Jean-Paul Fitoussi: We are Federal Governments orphan of a European Federalism


Europe has two main problems: democracy and doctrine. There is a real lack of democracy in Europe: people have the right to change their governments but not their policy. France is a good example of that: Sarkozy and Hollande represent the right and the left party but still, Hollande is adopting right-oriented measures because he's following EU policies. Governments policy agendas never get off the ground due to the lack of political power. We do not elect new governments, we just elect provincial governors. There is also a problem in the doctrine: U.S is the greater producer of doctrine but just for “external use”. On the other side, EU is the greater consumer of doctrine. We do not have power because ECB decides upon the monetary policy, the fiscal policy is decided by the Fiscal Compact, the industrial policy is in the hand of a special European Commission. These institutions work in a stable situation but in our case these instruments are necessary to get out from the crisis! If democracy was born as an institution that can fix problems by itself using the power of people, now there is no chance to change policies. Actually, we are not national states, we are federal governments orphan of a European Federalism. What we live today, I call it “balance of terror”: if a European Nation doesn't want to follow the doctrinal policy of Germany, the Spread keeps increasing until the Nation goes bankrupt. Italy, for example, is the richest Country in the planet for his heritage. What happens now is that rich Countries can go bankrupt just for the Spread! A Nation's balance is made by: the assets such as private capital, public capital, human capital, social capital and natural capital; by the loss such as public and private debt. How can we increase the national wealth? Surely, boosting the assets and decreasing the debt. This is what EU decided to do through his austerity policy: by reducing the public and private debt, the measures have outcomes on the assets too. If we lower the demand, we also reduce, as a domino effect, the private capital as much as the public, the human and the social one. We destroy the human capital: the unemployment rate is greater than in the '30s. In Greece more than 60% of young people are unemployed and the problem is that this is considered as a normal situation, the rule. Moreover the social capital is destroyed due to the lack of jobs, an extreme important social glue. There is also a scarcity of confidence, the real production factor. With these conditions, the liberal economy does not work. Even the natural capital is completely demolished: with no money, no investments are made, especially in the environment. In this way we have reduced the national wealth using the smart alibi of debt, destroying the assets. But, there is a good news: President Draghi is trying with the Quantitative Easing to give more leeway to governments. The bad news: governments can't invest with this cash due to the Fiscal Compact obligations. There is no economic dynamism.  What's the solution then? In the U.S. deficit was more than 12% and still, we are so scared to exceed 3%! U.S reduced it through growth. In Greece we decided to lower Greek GDP(about 25%) and their debt increased from 110% to 175%. In Italy EU lowered of 10% but the Italian population is slowly decreasing because couples are not having babies anymore. What we have is just a political problem, not an economic one. We built a Europe with a construction fault. We thought the Euro was enough. With it we took away the national power to the central banks. Before Euro, no rich Country would be insolvent because, as U.S and Japan, they would have their own central banks. European governments are weak due to their construction. Central banks were a “shelter” for the governments. ECB has a rule: the “no bail out” clause: that's a sign of a lack of solidarity among European Nations. President Draghi, paradoxically, was accused for the new measure of Quantitative Easing. In July 2015 we will know more about his trial. EU separated the legitimacy principle from the power: the European institutions are not legitimated by people, only treats can modify their power, but we need unanimity. We need an expansive economic and fiscal policy, a “healthy” competitiveness among Countries to increase production and investments. It has come the time that European institutions do what they tell the Countries to do: more flexibility, less rigidity. 

As a young Italian student, I do believe these words represent what I think of Europe. The crisis, that we all call “economic”, is just a political and social matter: people don't believe in European institutions anymore and our governments cannot guarantee us a stable context, because there is a “construction” problem between European Nations and EU. This stagnation doesn't lead anywhere: if we cannot invest in our Countries’ excellences because there are obligations to respect, the Nations won't build a better future. I believe investments are the key word of a “healthy” economy, they stimulate the entire system: they should be addressed to the public, the private, the social, the human and the natural sector. Without them, governments are blocked. Moreover, there is a real “balance of terror”: everybody knows how “scary” the word Spread is, but still this is the instrument to measure if an European country is “good” or “bad”. In this context, it's hard to see in the long term a change if, as Mr. Fitoussi says, the European institutions don't become more flexible. Greek election can represents an evolution for Europe, since the Tsipras administration wants to change the system, at least the way it works with Greece. The data about youth unemployment in Greece is disconcerting: 60% of young people don't have a job and the social impact is terrible. Young people now think that this is the normal situation, the rule is that the Country doesn't offer jobs, that there are few chances to have a stable future. According to Mr. Fitoussi, the European crisis is political and I add a social side to this analysis: people keep suffering and this is not a solution to the stagnation. Making people suffer more will not lead to a better Europe, only flexibility in the policy and an increase of the public and private investments will help the European system. To watch Mr. Fitoussi interview:

By Annaclara Mezzopera Wednesday, 22nd April 2015

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