The pandemic exposed the fragile state of Europe’s public services after years of austerity. Now the European Council has backed a new set of austerian fiscal rules — imposing an estimated €100 billion in cuts, which will hit working-class people hardest.
European Commission president Ursula von der Leyen addressing a press conference after the European Council Summit in Brussels, Belgium, on December 15, 2023. (Jonathan Raa / NurPhoto via Getty Images)
After a four-year break, European governments and institutions — including the continent’s Social Democrats — have decided to bring back austerity, mandating budget cuts of up to €100 billion next year. It’s another attack on the working class, which would be faced with job cuts, lower salaries, worse working conditions, and a further underfunding of public services. And we’ve been here before.
The aftermath of the 2008 economic crash kick-started a wave of austerity measures in Europe, as member states bore the brunt of the financial crisis and interventions to save the banks. In 2010, Greece was forced to implement harsh austerity measures. It started a movement of resistance that would lead to a tough standoff between the Syriza-led government and the European institutions in 2015.
Several other European countries, including Spain, Portugal, Ireland, and Italy, also implemented austerity programs. This turned out to be calamitous. Austerity measures meant reduced funding for essential public services like health care, education, and social welfare programs. This impacted availability as well as efficiency: longer waiting times for surgeries, overpopulated classes in school, and reduced access to social aid and benefits.
These austerity measures did not only cause social dramas, but also worsened and lengthened the crisis in Europe. The continent’s recovery after the 2008 financial crisis was a lot slower than it was in the United States. When the COVID-19 pandemic hit Europe, the underinvestment in health care services was exposed for all to see. The need to support a large number of economic sectors led to a rapid suspension of austerity, through the activation of the escape clause in the Stability and Growth Pact.
Between March 2020 and June 2021, the European Commission approved over €3 trillion in state aid measures to face the demands of the health crisis and support affected companies. In addition, a €750 billion European economic recovery package named NextGenerationEU was put in place to support member states’ recovery. Common European bonds were said to guarantee triple A–rated debt security for the borrowing.
The respite was short-lived. In December 2023, the meeting of European ministers of finance agreed to reintroduce slightly revised budgetary rules. The European Commission, the EU’s unelected executive, had been pushing for it for years. Last week, the European Parliament, which wields more limited competences, also gave its consent to a reform and reinstatement of budgetary rules. This was done through an alliance not just made up of right-wing and liberal parties, but also enjoying the active support of the Socialist and Democrats group, who claim to stand for building a “social Europe.”
The new rules would have disastrous consequences. The European Trade Union Confederation calculated that EU member states could be forced to collectively cut their budgets by more than €100 billion during the next year. Member states could request to extend the cuts over a seven-year period. This will however come in exchange for commitments to harsh “reforms” of pension systems, labor markets, and wage setting mechanisms. The flexibility will also depend on the goodwill of the European Commission. Or rather, on the bargaining power of the country concerned, meaning that smaller member states are less likely to benefit.
The return of austerity will inevitably lead to significant cuts to public services everywhere. This is especially the case because exceptions are being made for some sectors — notably for military expenditure. This way, austerity will also reinforce the ongoing militarization of the economy and society. In my own country, Belgium, it could also threaten the system of automatic wage indexation. Today this system partially compensates for workers’ loss of purchasing power due to inflation. But within the current budgetary procedure, it has been criticized repeatedly by the European Commission.
In the meantime, negotiations between the three main European institutions have started in order to align their respective positions. Holding the rotating presidency of the European Union, the Belgian government plays a key role in these negotiations. Belgium could make a real difference in Europe by opposing these rules. This is the only right choice for the working class across the EU. Moreover, amongst the members of the European Parliament voting against the new rules, we find four out of seven parties that today make up the Belgian coalition government. So, in theory, the Belgian government should oppose the austerity measures. That would be extremely important. If the country holding the rotating presidency of the EU decided to postpone, delay, or sabotage the austerity agenda, the road to its abandonment would be wide open.
In practice however, Belgium’s green and social democratic parties practice a peculiar form of political schizophrenia. Under pressure not just from the trade unions, but also the rising Belgian Workers’ Party, they voted against the new rules in a public parliamentary vote where their vote was non-decisive. But behind closed doors, within the Belgian government where they actually have the power to sink such measures, they fully support them.
Yet, the chance of sinking austerity is not one to be missed. A recent report by Oxfam highlighted the enormous excess profits of large corporations and wealth accumulated by a few extremely wealthy individuals. According to the 2023 European Barometer of Precariousness and Poverty, almost one-third of Europeans feel they are currently in a precarious financial and material situation. A similar number admitted they had had to skip a meal when hungry.
We need more public investment in public services, housing, infrastructure, and the climate transition. The implementation of a fair tax policy that targets big companies and millionaires can be part of the financing solutions. Simultaneously, a large European public investment package, supported by the European Central and Investment Banks, in their respective capacities, can help to overcome structural inequalities between member states and regions.
This is not the first time that unelected European institutions have intervened to force spending cuts and belt-tightening on EU member states. Indeed, it is part of a pattern of austerity imposed from above that not only eats away at standards of living, but also at the European project itself. To workers this feels less like a project of democratic union than it does a corporate straitjacket, systematically promoting the interests of the bosses at the expenses of working-class Europeans.
European workers cannot afford austerity, and they cannot afford an EU that imposes it. We need a Europe with an ambitious program of public investment. It is not too late. But binning austerity will require continuous mobilization and a clear break with traditional policies.