Austerity Treaty: no democracy without referendums

Within days a new legal creature will most likely have taken its final shape: an EU treaty that is not really an EU treaty. European Union rules stipulate that new treaties have to be approved by all member states, so with the UK vetoing the proposals, member state governments chose to be creative. In the late hours of the EU summit in December they outlined a text that will expand the role of the EU and affect the role of the EU institutions in key decisions on member states’ policies, that will reinterpret and change the functioning of the existing EU treaty, and yet – due to the British veto – it won’t be an EU treaty.

Though negotiations haven’t finished yet, the key elements seem to be set in stone: mainly, the treaty will force member states to stick to ‘balanced budgets’ from now on with harsher rules to drive expenditure down –  even stricter than the existing rules that only allow for a deficit of 3 % of GDP. It’s hard to exaggerate the consequences. To bring deficits down to next-to-nothing under the present circumstances will be very costly and disastrous for the economy and for welfare. Rest assured they’re not going for defence budgets: it’s social expenditure that will bear the brunt of the cuts. Nor is it a loose declaration: whether this “debt brake” is introduced “correctly” by signatory states is to be monitored by the European Court of Justice.

Though the treaty is all about member states’ expenditure, with nothing on taxation or the long term value of investments, it’s perversely being called a “fiscal compact”. All things considered,  “Austerity Treaty” would be much more appropriate and has already been widely used.

On top of this, there will be a series of provisions to increase the EU institutions’ control over member states’ economic policies to ensure reforms to promote competitiveness and “sound public finances” – defined to fit the interests of large corporations and banks, and to roll-back welfare policies.

The new treaty is the next big building block in the construction of system of rules on economic policy that include a number of laws passed in the European Union over the past year and a half, such as the European Semester (control of budgets and fiscal policies), and the six legislative acts in the ‘six pack’ (tougher rules to impose austerity measures and hold down wages). Under the new treaty, these rules will have a shaky and questionable basis in the EU Treaty.

This wave of reform is changing the face of the European Union. Equipped with new powers, the Commission can meddle with key decisions on state budgets, including social expenditure, the future of public services, labour law and wage policies.

This development fits hand-in-glove with the agenda of big business in Europe – industry and finance alike. Industrial corporations can clearly see their buzzword “competitiveness” introduced as an objective in a common economic policy that will be backed up by strong legal instruments; and banks can see states taking the blame and paying the bill for their own irresponsible behavior. And now – as in the future – this will be implemented with little democratic debate and through technocratic procedures that will be impenetrable to voices from the public – a “Corporate EUtopia”. No wonder this new fiscal compact has been routinely applauded by the European Banking Federation and by the European employers’ association BusinessEurope - which notes with satisfaction that it’s all “in line with the statement” they published shortly before the summit. Their vision for Europe has made giant strides in the last year, with a full seven EU summits in 2011to ensure it could be done speedily (the norm is four).

Given the scope of the changes, any serious democrat would consult the public. But referendums are not to likely to be entered into voluntarily. The prospect of referendums is clearly the elephant in the negotiating room where governments are struggling hard to both squeeze the thumbscrews a notch while avoiding having to ask anyone. National laws and traditions are being scrutinized to find ways to circumvent rules on popular votes, sometimes with almost amusing results. In the first version of the treaty, signatory states were asked to insert the budgetary objective in their constitutions. Since such a constitutional change would trigger a referendum in some countries, another new legal creature has been invented -  –a law that cannot be changed. In other words, constitutional rules outside the constitutions.

The conclusion must be that if there is to be a real popular debate and a real popular decision on the mandate of the European Union, the task lies squarely in the hands of civil rights groups, social movements and other democratic forces in society.

Time is of the essence. The final version of the new treaty is to be finalised by the end of January, signed in March  to enter into force in January 2013. If there are to be referendums anywhere, the struggles for the peoples of Europe to have a say on their future must be won very soon.