Future of Europe - Perspectives from Spain by Green European Foundation

The Future of Europe - Perspectives from Spain

The European Union is in a vulnerable situation. The project that started half a century ago is now staggering. While its primary objective of ensuring peace on the continent has been a success, subsequent expectations of greater political integration beyond a mere common market are not accomplished. The EU project itself is now in question, not only from the outside, where the markets doubt and test the viability of the Euro - its economic flagship, but also from within Europe whose citizens are beginning to doubt the direction of the project and the legitimacy of EU policies. Even in countries traditionally proEuropean like Spain or Greece, where in past times of dictatorship the EU was seen as the ultimate democratic achievement, this once unconditional support is cracking, mainly as a result of austerity policies imposed by European authorities. Identifying the need to reflect about the causes of this turnaround, GEF organised with support of Fundacion EQUO and Fundacio Nous Horitzons a seminar on October 4th in Madrid, meant to collect ideas on how to change Europe so that it is better fit to address the critical economic situation inside the euro-zone, starting from a Spanish perspective. This article is based on the conclusions of the seminar, detailing on the Spanish views on European integration in light of the crisis. The article has been written by Alejandro Sanchez, Director of the Fundacion EQUO, with contributions from Fernando Rodrigo and Marc Gimenez Villahoz.

The seminar in Madrid was organised along two lines. Firstly, activists around the Spanish Green party EQUO discussed in three working groups about crucial questions of current relevance. Secondly, there was a public debate that benefited from the contributions of Pierre Jonckheer, GEF co- president, Laia Ortiz, member of the Spanish Parliament from ICV (Inicitiava per Catalunya Verds – Catalan Green Party), Reyes Montiel, Co-spokesperson of EQUO and Mariano Baratech,

sociologist and expert from the EQUO Foundation. The debate was moderated by political journalist Fernando Berlin. The conclusions of the seminar are presented below, after an introduction to the Spanish political system and the particularities of the economic crisis in Spain.

The Spanish Party Political System Spain is currently governed by the conservative party (Partido Popular - PP) that holds an absolute majority (186 of 350 parliamentary seats since the 2011 elections). The landslide electoral win of the conservatives was the result of a massive protest vote against the Socialist Party (PSOE) for its inability to address the economic crisis after 8 years in power. The Spanish party system was created with the intention to provide on the one hand political stability to the young democracy trough a nation-wide two-party system (the electoral system making it virtually impossible for any other party except the PP and PSOE to govern) and on the other hand to allow the representation of regional political forces in the chamber of deputies, as the electoral system favours parties that concentrate big amounts of votes in a specific region. For this reason 7 parliamentarian groups are represented in the Spanish Parliament. The biggest groups are of course the conservatives and the socialist, the third force is the Catalan party Convergència i Unió (currently governing Catalonia), while the fourth party is “Izquierda plural”, a coalition of national and regional leftist parties. ICV and Equo are the two Green parties in the Spanish political spectrum. ICV, the Catalan Green Party, has two members in the Spanish Parliament as part of the Izquierda Plural coalition. Equo is a recently founded party with the aim to develop and consolidate a national Green party in Spain. Equo ran for the first time in the 2011 elections and was the party with the highest number of votes (215.776) left outside of Parliament. Nevertheless, EQUO got a Member of Parliament elected in Valencia through their coalition with Compromis (a regional-based coalition), with over 125.000 votes.

