Where Now for European Social Democracy? - Policy Network

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ROGER LIDDLE 65particularly in order to sustain elite support for the European project,does not mean it is ‘bad for working families’. Because it is goodfor growth and good for jobs, it is good for working families too. Wehave no less an authority than the economists of the IMF and theFederal Reserve to underline the point. “Our simulations indicate thatincreasing competition in the euro area to US levels could boost outputby 12.4 per cent in the euro area and 0.8 per cent in the rest of theworld” 10 . As a result, they predict Europe could enjoy an investmentand jobs boom.In the short term, there are inevitable losers from marketintegration. Social democrats have an obligation to help these losers toadjust. The traditional social democratic response has been to pressfor increased European funding to strengthen ‘social cohesion’ andto argue for a social agenda of high regulatory standards in orderto prevent a ‘race to the bottom’. Both these traditional responsesrequire modification.The traditional European instruments for strengthening cohesionhave been the Structural and Regional Funds. At one time, it waspredicted that the golden triangle at Europe’s core would be the majorbeneficiary of market integration at the expense of the periphery, butthis has proved false. No-one disputes the case for transfers to the newmembers of the EU whose living standards are less than half the EUaverage. But within the countries of the EU 15, regional differentialsfollow no consistent pattern and the effectiveness of EU interventionhas varied a great deal. There is a debate to be had on whether thistype of intervention is most appropriately channelled throughEuropean, national or sub-national budgets – albeit within a commonEuropean framework. There is also an issue about whether aid shouldbe refocused more on stimulating new sources of growth and helpingindividuals to adjust rather than on specific geographical areas andinfrastructure projects. But, for a social democrat, the promotion ofeffective support for adjustment must march hand-in-hand withmarket integration.On the issue of regulation, business across Europe is demandingthat the politicians ensure ‘Brussels gets off its back’. Social democratsneed to open up a more sophisticated debate about regulation and its
66WHERE NOW FOR EUROPEAN SOCIAL DEMOCRACY?impact on jobs and competitiveness. EU-wide regulation can promotecompetitiveness by setting standards that apply across a huge market,the best example of which is how the GSM standard has made Europethe world leader in mobile telephony. EU-wide regulation can howevercost jobs in internationally competitive markets, if Europeancompanies are expected to adhere to more costly standards than theiroverseas competitors, as the Germans fear in the case of the presentdiscussions over the Chemicals Directive.Also, social democrats have to recognise that ‘Social Chapter’regulation can pose a particular burden on small firms. The LabourGovernment in Britain supports the concept of a floor of socialstandards, which since 1997 has become more solid and widely based.But there has to be flexibility in application. We have to accept thatthere may be trade-offs between the creation of new jobs and theimposition of costly social standards. All one can do is strike a balance,case by case.It is simply not good enough to argue that, in the long run, allEurope can be winners from more open markets. In the long run, weare all dead, as Keynes famously quipped. Certainly, we need strongaction at European level to strengthen the Single Market, such asbacking for the European Commission’s present proposals to extendthe Single Market in services and more determined enforcement ofexisting rules on competition and state aids. But we also need fullconsideration of imaginative proposals like those contained in the Sapirreport for ‘restructuring credits’ that redundant workers could puttowards the costs of moving home or retraining 11 . Social democratsneed to sharpen Lisbon’s policy focus on the problem of assisting thelosers from market integration.Equally, reform of the Stability and Growth Pact matters to bothmembers and non-members of the euro alike. The present Pact isinimical to the Lisbon objective of ensuring stable macro conditions forgrowth. Several countries have been forced by the Pact into policiesthat aggravate the economic cycle. This is not just a matter thataffects members of the euro. Perverse economic policies outsideeurozone areas are damaging to countries like Britain outside the eurowith over half their export markets in the eurozone. The decision by
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Where Now forEuropeanSocial Democra
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Published in 2004 by Policy Network
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AcknowledgementsThis collection of
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Notes on the ContributorsTony Blair
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PrefaceTONY BLAIRI welcome this pub
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6WHERE NOW FOR EUROPEAN SOCIAL DEMO
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What is a just society?For a radica
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Page 58 and 59: JEAN PISANI-FERRY 51and full employ
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Page 62: JEAN PISANI-FERRY 55macroeconomic f
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Page 94 and 95: BRIGITTE ZYPRIES 87that these recom
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Where Now for European Social Democracy? - Policy Network

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