Column | More security, more state

This piece is about the European Stability and Growth Pact, the system of rigid budget and debt ceilings that should keep twenty countries with different economies and one euro more or less stable. That system doesn’t work. It needs to be changed. Some say this will be another pitched battle between northern and southern Europe. Germany is against. But that could turn out differently.

First sketch the decor. For example, the Rotterdam Intelligence Group published a report this week showing that the government is the preferred employer among the Dutch working population, for the fourth year in a row. Schiphol, tax authorities, police, care – they are all on the rise. People want certainty, predictability. And more justice. The Brussels negotiations on the Stability Pact are not unrelated to this.

Or take recent research of the Swiss think tank Sotomo, which shows that more and more people believe that government subsidies and interventions are necessary. They’ve had enough of the commercialization of everything. Citizens think that the state has better intentions than companies that regulate themselves. “The nanny state has received majority support,” said Sotomo director Michael Hermann. If even the Swiss think like this, you know something is shifting. Also political.

And yes. One party after another from the political center, says Hermann, is converting to more social policies. More security, more state. You see it in the Netherlands: high social expenditure in recent years, and that with a liberal prime minister.

Austria is also interesting. Made there the communist party last week a blow in elections in Salzburg. Well, communists. Rather some former Greens, concerned about exploding house prices. Since the Greens do little about this – who are trying to achieve climate goals – and neither do the Social Democrats – who are torn apart by an internal battle of ideas – they went to the KPÖ. Et voila: 21.5 percent, the best score in decades. In 2021, a communist became mayor of Graz. There will be Austrian parliamentary elections next year. The KPÖ – “We are not revolutionaries!” – looks forward to it.

In this socio-economic and political context, reforms of the Stability Pact in Europe are being discussed. Just to be clear: it is governments and the European Parliament that decide how that pact should be changed. The Commission has made a proposal this week, but has not taken any decisions.

Former Commission President Romano Prodi once said that the pact, with its strict fiscal rules (3 percent) and debt rules (60 percent of national GDP), is “stupid”. As said: all countries have completely different economies. What works for one doesn’t work for the other. During the euro crisis, countries such as Greece and Ireland had to implement drastic austerity measures in the midst of a resounding recession. As a result, the recession lasted longer. Clearcutting, social misery, capital flight and political instability almost killed the euro. The lesson is: of course there should be rules, but they should be enforced more flexibly.

During the pandemic, all countries helped citizens and businesses. Almost everyone now has significant debts and deficits. It was force majeure. That is why the Pact was put on ice until January 2024. But now climate concerns, the energy transition and the war in Ukraine are costing us. We must help Ukraine. America cannot continue to pay for our defense.

How do we get rid of our debts and deficits? By looking for each country at what is possible and what is not. This must be done with policy, not with a blunt axe. Nobody wants another euro crisis.

Brussels fights about money are always fierce. The Commission proposal goes too far for Berlin, not far enough for Paris and Rome – a good start, many think.

And actually it is not Berlin who is dissatisfied, but Finance Minister Christian Lindner. He wants to leave the pact as it is. Germany is powerful, in euroland. But Lindner is an FDP member, whose coalition partners – Social Democrats and Greens – are more lenient. His toy is economizing. But German media already wrote this week that he will lose this battle.

They could well be right. The FDP wants less state, but comes with that in the polls no higher than 8 percent. If Lindner wants to stay above the electoral threshold, he has to make concessions.

29-04: In an earlier version of this column, the percentages for European budget and debt rules were mistakenly switched. This has been adjusted.