The EU from crisis to crisis

Social Democracy in Europe has been on the decline: some parties are experiencing an erosion of support while others have simply collapsed at some point. While the creation of the particular economic model of the European Union (EU) has historically relied on Social Democratic inputs, the functioning of the EU, and especially its lack of resilience at the time of the great financial and economic crisis, undermined support for progressives in various countries. The EU drifted towards a model that is hard to reconcile with the key tenets of Social Democracy: the commitment to full employment, well-regulated working conditions and a strong welfare state. Whether the EU can be reformed at all, and whether Socialist, Social Democratic and related progressive parties—hereinafter just referred to as the Social Democrats—can become the drivers of this change, will be key questions when a progressive reconstruction strategy is assembled. The EU as we know it was designed and inaugurated under Jacques Delors as Commission President. The French Socialist politician is often referred to as the EU's foremost architect. Experts credit him with the introduction of the single market, preparation of the currency union and strengthening of the EU's social dimension. Most importantly, it was under his leadership that the expression of a ‘European social model’ was coined, and EU-wide tripartite consultations begun, leading to the enactment of social legislation. While some of Delors’ contemporaries were Socialists like him—Francois Mitterrand, Bettino Craxi and Felipe Gonzalez—, other leading statesmen came from centre-right orientation: Helmut Kohl, Ruud Lubbers and Giulio Andreotti. EU policy already at that time developed as an amalgam of policies, under the constant pressure for a compromise between Liberals, Christian Democrats and Social Democrats. Where Delors’ socialist approach mattered, in particular, was his standoff with Margaret Thatcher, the Conservative prime minister of the United Kingdom, who rejected the idea that the single market should also bring with itself a single currency, as well as closer cooperation between member states in the fields of interior and social policies. Delors was committed to building a social dimension for the single market, but not for the currency union. The difference between the two is highly significant; we can thus talk about a Delors-paradox here. While the single market–related social legislation introduced by Delors has been of great importance, this architecture has been progressively undermined by the currency union, which in social terms has polarised, rather than unified the Union. From the beginning of the 1990s, cooperation between the EU Member States in the monetary field outstripped cooperation in other areas, mostly due to political reasons (in other words, by prioritising the euro's unifying role). The single currency was introduced without an EU-level system for the supervision of financial institutions operating on the single market, and thus without any real economic governance that could help to make development more evenly balanced, and without any uniform, solidarity-based crisis-management mechanisms to respond to shocks. The Economic and Monetary Union (EMU) in its current form is the product of the 1992 Maastricht Treaty. It is the result of a 25-year-long process in which—as the Bretton Woods financial system began to break down—the EU started to explore and implement various forms of monetary integration, and eventually started to phase-out national currencies. However, while in the 1970s, a number of documents were produced envisioning monetary union alongside a substantial fiscal capacity (e.g. joint unemployment benefit fund), this aspect was completely absent from the Maastricht model. The technical preparation of the treaty on a currency union was entrusted by Delors to a group of central bankers. The minimalist EMU model devised by these bankers managed to eliminate the threat of a currency crisis that had afflicted Europe in the past. At the same time, having removed the option to devalue national currencies, and in the absence of other balancing mechanisms, the likelihood of fiscal and social crises increased. The absence of such balancing mechanisms can be seen first and foremost (though not exclusively) in the social dimension of the currency union. The Maastricht model was conceived in an era of considerable faith in markets’ ability to self-regulate, without an apparent need for an institutional solution ensuring financial balance and fiscal prudence within the EU. Later corrective measures that sought to strengthen financial stability or economic governance were not sufficiently strong to overcome the shortcomings of this model. And in fact, reform steps were taken in the wrong direction, more often than not. Party politics played a significant role in the evolution of EU governance. In the mid-1990s, when the centre-right had a majority in the European Council (Kohl, Chirac, Berlusconi, Major), the EU amended the Maastricht framework with the Stability and Growth Pact (SGP), a set of rules and procedures limiting the scope of autonomous, and potentially counter-cyclical fiscal policies at the national levels. A few years later, when the centre-left dominated European politics (Blair, Schröder, Jospin, D'Alema, etc.), a very different type of EU policy, the Lisbon Strategy was produced. The lasting impact of the Lisbon Strategy has been less pronounced than that of the SGP. This may be considered unfortunate, since the resulting arrangements have certainly constrained subsequent policy choices. Cemented in EU treaties, this architecture can be challenged from the perspective of democratic legitimacy. (Similarly to national constitutions, which are also hard to change.) In the EU context, this