Europe's Reversed New Deal

In the EU the prevailing political line is not for improving the economy and enhancing employment, but a policy of '"austerity", which means deflation and stagnation

The current crisis was initially compared with that of 1929, and there were reasons for alarm. But,   the crisis   having been diagnosed in time, there was hope that Governments would stop its progress, and avoid the social disaster of the Great Depression. Unfortunately things went in the opposite way.

Three years have passed and America is still running the risk of a new recession. Unemployment is higher than what Barack Obama found entering the White House. In early September, in a dramatic speech to Congress, the President called for the urgent approval of a 450 billion dollars plan to revive the economy and increase   employment. We don’t know if it will be enough. Robert Reich, former labor minister of Bill Clinton, wrote that it would take at least 1000 billion dollars for the US to start growing again.  The radical fundamentalist Tea Party and the fierce Republican opposition are threatening to refuse or distort the measures of the President.

Things are even worse in Europe. The prevailing political line is not for improving the economy and enhancing employment, but a policy of '"austerity", which means deflation and stagnation. Now, the risk of Greek default appears increasingly concrete. Yet three years ago, when the new government Paparndreu honestly admitted that the previous Conservative government had left a deficit much higher than declared, it was still possible to outline a recovery, and to adopt an adjustment plan in a reasonable time. But with the imposition by Brussels’ authorities of hard financial measures so onerous as to be impracticable, a liquidity crisis became an insolvency crisis that now appears unmanageable.

 The case of Spain is in its turn indicative. It is argued that the difficulties of Euro countries have been created by an irresponsible fiscal policy. This does not apply to Spain.  At the start of the housing crisis the country had a public debt well below the European average and the Maastricht criteria. Some of the components of its banking system, a number of territorial banks, were however involved in financial difficulties aggravated by the international context. The government deficit resulting from bailing them out could have been be tackled by increasing the debt in the short run, without stifling the economic recovery. However, the EU authorities imposed an immediate and severe budget adjustment, the notorious “structural reforms”, which further deteriorated   the economic situation, caused the breakdown of industrial relations and, ultimately, brought on the crisis of one of the last Socialist governments in Europe.

The Italian case is the most recent upshot of the crisis’s domino effect, but not necessarily the last one. Italy was first asked to get the zero deficit budgets by 2014; then the objective was anticipated within the next two years, with a larger financial maneuver amounting to over fifty billion. A first year student of Economics  would correctly  predict  its  effect of stunting growth , making  it more difficult  the reduction  of the debt.

Let’s return to the comparison with the crisis of '29.  In America, the Presidency of Franklin D. Roosevelt brought a radical change for economic recovery and a strong fight against unemployment. Between '33 and ‘35 the direct intervention of the State   gave a job to millions of workers and young people building roads, bridges, dams, power stations, and parks that we still admire when traveling in the United States.

The most impressive and lasting achievements were the establishment of the Social Security, the  unemployment benefits, the  assistance  for single mothers with children, the minimum wage, in addition to the “Wagner Act” ,  which allowed in the following decades an extraordinary development of the American trade unionism. In short, social and political reforms were applied in a democratic country as a tool against the crisis. A more just society was created, which mitigated the explosion of economic inequality of the roaring Twenties.

We cannot compare   without dismay these policies to what’s happening to day in Europe. The authorities of the European Union, the European Central Bank, the European Commission and the right wing coalitions governing most of the Union members, strongly insist, under the threat of financial markets, on the need of structural reforms: basically a further reduction of pension schemes, the full deregulation of labor markets, the retrenchment of the welfare systems and the privatization of public services.

The Italian case falls within this framework, and is especially telling.  Italy has possibly the worst   right-wing government in the Union. Nevertheless, public debt, although historically very high, reaching 120 percent of GDP, remained steady during the crisis, and the deficit, according to current estimates, is the lowest among the major euro countries, except Germany. This did not stop the financial markets hunting to a new prey, the biggest, after Greece, Ireland, Portugal and then Spain.

The ECB, the Brussels authorities and Ms Merkel have indicated in letters  labeled  "confidential", and in public statements, that the Italian government must  to take increasing “austerity” measures, after those already implemented in the summer to   balance the budget just in  two years .

However, this is not the end of the story. Within the urgent financial  plan of Berlusconi's government dictated  by the European authorities  there is  a provision not connected  to the budget issue: that is, the possibility  that consensual Trade Unions   sign , at enterprise’s level , agreements  which allow the   firing  of    workers without a “just cause”. A measure that Confindustria and right wing parties have been proposing for years. The first attempt of doing so by the Berlusconi government in 2002 was overthrown after the largest mass demonstration of the working class in the history of the Republic.

This was the straw that broke the camel's back of discontent and protest, the reasons for the general strike of September 6 proclaimed by CGIL, the main Italian Trade Union Confederation. In spite of its success, the norm remained in the government decree but, according to labor jurists, it violates national contracts, the Statute of Workers, and the Constitution itself, and therefore it is quite unlikely to become operational.

But in the political attack of the government there is something more. He wants to implement a plan that radically changes the structure of collective bargaining and union representation. In essence, the canceling of the national contract, and moving the focus of the bargaining at the enterprise level. This design has the support of not only employers but also a broad political spectrum of right and a wing economists and labor lawyers, alleged (or self-proclaimed) of center-left.

 A striking example of this attempt   was given when Mr.Marchionne, new CEO of Fiat-Chrysler, asked to separate Fiat workers from the metalworkers' national contract. He threatened the closure of the Pomigliano plant, near Naples, and of the historical Mirafiori plant in Turin, once the largest European car manufacturing plant. The Unions were divided, as FIOM-CGIL was against the severance from the national contract. The workers were blackmailed, and a referendum was won by the Company due to the votes of the white collars.

In this framework, the neo-conservative politics across the European Union, and in particular the Eurozone, has provoked in a number of countries growing mass protest and mobilization. Nevertheless, it seems that the European political spectrum of the left hasn’t grasped a clear recognition of the fact that the ruling groups are ruthlessly using the crisis to reestablish their failed hegemony.

Contrary to the hopes of coping with the crisis following the lessons of the Great Depression, we are facing a reversal of what at the beginning of the crisis was considered as a possible new New Deal. We should now ask ourselves whether it would still be possible to avoid the decline of the Western world, and especially of Europe, by a joint initiative. That would require a new analysis and a new political strategy of the left-oriented parties, trade unions, and progressive intellectuals. Reminding the slogan of the recent women's mass demonstrations, we can ask ourselves: "If not now, when?"

Antonio Lettieri

President of CISS - Center for International Social Studies (Roma). He was National Secretary of CGIL; Member of ILO Governing Body, Member of the OECD's Trade Union Advisory Council and Advisor of Labor Minister for European Affairs.(