Saturday, 10 December 2011

Has the new 'EU minus one' outlawed leftist governments for ever?

Has the new 'EU minus one' outlawed leftist governments for ever by its banning of public sector fiscal deficits? Are the Centre-Right parties that dominate the current EU using these new intergovernmental agreements to ensure that Keynesian solutions to economic problems are now impossible? These are the views of Owen Jones in his New Statesman blog of 9 December (

However, Owen Jones' arguments are way off-beam. The new 'EU minus one' deal does NOT outlaw expansionary fiscal policy, as long as it's investment- led, not based on a structural deficit.

Moreover, there's nothing leftist (or indeed Keynesian) about a 'structural deficit' - subsidising current voters at the expense of future generations is just as irresponsible as refusing to invest on their behalf, which is the Osborne agenda. An investment-led budget which is green and equality-enhancing does NOT contribute to a structural deficit, indeed it REDUCES the risk of future structural deficits.

Owen Jones also misses the point that a balanced budget can represent expansionary fiscal policy, if it is at a higher level of tax and spend, which is what EVERY country in the EU (including Germany) now desperately needs.

The fundamental socialist agenda is about fairness and equity. A fairer tax and spend regime will be no more difficult under the 'EU minus one' intergovernmental treaties than it was before. Interestingly, one of the comments on Owen Jones' post is by Jon Burke, who argues that the new 'EU minus one' agreements will be good for genuinely leftist governments in the EU, since they will have to make the case explicitly for a more progressive tax and spend system, rather than simply using deficit financing to bottle out of taxing the rich at appropriate levels (and making sure they pay up, rather than evading and avoiding tax). This is a valid argument but underplays the importance of investment-led expansionary fiscal policy.

A genuinely equitable and sustainable growth agenda, based on investment for the future, is what we should be fighting to convince European voters to accept. This will be a tough argument to win. However, it will be a lot easier - and a great deal more important - than trying to interest voters in the arcane details of which international forces ('the markets', 'the credit rating agencies', 'Brussels', 'the IMF') are most responsible for making it 'essential' that our governments impose savage cuts which are socially unjust, speed up irreversible climate change and undermine our economic future.

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