situation has resulted in a constant pressure for reforming governance structures to enable more genuine initiatives by citizens and elected members of the European Parliament, as well as applying majority decision making more widely and subject to fewer veto points. The party political aspect of EU construction should not be underestimated though (see Andor & Watt, 2018) . Of the 10 European Commissions, starting with the one led by Roy Jenkins in 1977, only one (Prodi from 1999) had a clear left-of-centre majority in the College. Fully seven have had a centre-right (the European People's Party [EPP]/Alliance of Liberals and Democrats for Europe [ALDE]) majority. Yet the College of Commissioners consists of those sent by national governments and thus its composition reflects electoral outcomes in the Member States. Similarly, in every European Parliament but one since 1979, Conservative-Liberal parties formed a larger block than left-of-centre groups. Members of the European Parliament (MEPs) are directly elected by EU voters (albeit not proportionately, to the advantage of smaller countries). Given the above, it goes almost without saying that on the (European) Council, the real powerhouse of the EU, the centre-right has had a kind of iron grip on power; indeed EPP-affiliated parties alone have held a majority of Council votes almost uninterruptedly, the exception being the already mentioned interlude at the end of the 1990s. However, the 1990s saw a dual transformation of Europe: the transition to monetary union took place alongside enlargements, which made the EU more imbalanced than before also geographically. The risks of the East-West imbalance were easier to spot than the risks of the incomplete EMU. Party political divisions became visible also in the responses given to enlargement. Regarding Eastern Europe, progressive forces developed a dual strategy. Driven by political considerations focusing on the reunification of the continent, the idea of Eastern enlargement was supported as a logical continuation of the fall of the Iron Curtain, and as such, it had to be celebrated. At the same time, Social Democrats, especially those with a trade union background, challenged specific aspects of the single market that were to be made more problematic by an asymmetric EU. These efforts gave rise to the social dumping debate, focusing on unfair competitive advantages linked to the wage gap and the weakness of industrial relations and welfare states in the new member states. This debate created some ambivalence about centre-left support for the single market. Focusing on social dumping, and especially on the group that was seen as an embodiment of that phenomenon (the so-called posted workers), not only created East-West tension in the post-enlargement years but also diverted attention from the incomplete nature of the EMU, which until the Great Recession remained an invisible time bomb. The long-term trends of social democratic erosion have been explored by various authors, most notably Benedetto, Hix, and Mastrorocco (2019). Some common processes behind long-term electoral decline can be explained by factors in societal change (e.g., more people participating in higher education while private-sector trade unions have been losing members). Due to such trends, social democrats often came second instead of first, or third instead of second in their respective national elections. Such trend can simply point towards greater pluralism in Europe (due to the decline of both centre-left and centre-right catch-all parties in most cases), and the rise of various off-mainstream political parties (radicals, extremists, regionalists, populists, etc.). Beyond the common trends of long-term erosion, there are also specific causes behind the crisis of progressive parties in various European countries. For example, Social Democrats have collapsed in some countries at the time of the financial and economic crisis where the centre-left became associated with harsh fiscal adjustment programs, or as it is often called, austerity (Hungary, Greece and Ireland). In such cases, national governments found themselves cornered by international creditors, also due to the incapacity of the EU to shield its members from harsh consequences of financial sector failure. At the time of the euro area crisis, voters gave a chance to Social Democratic parties to prove that there was a progressive solution to the recession, but this was delivered only in part, leading to a dive of centre-left support in further countries like France, Italy, as well as the Netherlands. In recent years, the relatively stronger performance of some Social Democratic parties is either linked to a more clear focus on tackling inequality (the United Kingdom in 2017, Portugal in 2015 and 2019) or an openness to integrate elements of the nationalist agenda (Denmark, Slovakia, Romania in certain periods). In principle, the great financial crisis of 2008–2009 should have given a golden opportunity for Social Democrats by exposing all the flaws of the inherited model of finance and business. Instead, progressives found themselves losing positions. In the 2010–2011 period, most national elections were won by right-wing parties, which then had the political majorities to put their views into effect. This at least partly explains why in 2011, EU policy shifted dramatically towards pro-cyclical fiscal tightening and a type of reform in the Euro Area which focused exclusively on fiscal discipline and cost competitiveness. In this period, the EPP was predominant in all three EU institutions, and the Franco-German `Merkozy’ tandem even performed a rare example of micromanaging as a result. For years, the EPP was adamant to defend the original model of the EMU, and progressives failed to mount a forceful challenge. In the 2012–2014 period, voters in various