Brussels, the usually placid seat of the European Union, was transformed into a battleground today, with tens of thousands of workers from across Europe marching through the streets in protest against austerity packages recently put in place by governments in the region.
The protests were one of a series of parallel strikes and demonstrations held around Europe on the same day. In Spain, the country’s first general strike since 2002 paralysed the transportation system, while workers took to the streets in countries from Greece and Italy to Portugal and Slovenia.
The continent-wide trade union action was a reflection of the insecurities generated in Europe by the recent budget-slashing, tax-raising and pension-cutting schemes European governments seeking to control their debt have been forced into.
After decades of being cosseted by generous welfare states, the retraction of some privileges provoked by the high debt and decreasing competitiveness of many European countries has come as a shock to workers. In Spain, for example, where unemployment has doubled over the past three years, public sector employees are facing a pay cut of five per cent. In France, President Nicolas Sarkozy’s plans to raise the minimum retirement age from 60 to 62 has met with fierce opposition.
Wednesday’s demonstration in Brussels was being billed as possibly the largest ever seen in the city, with some 100,000 workers expected to join by the end of the day.
At Schuman, the area where a majority of the EU institutions are located, the drone of helicopters and cry of sirens created a grim aural backdrop as scores of police officers prepared against the onslaught of protesters marching through the city towards them.
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EC proposes tough rules
But inside the Berlaymont, the building that acts as the headquarters of the European Commission, there was a hush as President José Manuel Barroso held a press conference announcing further proposals to reduce public debt, deficits and macroeconomic imbalances within Europe.
Seeking to ensure against a repeat of the Greek sovereign debt crisis, that at one point threatened the continued existence of European monetary union, the EC proposed tough sanctions against euro zone countries that break rules on fiscal and macroeconomic policy.
The commission is recommending fines of up to 0.2 per cent of gross domestic product (GDP) for countries that repeatedly fail to act to bring their deficits and total debt below the EU’s minimum permitted levels as outlined in what is called the ‘Stability and Growth Pact’ (SGP). The SGP requires member governments to keep budget deficits below three per cent of GDP and their total debt below 60 per cent of GDP.
Moreover, countries that don’t act to address macroeconomic imbalances — such as rapidly rising wages that make the economy less competitive — would face fines of up to 0.1 per cent of GDP. Crucially, these fines would be levied in a nearly automatic way, avoided only if a majority of members vote against.
Subject to approval by the 27-member European Council as well as the European Parliament, the Commission’s proposals will come into effect from 2012. Speaking to reporters, Barosso said they marked “a sea change in the way economic governance is dealt with in the European Union, and in particular in the euro area”.
Legislation that would apply to non-euro zone EU member-states is also reported to be in the pipeline, although Wednesday’s announcement made no reference to this.
Related issues
EU finance ministers will remain hard at work for the rest of the week. A series of meetings are planned to discuss, amongst other issues, possible ways of penalising rating agencies for passing judgment on countries based on “wrong analysis”.
There has been much frustration in Brussels over the actions of rating agencies earlier in the year. Standard & Poor’s decision to demote Greece to junk status, even as the EU struggled to come up with a bailout package, ultimately pushing up the cost of that package, has come in for particularly scathing criticism.
Representatives of the three big agencies — Standard & Poor’s, Moody’s and Fitch — have been asked to come to a meeting of the ministers this Friday to defend the way they take rating decisions.
Not everyone in Europe is happy with Brussels’ new economic activism. Britain and France are among those expressing reservations over being subject to ever-more rigorous diktats from unelected technocrats. The Commission’s proposals are, therefore, likely to hit some bumpy weather in their passage through the Council and Parliament, even as the workers’ protests get louder and larger.