The context: the economic crisis in Spain The economic crisis in Spain has its own characteristics that overlap with those of the general international crisis. The Spanish model of economic growth had been based on the construction industry, particularly private residential buildings, but also public infrastructure works. According to the Spanish National Statistics

The Future of Europe - Perspectives from Spain

Institute (INE) the weight of construction (both residential and non-residential activity) in the Spanish GDP increased from 11.7 % in 1996 to 17.9 % in 2007. At the same time, the sector grew from 9.3 % of total employment to 13 % during that period. However, the actual weight of the real estate sector in the Spanish economy was much higher. The overall figure of that activity in the productive structure of the country was around 39.4 % of GDP in 2007, excluding the involvement of the sector on energy or on net taxes. The number of homes built in 2007 was 700,000. Direct employment in the sector reached 3 million workers. This strong growth in construction brought about a strong demand for workers that was provided from a growing immigration – between 2000 and 2010, 6 million persons immigrated to Spain, now accounting for 12% of the total population. This real-estate based model of growth that induced the crisis in Spain is not comparable to economic developments elsewhere in Europe, except in Ireland. Apart from the enormous environmental impact, the commitment to unbridled construction of residential and civil works implied strong internal (from households and firms) and external debts (from banks) to ensure the investments needed to feed it. These investments were made at the cost of marginalising knowledge and technology, green jobs and sustainable industries, abandoning productive investments and channelling savings into credit and property speculation. Spain had an unbalanced growth, deformed and unsustainable, socially, economically and environmentally. The private debt in the housing sector (debt of households) currently totals 800.000 million € and there are now more than 1 million unsold homes, which is weighing down a significant economic recovery. The Spanish banks also borrowed heavily on the European interbank market from mainly German banks which were able to channel the German savings to Spain. As opposed to other crisis hit countries, the biggest problem in Spain is not the deficit or the public debt. In 2007 Spain's public debt was 36% of GDP and a budgetary surplus existed. By contrast, private debt in Spain (firms and households) amounted to 240% of GDP, well above the European average and similar only to that of Ireland. In 2011 the national (public) debt had risen to 75%. The total of the private and public debt now exceeds 300% of the Spanish GDP. The budget deficit had risen to 9% in 2011. Nevertheless, Spain's public debt is still currently 10 points lower than the euro-zone average.

This drastic change occurred due to a collapse in tax revenues caused by the collapse of the real estate sector, the decrease in consumption, and especially by the increase in fraud and tax evasion of the high incomes and corporations. In addition, because of the risk premium increase, Spain allocates annually 38 billion € in interest payments (3.8% of GDP), a figure that exceeds the sum of all civil servants’ salaries (32 billion €). Labour income and indirect tax revenues support public expenditure, having increased the rates of the Income Tax and VAT up to the levels of countries with higher taxation. However, big companies and big fortunes still do not virtually pay. There is a growing “defiscalisation” of capital incomes. Estimates managed in Spain by experts and even by tax inspectors themselves show that there is a tax fraud of around 8% of the GDP, which means about 80 billion € in 2012. This implies much lower tax revenues in Spain compared to other EU countries (see graph on page 3), at about 7 percent of GDP, which leads to a serious imbalance in the state accounts and justifies budget cuts and attacks on social policies and the welfare state which is already underdeveloped compared to neighbouring countries. The inefficient tax policy renders redistributive policies incapable to fighting poverty and inequality in Spain, which is already the highest in the European Union. It is producing a growing and sustained decrease in real wages in the national income since 1998, which was also accelerated by the last labour reform of the Popular Party government in 2012. For instance, even though capital income grew from 30% to 35% of national income in the period 2000- 2011, Spain now exceeds 6 million unemployed persons and there are over 1.7 million households with all members unemployed. The mass unemployment in Spain, especially the youth unemployment - currently 52% of young people under 30 are unemployed - has been a growing burden on the social sectors. The inability to pay back the debts incurred to purchase a house has led to more than 350,000 families being evicted from their homes (20082011). During the last year, there have been 400 foreclosures a day. The latest figures on the evolution of poverty show that 21% of Spanish families live below the poverty line and that 45% are unable to face any extraordinary expenses. Nearly 2 million people receive food aid from NGOs on a daily basis.

