On the 2nd of March, 25 of the 27 EU member states signed the intergovernmental ‘Treaty on Stability, Coordination and Governance’ or ‘Fiscal Compact’. It requires EU member states to incorporate the prohibition of structural budget deficits in their constitution, and foresees strict surveillance, automatic correction mechanisms and a severe penalty in case of default. The treaty will enter into force as soon as it has been ratified by 12 countries.
It might seem common sense not to spend more money than you have. Do all families not have to stick to this rule? Why not states then? But if a family invests in a house or a car, it can decide to borrow money and pay it back over a period of time. This also counts for states. Yet, the ‘Fiscal Compact’ imposes that from now on all strategic economic and social investments will have to be done with current tax income only. In consequence, governments will be obliged to turn to the private sector… for profitable investments. More private transport, private schools, private hospitals, private health insurance… for those who can afford it, obviously.
This treaty is just a new step in a long series of EU neoliberal policies and practices to undermine what had been considered as essential progress towards a less unjust and less unequal society: social security with its different elements; public services that escaped from the limits of competition in the areas of energy, water, transport, but also education and health; the right to a decent job; the progressivity of taxes; the indexation of salaries and social allocations…
The forced inclusion of this ‘Fiscal Compact’ in member state constitutions or laws with equivalent status further limits democratic decision making on strategic policy issues. It might be important to recall article 21 of the Universal Declaration of Human Rights adopted in December of 1948: “The will of the people shall be the foundation of the authority of governments”.