The other morning I got a shock to see that somebody had stuffed a single page flyer into my mailbox about the EU’s Recovery Fund. They must have been busy because there are some 2.5 million households in Finland!
The flyer refutes the Prime Minister’s statement that the Recovery Fund is beneficial for Finland and therefore should be confirmed in Parliament.
In summary, the writer claims to base his arguments on the following:
- The fund is being used to reduce the indebtedness of poorly managed countries (Italy and Spain are specifically mentioned) and take the EU towards a federal state.
- This is the start of the EU borrowing money with the joint and several guarantee of member states and allows the EU to start taxing member states. Such actions are said to conflict with our national sovereignty.
- The Recovery Fund is not stimulating recovery from the pandemic but is just a payment from rich well-managed countries to poor badly-managed member states….
It then says that we should call our MPs, and support the Conservative Party that is opposing the Recovery Fund, or not opposing, or partially opposing depending which member of that party is speaking!
The flyer they states that Finland has a choice of accepting a Federal Europe or not accepting and thus exits from the EU. Martin Wolf has described Brexit as sheer madness and he is most certainly right. Why any country would want to break trading ties with its biggest trading partners?
In closing the flyer quotes the “wise” words of 4 academics who make similar claims about the fund being ineffective…
Europe is a free trade area and we Finns, long with the 27 other countries benefit from relatively open borders, high levels of democracy and security (no wars or open strife), reduced foreign exchange risks and many common standards, reduced paperwork, and many shared common values. There are plenty of bad things going on but they are relatively minor compared to the above advantages.
The EU has arranged the Recovery Fund to stimulate our weakened economies and that is taking place by a fiscal proposal whereby we borrow huge amounts of cash which is used to increase output to get people employed quickly. We have seen that monetary policy, low interest rates and QE, have not done their job since the last financial crisis and they are not impacting demand inside the real economy. Unemployment rates and employment rates in the EU are still too high and too low respectively… people need to work, people need extra education and training in digital matters, we must improve productivity and we need to deal now with the challenges of climate change, strengthen democracy, and ensure fair working conditions and fair taxation for all of our people.
Austerity is fine when we are in an active economic boom but that economic condition was last seen in 2007 – since then the austerity hawks have been barking up the wrong tree…
…. and if you do not agree with this article then read up on what Paul Krugman has been writing these past years about Monetary and Fiscal policy.
“Yet there was a considerable amount of influential new thinking — not on behalf of effective policies to restore full employment, but to justify austerity policies in the face of mass unemployment. In particular, there were unconventional analyses suggesting that debt in excess of 90 percent of G.D.P. would somehow have devastating effects on economic growth and that fiscal contraction would somehow be expansionary, because it would improve confidence. These novel ideas were enthusiastically adopted by many politicians and policymakers. They also turned out to be completely wrong… Conventional analysis says what Janet Yellen said: If the stimulus proves bigger than needed, the Fed can keep things under control.” (quote from New York Times 8.5.21)
In other words economic stimulus is important just now and can break austerity guidelines when needed… and in the big picture the EU needs a big stimulus. Reforms in the EU are what we should be demanding and concentrating and not trying to stop the stimulus with bogus arguments. Nobody is pushing for a federal EU, and we have been effectively paying a tiny amount of our taxes to support the costs of the EU for decades.
PS for clarity – Monetary Policy refers to central bank activities that are directed toward influencing the quantity of money and credit in an economy. By contrast, fiscal policy refers to the government’s decisions about taxation and spending. The two sets of policies affect the economy via different mechanisms.