This year’s EuroMemorandum proposes alternative policies for the EU to effectively address the present polycrisis.
The neoliberal global and European order has entered a polycrisis, understood as multiple shocks feeding each other with growing complexity. Taking its cue from the UNEP Emissions Gap Report that the time for incremental change has passed, and that only a root-and-branch economic transformation can save humanity from disaster, the 2023 EuroMemorandum analyses the polycrisis Europe faces, critiques EU policy, and offers radical policy alternatives.
CHAPTER 1: The macroeconomic outlook 2023 will be a difficult year as the EU is ill-prepared to address the polycrisis.
The following alternative macroeconomic policies are urgently needed:
- The centrepiece of EU macroeconomic policy should be a major public investment programme to promote an ecological and social transformation.
- The inflation problem should be dealt with through fiscal policy, rather than interest rate hikes, including selective cuts in indirect taxation of essential goods and services, higher taxation for particular sectors and sections of the population, price controls in sectors of strategic importance (energy, rent, essential food items), support for the middle-and-low-income households suffering from the cost-of-living crisis, and for businesses that have problems meeting increased energy bills.
- Increased public spending should be financed through increased taxes on the income and wealth of high-net-worth individuals and large corporations, windfall gains made by energy providers and other manufacturers, as well as by the financial sector.
- Public spending may also be financed through common borrowing based on the solidarity principle. The positive experience of this aspect of Next Generation EU indicates its feasibility.
- The common EU budget needs expanding. 5% of EU GNI is the minimum rate required under the present circumstances.
- The revised Stability and Growth Pact does not include preferential treatment for green investment, nor reference to indicators beyond GDP, accounting for social and environmental goals. This should be rectified.
- The European Central Bank (ECB)’s mandate should be expanded to include full employment in addition to inflation, while the 2% inflation target must be raised to accommodate a needs-based fiscal policy.
- EU economic governance should be embedded in a democratic participatory framework, where the European Parliament participates in decision-making, oversees implementation, and holds the European Commission and the ECB accountable.
CHAPTER 2: Dealing with the cost-of-living crisis
Real wages are expected to decrease on average by 6.5% in 2022 and 2023; social benefits have not been adjusted to compensate for increased inflation. Furthermore, the consumption basket of lower income households renders them particularly vulnerable to the price increases of energy, food and rent. However, wage devaluation concerns all employees, increasing the risk of impoverishment. The cost-of-living crisis adds a further layer to a wider and long-standing crisis of social reproduction.
Everyday life does not simply involve difficulties in covering energy and supermarket bills, repaying loans, paying taxes etc., but also difficulties in getting access to essential social services that have been eroded by austerity and privatisation (healthcare, childcare, long-term care and education).
EU social policy developments have been contradictory. Important relatively progressive developments include the Action Plan of the European Pillar of Social Rights: the Directive on adequate minimum wages; the European Commission’s proposal for a Council recommendation on adequate minimum income; and the European Care Strategy. However, these are not compatible with the economic policy stance analysed in the first chapter.
The EuroMemorandum Group calls for the following alternative social policies:
- Wage increases and wage indexation mechanisms, especially of low wages, should be prioritised in policy and collective bargaining agendas.
- Disconnecting households from energy grids should be banned.
- Access to essential public services and goods should be part of a rights-based approach to ensure that the needs of the population are effectively covered. Investment in public services and infrastructures is a means to deal with both the immediate cost-of-living crisis and longer-term social and environmental goals.
CHAPTER 3: Global disorder, the climate crisis, and the need for rapid socio-ecological transformation
The scale and urgency of the climate crisis is growing. Several tipping points have either been triggered or are imminently threatened. Approximately $4.3 trillion are necessary by 2030 to avoid the worst outcomes.
Reliance on private “green finance” to address the climate crisis and mitigate the effects of damage already sustained dominates EU policy. This optimistic faith in “green finance” is misplaced. Studies of the world’s largest asset management funds show clear evidence of “greenwashing”. Three companies manage assets of over $20 trillion and spend large sums advertising their green credentials. However, as large shareholders in fossil fuel corporations, they have consistently supported the carbon majors’ resolutions at shareholder annual general meetings. Rather than promoting environmental stewardship, the Big Three are stewards of the status quo of shareholder value maximisation.
