ETUC warns policymakers not to respond to the recession by reverting to a ‘business as usual’ approach. A rigid implementation of the Stability Pact, ‘make-work-pay’ policies to weaken unemployment benefits, cuts in job protection to make it possible for business to fire core workers at low cost, cuts in wages along with International Monetary Fund (IMF) steered misadjustment programmes in eastern Europe constitute an explosive cocktail and will make the recession spiral further out of control. A separate note from ETUC spells out the different mechanisms at work.

To tackle the crisis, ETUC demands instead an expanded European recovery initiative, investing annually 1% of gross domestic product (GDP) over the next three years in the greening of the European economy. The June European Council is to identify European infrastructure and network investment projects working to put the European economy on the path of sustainable development.

Says Reiner Hoffmann, ETUC Deputy General Secretary: ‘The Commission’s forecast of a recession of minus 4% growth shows that the European recovery initiative is largely insufficient. More needs to be done. Europe needs an expanded recovery programme’.

Background note on mechanisms at work

See the background note From recession to depression? - Downwards spirals European policymakers should take care to avoid, in which ETUC outlines the different mechanisms at work that will prolong the downwards tailspin of the economy.