Athens, 16 May 2011

We selected Athens as the venue for our 12th Congress because it is the eye of the storm which threatens Europe and the euro. We are here to show our solidarity. We are not bureaucrats on holiday as some posters proclaim in the streets of Athens. Greece was first country into trouble but it is not the last.

Greece was the cradle of Western civilisation, now it is the cradle of Europe’s economic crisis.

The ratings agencies circle the country like sharks round a wounded victim; the EU is clearly uncertain about whether to launch another lifeboat.

Some of the reasons can be laid at Greece’s own door – the problems with tax collection in particular. But the EU / IMF terms have been too tough. The debt repayments are too much, too soon.

We have said that from the start. And it gives me no pleasure to say – we told you so.

Now the options are narrowing. No-one wants a default – that would wipe out Greek banks and maybe some others –, nor for Greece to fall out of the euro. But some debt restructuring, some easing of the austerity terms, with reciprocal action by Greece is urgently necessary. Austerity is not working. The only way Greece will meet its obligations is through growth, through the rich and comfortable meeting their obligations to the country especially on tax, and through agreed programmes including with unions about the necessary action to be taken.

Now the options are narrowing. No-one wants a default – that would wipe out Greek banks and maybe some others –, nor for Greece to fall out of the euro. But some debt restructuring, some easing of the austerity terms, with reciprocal action by Greece is urgently necessary. Austerity is not working. The only way Greece will meet its obligations is through growth, through the rich and comfortable meeting their obligations to the country especially on tax, and through agreed programmes including with unions about the necessary action to be taken.

It’s time for Greece to pull together, not fracture – and it is time for the EU to help.

That is one message at this Congress.

The others are that while the problems may threaten now to engulf Greece, Ireland and Portugal, the whole of the EU is threatened.

The financial crisis crashed, like a tidal wave, into Europe in 2008. Credit disappeared, industrial production dived, economies halted.

At first, the EU did well. Banks were propped up by Governments assuming responsibility for bad debts. Short-time working schemes, car scrappage schemes, and other stimuli packages kept the economy moving. We did not repeat the disastrous decisions of the 1930s to cut in a recession and so make things worse. Keynes’ lessons seemed well learned.

That is, until Greece in 2010! Then the crisis switched from the banks to the debts of member states with individual countries coming under threat.

Whereas rescuing banks was easy to arrange – the major political decisions were taken quickly – rescuing countries is proving much more tortured and difficult. ‘Moral hazard’ was ignored when the banks were in trouble, but creditor member states are regarding debtor states as good-for-nothing, feckless spendthrifts, requiring as much punishment as help.

The Euro Plus Pact will operate generally in the eurozone and six other countries from 2013, generalising the austerity approach unless countries’ economies are fully competitive. Otherwise, it is clear that member states will have to lower wages, reduce pension entitlements, cut welfare and other public spending.

What is already evident is that the austerity measures are not working. Growth in Greece and Ireland, (and in the UK where the Coalition Government is prescribing similar medicine) is stagnant.

The EU must alter its direction of travel. It must give growth more help than just rely on the warm words of EU 2020. Economic governance cannot just be austerity governance.

The EU must alter its direction of travel. It must give growth more help than just rely on the warm words of EU 2020. Economic governance cannot just be austerity governance.

It must give equality more prominence.

It must do more to help the young who are the major casualties of the recession so far.

It must restore the drive for a more sustainable environment and sustainable economies.

It must combat the rise of the eurosceptic and nationalist right who will wreck the EU and their neighbours if they ever come to power.