The European Council should put inequality and Social imbalances at the heart of the European economic governance

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On 16 September, the European Council will discuss proposals on economic governance. As they currently stand, these proposals basically boil down to virtually automatic sanctions, to be decided by finance ministers, against countries which fail to cut wages, social benefits and public services.

The European Trade Union Confederation (ETUC) rejects such a European ‘sanctions team’ cracking down on wages. Says John Monks, General Secretary of the ETUC: “The policy of repressing wages, making labour markets more flexible and weakening trade unions has gotten us into this mess; returning to a similar policy will make matters even worse”.
Instead, the ETUC calls upon the European Council to identify high and growing inequalities along with precarious work practices as the fundamental cause of macroeconomic imbalances. Growing inequalities cause demand to leak out of the economy. If countries react to this by resorting to a ‘beggar-thy-neighbour’ policy to boost their own exports at the expense of other member states, current account imbalances start to occur.
Economic governance, for the ETUC, is therefore about common European policies to stop the social race to the bottom that is going on in the internal market. Economic governance is also too important to be left to finance ministers only. The ETUC believes that the process of economic governance should be led by the European Council, with social and employment ministers and social partners providing their input.
Says John Monks, General Secretary of the ETUC: ”Macroeconomic imbalances are simply the tip of the iceberg. High and growing inequalities, as well as the spreading incidence of precarious work, are the real problems Europe should be addressing”.

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