The tide of recession is currently sweeping in very fast. If left uncontrolled, this recession risks turning into an entrenched depression. Interest rate cuts and automatic stabilisers – both of which are necessary – will only be able to absorb part of the shock. To turn the recessionary tide around, Europe also needs a rapid, ambitious and joint plan providing for a clear demand stimulus.
ETUC urges the Commission to develop a binding European framework for recovery in its forthcoming communication on 26 November 2008. Such a framework must be based on two priorities:
• The first priority is to keep the economy going over the very short term. Member States should have to commit themselves to invest an additional 1% of GDP in measures strengthening the security dimension on labour markets going in the doldrums for the moment. This implies stronger unemployment benefit systems, more training and social economy employment programmes for those who have lost their job – this has to be put in place as soon as possible.
• The second priority is to climb out of the crisis. Each Member State is to prepare an investment package worth of 1% of GDP of new and additional investments in innovation and a sustainable, ‘green’ economy. This package should kick in no later than mid 2009.
To make this plan work, Europe will have to mobilise forces to work together as one team: a coordinated and joint fiscal stimulus will have a double effect compared with Member States acting in isolation from each other. Moreover, a European Sovereign Investment Fund, issuing European bonds, will provide Member States with access to worldwide savings at lower interest rates. Finally, Europe has to make it clear that all of the different forms of flexibility provided for by the 2005 reform of the Stability Pact are to be used.
More importantly, the European social partners must be part of the process, also to ensure a downwards floor in wage developments of at least 2% so that insurance against a deflationary wage spiral is taken out.
General Secretary of ETUC John Monks emphasises that: ‘This cannot be business as usual. Today, it is not the time for supply-side deregulation experiments. On the contrary, it is time to act on the demand side, and to act in a significant and convincingly manner. ’
See the full ETUC Action for recovery report – A European plan to relaunch the economy: Investing in people, the environment and innovation