A STEP IN THE RIGHT DIRECTION

This week’s European summit will see the first exchanges of fire in what promises to be a gruelling battle over the economic and social role of the European Union.

The protagonists are already well entren­ched. On one side are the forces of light – the followers of European Commission president Jacques Delors, whose imaginative white paper on competitiveness, growth and unem­ployment will be discussed in Brussels. De­lors believes that Europe, with 20 million out of work already, is facing ever-increasing unemployment unless there is concerted Eu­rope-wide intervention to create jobs. The white paper, Tackling the Challenges and Moving into the 21st Century, proposes a package of measures for infrastructural investment (in communications  –  both infor­mation technology and transport  – and energy), research and development, and the skills of the workforce. On information tech­nology, Delors suggests EU spending of Ecu20 billion (£15 billion) a year for the rest of the 1990s; on transport and energy, his target is Ecu250 billion (£190 billion) of in­vestment by the end of the century.

Instead of cutting wages and pruning unem­ployment benefits to “price people into jobs”, Delors argues for a “European social pact” whereby unions agree that gains from in­creased productivity should be ploughed back into investment. Workers should be given the opportunity of retraining through­out their lives. Meanwhile, new types of enterprise should be created between public and private sectors to develop a new “social economy”, producing socially useful non­commercial goods and services (such as inner-city renovation, home helps for the elderly, child-care for working mothers and so on) and creating some three million jobs. 

Ranged against Delors and the intervention­ists are the usual suspects: the British govern­ment and Unice, the European employers’ confederation. They believe that the key to

European economic recovery is labour mar­ket deregulation and reduced employment costs. Unice’s report, Making Britain More Competitive, published on Tuesday, calls for cuts in employers’ social security contribu­tions for young and low-paid workers and relaxation of rules on maximum working hours, minimum wages and making workers redundant. The ideological affinity with the Tory policies that have done such damage in the past 14 years in Britain is striking.

The stark difference between the two ap­proaches to EU economic and social policies makes it almost inconceivable that this week’s summit will reach any consensus  –  and, in the short term at least, the predomin­ance of right-wing governments among EU members means that the best that Delors can hope for is a request to put his proposals in more detail. Although he has the backing of the Belgian EU Presidency, the EU’s big guns  – Germany, France, Italy and Britain  –  are either worried about the costs of his pro­posals or (in the case of Britain) vehemently opposed on dogmatic grounds.

In the longer run, however, the prospects for something like the Delors plan being put into practice are rather better. To begin with, his proposals are not in fact far removed from what the mainstream European Christian Democratic right would like to do: the reason that German Chancellor Helmut Kohl is cur­rently unenthusiastic about them has less to do with ideology than with the burden of debt with which reunification has saddled his country. An improvement in Germany’s economy, expected some  time in the next  18 months, could work wonders for Christian Democrat dithering over the Delors plan, al­though its author might well have retired by then.

Just as important, the political balance in the EU is by no means set in stone. Both Italy and Germany face general elections in the coming year that seem likely, as things currently stand, to result in left-leaning coalitions coming to power.

Last weekend’s Italian local elections show that the former-communist Party of the Democratic Left (PDS) is now the only coher­ent national political force: many political commentators reckon that it is set to be the core of the government that takes office after elections likely in the spring. In Ger­many, although the Social Democrats (SPD) are not performing as well as they would like, the popularity of Chancellor Kohl’s Christian Democratic Union has plummeted, particu­larly in the east of the country, and there’s a possibility of an SPD-CDU “Grand Coalition” taking power next autumn. With both PDS and SPD in government, the laissez-faire la­bour market deregulation approach so beloved of the British Tories would have far less purchase.

Of course, this cannot be taken for granted: expectations of shifts to the left in Europe have all too often been dashed in recent years, and a Franco-British laissez-faire bloc could seriously damage the prospects of the Delors plan even with left-leaning governments in Germany and Italy. Neither should anyone underestimate the widespread fear in the Eu­ropean establishment that, faced with grow­ing competition from the newly industrialising countries of the far east, Eu­rope has no option but to cut wages and employment costs by any means necessary.

But at least there are grounds for cautious optimism. The Delors plan is far from perfect. It falls well short of the sort of counter-cycli­cal Keynesian expansionism that Europe so badly needs, and it does nothing to address the democratic deficit in EU macro-economic policy-making: it is designed to be im­plemented by the unelected Commission after approval in secretive intergovernmental bodies. Nevertheless, it is a crucial first step towards the pan-European pro-growth macro-economic policy that is our only hope of tackling unemployment. As such it deserves all the support the left can give it.