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Euroviews. Europe can't afford another austerity crisis

People buy items for one euro at a store in central Athens, July 2015
People buy items for one euro at a store in central Athens, July 2015 Copyright AP Photo/Euronews
Copyright AP Photo/Euronews
By Lucie Studničná
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The opinions expressed in this article are those of the author and do not represent in any way the editorial position of Euronews.

Europeans are calling for leadership, not cowardice. This is not the time for quick fixes and old approaches. For the EU to keep pace on the global stage and establish itself as a strong international force, backing off is not an option, Lucie Studničná writes.

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Earlier in April, almost all member states signed the declaration of La Hulpe, together with the EU institutions and the Belgian presidency, as a strong signal of the importance of social policy and the European Pillar of Social Rights. 

But just days ago, the European Parliament ratified a new set of fiscal rules that the Council agreed upon last December, which signals a troubling return toward austerity measures. 

If you remember when governments across Europe slashed budgets, cut services, and generally made life harder for everyone, then you know why many are alarmed by this change in policy.

Fiscal constraints will make matters worse

Concretely, the fiscal rules will require governments to maintain budget deficits and public debt below 3% and 60% of GDP, respectively. However, those rules take a new approach and divide countries into high‑, medium‑, and low-risk groups.

High and medium-risk countries are required to reduce their debt and/or deficits, while low-risk countries are expected to maintain debt levels below 60% and deficits below 3%. 

With Europe facing a cost-of-living crisis, a climate crisis, and a surge in anti-democratic movements, there is no doubt that these fiscal constraints will make matters worse.
A protestor holds a sign which reads 'stop austerity' during a demonstration against austerity measures in Brussels, December 2023
A protestor holds a sign which reads 'stop austerity' during a demonstration against austerity measures in Brussels, December 2023AP Photo/Sylvain Plazy

Under this new approach, member states with a public debt-to-GDP ratio exceeding 90% must reduce their debt by one percentage point of GDP each year. EU countries with debt-to-GDP ratios between 60% and 90% are required to reduce their debt by 0.5 percentage points annually.

According to a study by the European Trade Union Confederation and New Economics Foundation, to allow all member states to meet their social and green public investment needs, an additional €300-420bn (2.1-2.9% of EU GDP) annually would be needed. With these fiscal rules in place, only three countries — Denmark, Sweden, and Ireland — can afford this level of investment. 

With Europe facing a cost-of-living crisis, a climate crisis, and a surge in anti-democratic movements, there is no doubt that these fiscal constraints will make matters worse.

What do Europeans want?

It's no surprise that the effects of these multiple crises are a central concern for Europeans. 

In a new Eurobarometer poll when asked about their top priorities, citizens point to combating poverty and social exclusion, improving healthcare, and creating jobs. Yet the new fiscal rules would stop Europe from investing in social programmes, hospitals, and climate action — exactly what people are asking for.

In a world that is rapidly digitalising, geopolitically tense, and increasingly competitive, the EU simply cannot afford to embrace policies that restrict public investment and choke off economic and social progress.
Protesters chant slogans during an anti-austerity rally in Athens, June 2018
Protesters chant slogans during an anti-austerity rally in Athens, June 2018AP Photo

Originally, fiscal rules were suspended to allow for high deficit spending during the COVID-19 pandemic, and later, following the energy crisis triggered by Russia’s war with Ukraine. However, even if the most brutal impacts of those crises are gradually fading into the past, we are still in the eye of the cyclone. Now is not the time to back away.

We know from past experience that austerity leads to greater inequality, while also hampering economic growth. 

In a world that is rapidly digitalising, geopolitically tense, and increasingly competitive, the EU simply cannot afford to embrace policies that restrict public investment and choke off economic and social progress.

Another interesting insight from the latest Eurobarometer survey is that over eight out of 10 Europeans (81%) feel that voting is more important than ever because of today's geopolitical challenges. What's more, 73% of EU citizens say that the EU's decisions directly affect their everyday lives. 

There's no quick fix for courage

This sends a clear message: Europeans are calling for leadership, not cowardice. This is not the time for quick fixes and old approaches. For the EU to keep pace on the global stage and establish itself as a strong international force, backing off is not an option.

With the European elections coming up, an influx of far-right and eurosceptic parties are knocking at the door of the European Parliament. This has been an ongoing issue that the EU has yet to address deeply. 

Trade unions and civil society organisations at the European Economic and Social Committee have been calling for years to strengthen citizen participation in EU policymaking to tackle this trend. 

This can't be fixed with short-term solutions; we need to start by actually listening to what citizens want and delivering the social progress and sustainable Europe we all so desperately need.

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Lucie Studničná is President of the Workers' Group at the European Economic and Social Committee (EESC).

Contact us at view@euronews.com to send pitches or submissions and be part of the conversation.

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