The European Commission wants to guide the economic policies of EU member states, but democratic oversight is needed to avoid austerity measures.

Last November, the Commission presented its first reform proposals, while strengthening public investment is key. Depending on which reforms are finally agreed upon, Member States will have more or less room to use public investment to finance their environmental and social transformation.

In the context of the coronavirus and the energy crisis, debt levels have risen significantly in many Member States. This means that the need for consolidation will increasingly put pressure on national budgets for the foreseeable future. In the meantime, the ECB is pursuing a historically unprecedented tightening of monetary policy, which has significantly increased member countries’ refinancing spending.

In addition, eurozone inflation figures are increasingly divergent, especially between Eastern and Western Europe. Memories of the last crisis in the eurozone remain strong, especially the subsequent austerity by the troika, which included the European Commission, the ECB and the International Monetary Fund. EU Economic Governance Reform. it should effectively prevent a recurrence of austerity austerity. Of course, any monetary union must have rules to ensure that member states pursue sound fiscal policies. However, after the financial crisis, they overdid it. The Troika’s austerity policies had fatal social consequences. And it didn’t even lead to the intended fiscal consolidation because so-called structural reforms stifled growth.

Changing the economic policy of the EU. this should not be left to the technocrats.

Can the provisions proposed by the Commission ensure that austerity is not reintroduced or structural reforms are imposed unilaterally to increase price competitiveness, mainly by cutting wages and suppressing social rights? Remains unclear. The fact is that the European Commission proposes a small deviation from the policy based on the rules of fiscal discipline. Political negotiations between Member States and the Commission will return to the focus of economic policy coordination. Debt reduction should no longer be determined “mechanically” on the basis of macroeconomic benchmarks, but should be negotiated.

If implemented correctly, more modest debt reductions could be negotiated with member countries, which would give them more room to finance public investment and stimulate growth. The problem with the reform agenda of the European Commission, from the point of view of trade unions, is that it is likely to be discussed in the political arena outside of democratic control. In other words, it would be good if the future fiscal policy of Europe were determined more by political negotiations than by the mechanical application of rules. This policy cannot be left to the technocrats.

* Dr. Dominika Bigon is Director of the European and International Economic Policy Department of the General Confederation of German Trade Unions. The article was published on the website of the Friedrich Ebert Institute.