‘Treat the cause, not the symptoms’ – Damanaki’s antidote to ‘austerity mania’

Maria Damanaki, Commissioner for Maritime Affairs and Fisheries

Social justice, solidarity and the danger of deep public cuts were the issues tackled by Maria Damanaki, the Commissioner for Maritime Affairs and Fisheries, when she spoke to Brussels Labour in September 2010. The timing of her speech on the European Debt Crisis and the European Left was particularly apt: the Commissioner had just emerged from talks on the financial package of responses to the banking and financial crisis, while the debt crisis in her native Greece remained a core concern for the European Union.

The Commissioner’s frank and critical approach to the subject reflected one of her main messages: the need for socialists to speak out and tackle the debt crisis head-on so as to reclaim ground lost to the centre-right in diagnosing and treating the problem. For Mrs Damanaki, socialists have understood better that the problem lay in poorly-regulated financial markets, but somehow our voices have been drowned out in the argument over solutions. It is painful to see how centre-right governments are putting forward our diagnosis and claiming it as their own whilst at the same time gambling with jobs and livelihoods of working people through proposing deep public sector cuts which may put future growth at risk.

A challenge for socialists

Maria Damanaki offered her visions for a European socialist response, arguing that we must start by challenging centre-right claims to the preserve of economic governance. By analogy, in seeking to treat the root of the problem we should not look only at the tree – the debt crisis which emerged in Greece – but also at the forest, which relates to a broader financial crisis arising from unchecked market freedoms. Here socialists have a contribution to make in pushing for greater financial supervision, curbing the influence of speculators and regulating the work of rating agencies. In the meantime, we also need to find a socialist answer to the debt problem, and be frank with ourselves about the fact we have not done so effectively yet.

European socialists also need to ensure that social justice is the bottom line. The stark reality of the global financial crisis is that those who caused it are not suffering the consequences. Mrs Damanaki returned time and again to this theme during her talk, speaking of her outrage that a disproportionate burden now falls on the poor, and that the left is paying for the mistakes of neo-liberal orthodoxy.

Wild and uncontrolled market freedoms caused the crisis: institutions took freedoms without honouring obligations, particularly those in the hedge fund and other high-risk financial sectors. Working people in Greece, and elsewhere, are owed an explanation as to who is responsible for the bills they are now paying.

However, to deliver a socialise vision and alternative, the Left will have to overcome splits which have emerged on core issues including services of general interest and public finances.
On fiscal consolidation, a broader discussion is needed about the impact on social and economic policy and for jobs and growth. Only socialists can deliver this, and are promoting debates on a transaction tax, a bank levy and impact assessments. Fiscal consolidation underpins social justice, which requires long-term planning and measures that promote jobs and growth, social equity and the welfare state. This was not respected in several member states, including Greece.

At the same time the answer does not lie in the short-termism of the public sector cuts planned across the continent, including in the UK. According to Mrs Damanaki, socialists across Europe need to be vocal in fighting “austerity mania”. Cutting for ideology’s sake may lead to stalling of the growth engine of Europe will stall. The Commissioner lamented the irony that, faced with a Hobson’s choice having inherited the problems of the previous centre-right administration, the incoming socialist government in Greece has had to take unpopular conservative measures to fix mistakes made by previous government, who handed over an economy that was “dead on arrival”.

The Greek tragedy and the European response

The Commissioner did not shy away from a critical reflection on the case of Greece, which can be instructive for Europe as an individual case study but also in its implications for European solidarity. There were structural problems in the Greek economy and the country now needs to make sacrifices. At the same time, the case highlights the need for a better collective response: the Commission and European Parliament spearheaded efforts to help Greece, but some member states had been lukewarm in their initial response. This loss of solidarity risked undermining the popularity of the EU in Greece and elsewhere.

In the Q&A session, the Commissioner acknowledged that there had been some failings in terms of EU-level auditing of Greece in the past and that the European response both prior to and during the crisis left room for improvement. Regulation is one answer, such as through an EU-level ban on short selling of sovereign debt, which could have eased the situation in which Greece found itself. The Europe 2020 vision will need to address these governance issues, as well as focus on social exclusion and poverty.

On the subject of blame for the crisis, the Commissioner acknowledged that, while not the trigger of the problem, monetary policy was too loose before the crisis and led to public debt. However, the main culprit was the anti-social behaviour in the banking sector: market failure was a problem of greed, as political actors did too little to stop it. People stopped trusting political leadership when the governments responded to the crisis by giving money to the banks, arriving cap-in-hand. As a result, governments of all persuasions now have the blame pinned on them faced, rather than it being targeted at the financial sector.

Ultimately, governments across Europe have responsibilities to act with a long-term policy vision for sustainable growth and fiscal balance. Noting the acute case of austerity mania in the UK, she offered a trenchant analysis of the risk inherent in deep cuts such as those pursued by the Tory-LibDem coalition.

The Socialist diagnosis of the illness is right: now we need to treat the causes (such as the lack of social justice and oversight in the financial system) rather than the symptoms (tackling debt).

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