countries were swinging back the centre-left, which means in fact that the last Social Democratic revival took place just a few years ago. For about 3 years starting in Denmark (September 2011), progressive parties in Europe experienced electoral success. For a certain period, the election of Francois Hollande as French President looked like a game changer. In his electoral retoric (Spring of 2012), he condemned austerity almost the same way as Syriza leader Alexis Tsipras in Greece. However, shortly after his election, he opted against challenging the ultra-conservative Fiscal Compact,11 The Treaty on Stability, Coordination and Governance in the EMU; also referred to as TSCG, or more plainly the Fiscal Stability Treaty was signed on March 2, 2012, as an intergovernmental treaty, representing a new stricter version of the SGP. The United Kingdom and the Czech Republic refrained from signing it. and settled with minor corrections of the policy agenda and a very gradual review of EU economic and fiscal policies. By 2013–2015, Social Democratic parties were either in government or participating in ruling coalitions in the majority of EU member states, including the largest ones of the euro area (Germany, France and Italy) and all the Benelux countries. In the 2014 EP elections, progressives won just marginally fewer seats than the EPP. This opportunity to influence the European policy agenda was missed, however—largely because of a focus on personality, instead of policy, during the EP election campaign and the subsequent negotiation process. Similarly, it was indeed a progressive achievement that in 2013, the Dutch finance minister from the Labour Party (PvdA) became elected chair of the Eurogroup, but those who expected a significant shift away from the position represented by the austerity obsessed German CDU finance minister Wolfgang Schäuble, had to be disappointed. However, the lack of a breakthrough did not mean the complete absence of progressive impact. As centre-left forces started winning elections from late 2011 onwards, the composition of the European Council started to change. As a consequence, EU-level policy focus began to shift at least partially towards growth, investment, employment and social rights. However, in the absence of consensus on the way forward within the progressive family regarding the currency union, the strengthening position of Social Democracts did not translate into a more forceful push for EMU reform. Instead, the lowest common denominator was found around the concept of investment, which was supposed to be the key to growth. The push for an investment agenda was not without precursors. One year earlier (2013), for example, German trade unions were campaigning with the draft Marshall Plan, albeit without a convincing definition of the source of funding, or any immediate impact on either EU or German government policy. The political debate around the European Parliament elections of 2014 contributed to the shift towards a proper recovery policy in the EU. This debate became somewhat polarised according to party political lines. The centre-right insisted on adherence to fiscal rules and subsidiarity, while the centre-left was looking for ways and means to add more stimulus and job creation. In July 2014, investment was declared a priority by newly elected Commission President Jean-Claude Juncker. He identified one of the Vice-Presidents as the investment chief of the EU and presented his investment plan to the European Parliament as early as November 2014. Neither leaders belong to the progressives; Social Democrats were thus unable to take credit for the recovery policy they had been pushing for. In a way, Social Democracy was prepared to address the crisis intellectually but not politically. In the 2008–2009 period, the Party of European Socialists (PES) extensively discussed the need for new tools such as a financial transaction tax (FTT) and the Eurobond. The former became official EU policy, although stuck for long in the process of enhanced cooperation. On the other hand, Eurobond and other forms of fiscal risk-sharing and mutualisation were fading away even in progressive policy fora, notwithstanding the long literature about monetary integration and optimum currency area, often rehearsed by Nobel Prize winners like Stiglitz (2016) and Krugman (1993). The failure to capitalise on the 2011–2013 electoral swing and the progressive intellectual inputs paved the way to a new historic drop. In the European Parliament inaugurated in July 2019, the proportion of seats held by Socialist, Social Democratic and related progressive parties (together forming the S&D22 Full name: Progressive Alliance of Socialists and Democrats. With 146 members from 25 member states (2019), the second largest group in the European Parliament. group) is the lowest ever. And, electoral support for progressives continues to show a downward trend in Europe. The 2019 result was perhaps better than expected by most, but this simply means that an EP election at the end of 2018 would have been even more disappointing. However bleak the picture dominated by declining influence and electoral clouds may be, it is not without silver lining. We can mention the strong performance of the left in the Iberian peninsula and a few other parts of the European South, together with the Dutch surge (explained primarily by the common Spitzenkandidat Frans Timmermans), and the return of the centre-left to governments in the North. On the other hand, the collapse of the Socialist Party in France leaves a large hole in the map, and the disarray into which the German SPD has fallen since the EP elections became a comparable drama. Among the ‘new EU member states’ in the East, Social Democrats remained in power in some countries33 By 2020 Social Democratic parties went to in both Romania and not without