The political leverage of both asset management corporations and global carbon-intensive enterprises is also colossal, adding considerable confusion to debates over environmental renewal within civil society.
Further major obstacles to ecological transformation include the hegemonic rivalries between major states, and wasteful and destructive wars. These all dilute the formulation and implementation of effective policies.
The Euro Memo Group holds fast to its conviction of the indivisibility of climate mitigation and radical reduction in social inequalities at national, regional and global levels. The current accumulation regime of financialised capitalism and value extraction by narrow elites weakens the potential for the democratic legitimation of fundamental change to our patterns of production, employment and consumption.
The preparedness of advanced economies, including those of the EU, to provide major volumes of financial and technological support to less developed regions is vitally important in order to carry forwards the hope of avoiding a ruined planet and the associated perils for the physical well-being of future generations. In concrete terms, this means the bulk of funding being deployed to support poorer states.
CHAPTER 4: Global disorder and its repercussions on the future of the EU
Anaemic uneven economic development and increasing uncertainty in everyday life shape the dynamics of world political economy, including through rising inequalities and the development of political systems. Wealth can be translated into political influence also in liberal democracies. When rules limiting the influence of money on politics in favour of the wealthy and big corporations are changed, the process easily becomes self-reinforcing. Previous changes enable new changes in the same direction, resulting in de-democratisation and increasingly asymmetric power-relations.
In a tightly interconnected world economy, no major development is isolated, while interdependence can easily become weaponised as illustrated by US-China relations. A lot depends on the capacity of actors to solve common problems by means of peaceful cooperation. In the 2000s, global governance began to decline. Global problems left unresolved may exacerbate those very problems and generate social conflicts. But they also involve disintegrative tendencies and contradictions in the global political economy.
The rise of nationalist-authoritarian orientations deepens the current gridlock of global governance. While attempts at forging unity of ‘the people’ through negativity mean anti-elitism, they also take the form of othering and enemy-construction. Even in moderate versions of nationalism, the tendency to follow myopic self-regarding policies in the interstate field makes cooperation more difficult and increases the likelihood of conflicts and their securitisation.
Global disorder has now culminated in full-scale war at the heart of Europe. The brutal short-sighted Russian invasion of Ukraine violates international law and causes enormous suffering and turmoil. Furthermore, the escalation has reached a point verging on nuclear war.
There is a nearly absolute moral imperative to de-escalate the conflict. This is a war between Russia and Ukraine, with intensive NATO involvement and with long-deteriorating US-Russia relations looming in the background. Any peace agreement must be negotiated by the relevant participants and with appropriate third parties; UN involvement is essential.
But a mere peace agreement alone is insufficient to reverse the ongoing disintegrative tendencies. It requires a series of far-reaching, long-term reforms in the governance of the world economy; that is, more adequate common institutions.
More than 130 economists and social scientists from all over Europe and beyond have declared their support for the new EuroMemorandum (click here for the list of signatories).
Read the EuroMemo on the right/below (mobile) in ‘Documents’ (English, PDF).
Other languages currently available (check the bottom of this page for updates):
The full text of the EuroMemorandum 2023 is also available in: Italian
Summaries of the EuroMemorandum are also available in: Greek
Table of Contents
1. The macroeconomic outlook (p.8)
- Macro developments (p.8)
- Tightening of Monetary Policy and Uncoordinated Fiscal Policy (p.11)
- Stability and Growth Pact Review (p.12)
- Alternative policy proposals (p.14)
2. Dealing with the cost-of-living crisis (p.16)
- The cost-of-living crisis and its effects (p.16)
- Policy developments at EU level: fiscal discipline inconsistent with new social commitments (p.19)
- Alternative proposals (p.22)
3. Global disorder, the climate crisis, and the need for rapid socio-ecological transformation (p.23)
- The false hope of commodified and financialised climate governance (p.25)
- Geopolitical rivalries (p.28)
- Decommodification and socio-ecological transformation (p.28)
4. Global disorder and its repercussions on the future of the EU (p.30)
- Political consequences of the concentration of wealth (p.30)
- The decline of global governance and disorder (p.32)
- Alternative policies and the need for institutional transformations (p.35)
Declaration of support (p.39)