EU socialists set out vision of harmony
FROM CHARLES BREMNER IN BRUSSELS
A MANIFESTO for a socialist Europe with more harmonised taxes and shared economic policies - including higher public spending - was launched last night by Britain and the ten other left-of-centre governments that dominate the EU. Backers of the plan, which advocates some higher taxes, also reflect a push for Euro-wide wage deals and cross-border collective bargaining - which would probably be met by British hostility. But the blueprint was greeted by Tory anger last night, with predictions that industry would be hit and jobs destroyed.
The programme: The New European Way - Economic Reform in the Framework of Monetary Union, calls itself a "set of common rules for the economic and social wellbeing of European citizens" and has taken on special force with the leftward swing in Europe since the election of Germany's Red-Green coalition in September.
Drafted partly by British officials, the manifesto blends new Labour-style rhetoric on reform with promises of closer budgetary and tax co-ordination that spring from the old-left socialists of Germany and France. The goal of the new socialist Europe should be "strong and sustainable economic development and full employment", it says.
Among its more controversial demands is that the European Central Bank should take into account the need for growth and not just stopping inflation, when it sets monetary policy.
Presenting the paper, Rudolf Edlinger, the Austrian Finance Minister, said the governments in monetary union were determined to push for more tax harmonisation - including higher taxes on capital and lower charges on wages.
Monetary union, which starts on January 1, would "make it imperative to start co-ordinating the sphere of taxation", he said. "The social democrat governments will also have to look at harmonising prices and wage policy." The manifesto is seen among continental left-wing parties as a vehicle for Britain to associate itself more closely with the 11 states about to embrace the euro.
The document was issued as Gordon Brown, the Chancellor, was meeting his German counterpart Oskar Lafontaine and other socialist ministers ahead of the first session of the EU's economic chiefs since the German election greatly reinforced the left-wing tide in EU government.
The first "Red Ecofin", as the new council has been dubbed, is to start after a session of the euro-11 group of single currency states, from which Mr Brown is excluded.
Today's Ecofin will see a first showdown between Britain - along with five other northern EU states that want to freeze the EU budget at the turn of the century - and the poorer southern nations, which are demanding a big rise in spending.
British spokesmen insisted that the New European Way amounted to no break with existing Labour policy. But some British officials have made no secret of their qualms about the detail - especially over taxation. The manifesto contains no mention of a common wages policy, but Herr Edlinger's mention of the subject reflected a push being led by Herr Lafontaine for closer co-ordination of wage agreements across industry in the euro zone. This would require cross-border collective bargaining between employers and unions - an idea that would probably be anathema to the British Government.
Tory Eurosceptics last night declared that the plan would lead to job losses and higher taxation. Michael Trend, the shadow spokesman on Europe, said: "The lurch to the left will increase taxes, hamper industry and destroy jobs in Britain and across Europe."
###########################
Paris, Monday, November 23, 1998
EU Socialists Seek 'New European Way'
Finance Ministers to Focus on Labor Policy
By Barry James, International Herald Tribune
BRUSSELS - Socialist-led European Union governments have pledged to increasingly pursue common policies on taxation, wages and prices when the single currency, the euro, comes into effect on Jan. 1, Finance Minister Rudolf Edlinger of Austria said Sunday.
Speaking on the eve of a meeting of EU finance ministers here, Mr. Edlinger said that although tax, wage and price policy remained the prerogative of the national governments, the completion of economic and monetary union would inevitably lead to greater ''harmonization'' of policies.
Mr. Edlinger was introducing what he called a discussion document, ''The New European Way,'' approved by socialist ministers who now dominate the EU's policy-setting finance council.
The document, which sets out the path to ''economic reform in the framework of EMU,'' is orthodox from a monetarist standpoint.
It glosses over the debate about the policy mix between the growth oriented policies sought by several socialist governments and the independent role of the new European Central Bank in creating conditions of monetary stability and low inflation.
But Mr. Edlinger said the document marked a departure from the policies pursued by former conservative administrations, such as that of former Chancellor Helmut Kohl in Germany, in that it places much greater emphasis on the need to create jobs through taxation and other policies.
He said that for the past 12 years, the tax burden has fallen mainly on labor, and that this burden would have to be shifted more toward taxes on capital and energy. The extent to which this shift takes place, he said, depends on the power of the various socialist parties, several of which are subject to agreements with coalition partners.
He said ministers were not challenging the independence of the central bank, but agreed that there had to be a much more serious discussion of policies between national governments and the Frankfurt-based bank, which will assume the responsibility for setting interest and exchange rates when the euro comes into being.
''You must have coordination,'' he said. ''Monetary policy is not an end in itself, but financial and monetary policies must benefit people.''
Mr. Edlinger said he hoped that governments would cooperate in reducing the EU unemployment, now at 16 million workers, with the same intensity with which, over the past four years, they had succeeded in bringing 11 nations into economic and monetary union.
The document says that the state should step in when it is a question of maintaining efficient public services, or of preventing technological change from creating new forms of inequality.
On the question of tax coordination, the document says that taxation should not be allowed to distort economic decisions with regard to labor, capital and services.
But along with a commitment to full employment, the document emphasizes that the socialist parties are also determined to follow policies leading to monetary stability and sustained fiscal discipline.
It says that the ECB must pursue a policy of ''credibility, certainty and predictability,'' but must also contribute to a debate on the relationship between monetary policy and employment and wage policies.
The bank will keep its decision-making processes a secret for 16 years to ensure that its board members can act independently of all pressures from national governments. But Mr. Edlinger said it was nonetheless important for the countries that adopt the euro to know what the arguments are so that they play a constructive role in policy-making. ''We are at the beginning of the debate,'' he said.
Copyright Int. Herald Tribune, 23. 11.98