as a precedent for the next potential debt crisis that might strike other EU Member States. They are trying to see how this kind of austerity measures work in practice, and how long a society can endure a regime of sustained fiscal consolidation.

If this is the case, – which I hope not – it is our responsibility as European Socialists to draw the lessons from the real-life Greek experiment and explore possible alternative responses. Allow me to outline some of these lessons.
First of all, the crisis of the economic system, needs reforms of the very foundations of that system. The Financial Supervision Package is a good example of such ambitious reforms. But also we have to find a socialist answer to the debt problem, exploring new revenues as transaction tax at an EU an international level.

Lesson Two: Those responsible for the crisis somehow manage to escape the consequences and the burden falls on the fragile layers of society. This is unacceptable. As European Socialists we have a duty to ensure that social justice is the bottom line of fiscal consolidation and austerity.

Lesson Three: Fiscal consolidation must also be accompanied by long term planning and measures that promote growth, jobs, social equity and the welfare state.

Lesson Four: A kind of “austerity” mania is spreading across the EU, even to Member States with healthy budgets, like Germany, France or the UK. This is insane. The growth engine of Europe will be stalling.

Dear friends, we have to add more logic to the “exit crisis” before it manages to kill Europe’s slightest hope for growth and recovery. We need long-term vision, not a short-sighted reaction to please financial markets.
We have to steer investment in the flagship initiatives of the EU 2020 strategy. Perhaps, we should improve the content of the strategy and adapt it better to our current needs. But overall, we have to target at the sustainable exit from the crisis, job creation, social inclusion and green growth.

Speaking as a Greek Socialist, I can tell you how unfair it is for a newly elected Socialist government to be obliged to take unpopular measures dictated by conservatives, to restore mistakes made by neo-liberals. The peoples of Europe who are now asked to foot the bill, and in particular the Greek people, have the right to know the true sequence of events.

Thank you very much.