The Future of Europe - Perspectives from Spain

Tax revenues as % of the GDP

The economic and social policies implemented by the previous two governments (PSOE – Social Democrats and especially the Partido Popular – Conservatives) were intended to promote a so-called "internal devaluation" – a measure meant to restore the economic competitiveness, mainly by reducing labour costs. This policy promoted by the EU –and Germany especially caused strong suffering within the Spanish society, as described above, and at the same time produced no visible improvement. Unemployment is increasing (with over 800,000 new unemployed persons in 2012), the decrease in wages has spread to all sectors, there is an increase of the population in poverty, consumption decreased and the economy continues to decline in terms of GDP. The only economic sector to have slightly recovered is the exports, but being a very small part of GDP, it has no real impact on the economy. These austerity policies are transforming the Spanish social model to the worse, by reducing protection, deregulating labour relations and labour laws, and privatising essential public services such as health care and education. The aim is to implement a neoliberal agenda exploiting the crisis and, supported and sustained by right-wing governments in the core countries of the eurozone and the European Commission.

Key issues discussed As mentioned before, the event was divided in two sections. First, three workshops were organised, discussing 3 key questions (European financial system, the Green New Deal as answer to the crisis and what is the Green vision for Europe) with Green activists from across Spain. This was followed by a public discussion dealing with the impact of the economic crisis on the European project, which gathered an audience of about 70 persons. During the public conference, the specific Spanish socioeconomic situation was discussed in a wider context of the role of the EU in addressing the crisis and of what are the expectations from the EU in this sense. The contribution of MP Laia Ortiz showed that the austerity measures currently pursued by the Troika are unsuitable as a solution to the economic crisis in Spain, as they appear to actually deepen the current recession. She clearly advocated for a different Europe - more democratic and more social – which could better face the negative trends of globalization and recover citizens’ sovereignty from the markets. Pierre Jonckheer’s intervention went in the same direction, pointing to the necessity of a different political model for EU. This model should be more federal, with a central European budget and more powers for the EU Parliament. Mariano Baratech talked about of the disillusion of citizens with the old “European dream” and argued in favour of a new

The Future of Europe - Perspectives from Spain

narrative based on a Greener Europe, centred on the concept of more solidarity. Finally, Reyes Montiel concluded by pointing to the responsibilities of public and private debt in causing the crisis, and the resulting necessity for a different fiscal framework. She pleaded for a more progressive tax policy; “It is not that we have spent over our possibilities, is that we have taxed below our responsibilities”.

The European Financial System This first workshop, focusing on the regulation of the financial system in Europe, was moderated by Fernando Rodrigo, coordinator of economic policy at the EQUO Foundation, together with Delfina Rossi, assistant to Raul Romeva, MEP. The debate focused on the causes of the financial crisis and its consequences. Among the fundamental causes identified were the predominance of financial economy over the real economy, the existence of large amounts of capital looking to maximize their returns on speculative markets, the financial deregulation undertaken in the ‘70s and ‘80s in the USA and UK, extended and then exported to other countries and the existence of tax heavens. With regard to Spain, the financial crisis has been the result of the house building and real estate speculation (the “bubble”), financed with bank debt (mainly from German and French banks) to companies and families. Private debt at the beginning of the crisis (2007) exceeded 300% of GDP, compared to less than 40% of GDP in public debt. Currently, public debt exceeds 80% of GDP. Currently private debt is being converted into sovereign debt through the bank bail outs. It was not the public deficit and the public debt that have caused the crisis, but the crisis that has caused the increase in public debt. The cost of financing the public debt in 2013 sums up to 37 billion euro - the second highest heading in the national budget after pensions. These costs cannot be sustained in an economy in depression, unless social benefits and basic public services (such as health, education, unemployment benefits and pensions) are cut, which is the current logic of austerity. Furthermore, this accumulation of debt makes impossible investments in a green and sustainable economy. The growing debt will perpetuate and increase social inequalities - Spain is already the most unequal country in Europe - , it will further increase

unemployment and destroy much of the country's productive economy.