in others have not been to While some in the and the South, Social Democrats are at a in and France the two countries which have been the forces of European integration for seven This on the role the EU crisis has played in the decline of Social Democracy and the of European policy within any progressive reconstruction strategy. In France, voters had already the in for the around the campaign of the to the surge of the Some of these former Socialist voters have remained with although in the the of his party has shifted towards and more in a different political and for different the of French Socialists to the fall of Social Democrats due to in to electoral failed to their in the in In those away from the SPD have in different especially the the have been the the SPD has made efforts to integrate a to the of change and there is a least because the party is to be on the Social Democratic It has been found in with the centre-right for resulting in and electoral In the United Kingdom, the shift away from Labour took place at even higher in the of the at the EP elections and then at the elections of was in by the focus of the campaign to became a in the of the Labour Party towards of a of of voters to the Democrats or the And by the Labour strategy also managed to those especially in the who saw the from the of as an of a democratic In years, away from Social Democrats took place towards the as in Greece and the crisis, and the Socialist Party voters the centre-left for Syriza and experienced the the has from in recent years, while in Greece the Syriza itself started to centre-left in electoral put in perspective the of long-term the of European has the of social and the end of full employment, together with the fiscal crisis of the welfare has created around the progressive this has been a trend for three or The recent of is a new and new is making Social Democrats more than and perhaps more than others in the political the of parties means those can also be the or European levels. within the of social democrats may well be to form ruling coalitions in most The then after progressives form more with From this the key is whether Social Democrats can a capacity to form primarily with left or parties in and various German progressive and coalitions have had a very different on Social Democratic parties than coalitions with and the centre-right (e.g. in the in The more to the of progressives and a towards and the The of to even had in some that the progressive an of to be While to the of this national and the has to not only but with social while also a central of the Social Democrats and other progressives primarily because of the commitment to a that is and more than we had in the past. This should not from the that in certain Social Democracy was more as European were more at least regarding While looking back to earlier can with not all elements for a progressive And, most importantly, to are to the about the capacity of progressive parties to a better This is since of the around the of the an of progressive politics by leaders like as well as This which some the third of Social Democracy being the and policy towards economic and social in to a progressive that had before This was also to a between and European but was found to be not for the erosion of the Social Democratic the working This continues to be at the of within the political family which is on a and for a new The point we are making in this is that the between Social Democracy and a strong European dimension in to the progressive have to A in the social democratic is that the EU can be This not taken for by all in social Among leading in political and (see there are of the that the EU is not being a and as such to rather than support progressive is that it is to an of either or from the EU. for and social only within the national in a significant political role in the debate around in the United Kingdom, in less significant forms and on the as often with those of the for example about the power of the in which is obsessed with and other policies. For some EU policies like should be that left parties a and they would have better the Among is perhaps the most and about the of the EU. In his that the of the EMU and the EU could be the election of governments in common policies and supported by is to add to The EU and the EMU are and reform This to the whether the EU is a a or both perhaps The concept of the from and his The Great At the time of his & that his We from (2016) that the that made came from the The from the was of the A and Economic of the and Economic of the of the and the most from In these and the key in a more way than the Great would be of the one may the of whether the EU has been and developed as a or not. We have to take of both and between the EU and the earlier The EU model as we know it some which as parts of the failed model of market Most importantly, we have to about the between the and the EMU. is to the of the of the market in the of we also have to add that of the in the of the of the EMU. The way unemployment and the risks and consequences of are to those who to Europe went in the last 10 of the on monetary policy is a of the of which the the Nobel in various of the EU, and not only those of the EMU, take a position because of the that the EU is and a or a Such often of who remained in within the against the majority which has been to the EU integration, at least since the late because they it was not one should not the fact that alongside a the EU also has developed a social itself as social market and its Most importantly, the EU has also developed a of long-term to policies and within its member states. The last years saw the and the of the Lisbon Strategy (in and its under the Europe 2020 in In the the EU long-term under the of and together with

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