The problem of the Spanish economy, in addition to the heavy indebtedness of its companies, banks and families, is the brutal fall in public revenues: state tax revenues are currently at about 33% of GDP. This is a result of an unfair and inadequate tax structure, a sharp drop in revenue from the decreased economic activity, consumption and employment, and a strong tax fraud. The banking bailout is first of all not democratic: it has not been discussed in Parliament, while the Memorandum of understanding containing the conditions has not been made public. Furthermore, the bailout is unfair and ineffective to restore the credit activity and the system's solvency. It has ensured that the banking debt is transformed into sovereign debt and thus turned the Spanish citizens into debtors. At the same time, the managers who left more than a half of the Spanish financial system in ruins, were not held accountable. Under these circumstances, there is a clear need for a European solution because further adjustment policies and cost reductions, will lead to economic and social disaster. Among others, the following proposals that were discussed during the workshop: >

There is a direct relationship between the tax system and the financial system. The tax on international financial transactions (Tobin tax) is essential, both for the limitation of international speculation, and for generating European and national resources to promote sustainable policies. It is also necessary to eradicate tax havens.

The EU banking union should be finalized rapidly and it should include: the creation of a European bank bailout fund and a deposit guarantee fund, with contributions from the banks themselves and the entire financial system, preventing that citizens pay for the banking crisis. Unique Supervision and the separation of commercial and financial banking, to limit the size of banks and to prevent systemic risks, should also be foreseen.

The reform the European Central Bank is essential. It is essential that the ECB could act

The Future of Europe - Perspectives from Spain

as a lender of last resort and to issue Eurobonds as soon as possible for debt pooling and reducing the current inequalities in the financing costs of states. >

The debt of banks should not have been converted into sovereign debt. Socialising losses, while benefits remain privatize is not acceptable. Companies should be allowed to go bankrupt when a social consensus exists over the costs of saving the respective institution exceeding any potential future benefits.

The dividends of shareholders and owners should be limited during the bailout programme.

The banks recapitalised and bailed out with public money should become public banks efficient, ethical and serving the sustainable economy

A control, monitoring and evaluation Committee should be created to oversee the use and application of the bailout fund for banks and the compliance with all established conditions on the possible privatization, sales or orderly bankruptcy proceedings. That Committee shall be composed of representatives of social and civil organisations, parliamentary representatives and experts of the Bank of Spain.

All persons accountable for the bankruptcy of the financial and banking system (bank managers and executives, banking authorities and regulators, political authorities, corporations that used their influence for preferential loans, board of directors etc) should take responsibility for the bankruptcy.

A public “housing bank” should be created that oversees the property assets of the nationalised banks and saving banks. A powerful public authority for rental housing should be also created.

Solutions to the crisis cannot be found in individual Member States. The crisis can only be overcome by advancing with the political, economic, fiscal, banking and social integration of the EU.

The Green New Deal Is the Green New Deal the answer to the crisis? How could the GND contribute to solving the crisis? How can this be explained to the public? These were the main questions addressed by this workshop, moderated by Alejandro Sanchez, Director of the Fundación EQUO. Here are the main conclusions of the debate: >

The GND cannot be combined with neoliberal austerity policies as we see being implemented today. To exit the deep depression, there is a need for job creation and investment in the real economy (a greener economy, more participatory and more focused on human needs).

The terminology Green New Deal was also discussed. In order to give meaning to this term, it needs to go clearly beyond the neoliberal economic concept, and address the organisation of employment, the decline in consumption, as well as ideas of de-growth or Tim Jackson’s prosperity without growth. Changing the name “Green New Deal” to a more explicit concept such as “New Deal for Common Goods and Sustainability” would highlight the environmental, economic and social sustainability dimensions of the concept. In the Spanish context, the phrase Green New Deal has to be translated.

The scale of the global economy should become more human, not exclusively focusing on big projects or investments, but rather on smaller projects that are manageable, controllable, local, based on food sovereignty and selfsufficiency. More needs to be done in Europe and beyond for label traceability, environmental and social cooperativism and fair trade.

The GND must come from Europe and it must bring social on top of economic change. It must represent a transition to a way out of the crisis, alongside a political change in Europe. What must be avoided is that the GND is perceived to be a green washing of the capitalist system.

The Canary Islands were presented as a potential laboratory for implementing GND policies. The insular character is a good premise to try to get selfsufficiency, for example in energy through the implementation

The Future of Europe - Perspectives from Spain

of renewables instead of fossil fuel plants, as it is currently intended on the El Hierro Island.

What does “more Europe” mean?

citizens does not advance, hence the increasing euro-scepticism. >

Is the current democratic deficit in decisionmaking at European level also ideological, or is it intrinsic to the increasing global competition for the control of resources by the established and emerging global powers? >

Absence of a European public opinion: To begin with, the European elections do not directly decide on the European government (the Commission), which is appointed by member states instead citizens. There is little visibility of decisions made at European level, their implications or their reasoning, due to a lack of media coverage of the European decisionmaking processes. A public debate on EU issues is not possible because information is only conveyed in the media about decisions already taken. Communication on European policy is done at national level, which is then used by national governments to assume popular decisions, and to blame unpopular ones on Europe.

Criticism voiced towards the current state of the EU:

Opacity and governmentalism leading to a lack of legitimacy: Europe is seen as a closed shop by its citizens. More transparency is needed, as well as an effort to render understandable the effects of European legislation. There is a clear lack of permeability of the European political system towards the citizens. This is a project of national governments. There is a problem of legitimacy, the result of a lack of democracy in the decisionmaking process. The Europe of

Weakness, disunity and nationalism: The EU budget is very low, and made up only of contributions from Member States. The EU has little room to boost the public sector. There has not been a real culture of a shared project. The engine has been exclusively the safety and money provided by the single market.

Over two hours of discussion, mixed answers were given to the above questions: from spontaneous criticism of the current state of affairs, to listing the positive elements still present in the Union, to trying to focus on proposals to reverse the growing euro-scepticism in Spain and Europe, as developed below.

Political vision and ideology: The European project has been broken, because as such there was no project to begin with. No strong European leaders have come forward over the past decades, because of member states’ governments prioritising national interests over European ones. The EC, the EU and the Euro have not had a vocation to strengthen social rights, equity and cohesion, which was proved once the economic crisis unrolled.

Is the lack of a good response to the crisis a matter of poor architecture of the European Monetary Union or is it an ideological obstinacy?

Given the current doubts about the economic and political viability of the European project, should there be a return to a strictly national logic, or should we on the contrary accelerate the process of integration into a truly federal entity? There was a consensus on this last point in the workshop, with participants clearly advocating for greater European integration.

Imbalanced institutions: In recent years there has been a de facto loss of political weight within the EU of the traditional engines of European integration (the European Commission and the European Parliament) to the benefit of the Council, even though the Lisbon Treaty allocated more powers to the European Parliament. This effectively left decision-making in the EU in the hands of national governments (the fiscal pact is the latest such example).

The discussion was structured around three questions: What is the Green vision for the future of Europe?; What are the fundamental pillars of a Green Europe?; and What should be the road map to reaching a greater political union and what is the role for the European institutions in this process?. The workshop was moderated by Marc Gimenez, advisor to the Greens/EFA parliamentary group and member of ICV. During the discussion other relevant questions arose:

Changing trend in Southern Europe: After two decades of democratic consolidation and economic development as a result of EU

The Future of Europe - Perspectives from Spain

integration, regression occurred in both areas recently. Europe is perceived as the domain that imposes measures that undermine social cohesion and democracy. >

Education policy, particularly in the field of citizenship rights, must become more ambitious. The Erasmus programme must be continued. Linguistic diversity and language learning have been continuously promoted by the EU and should remain so.

Historically for the Spanish, the EU has meant freedom and economic prosperity. The EU remains a guarantor that there will not be a severe democratic regression in Spain, nor in any of the other 26 Member States.

The European framework is the only option to achieve the Green aim of global sustainability.

The influence of markets: The logic of wealth creation for a few has had monopoly over European policies, the EU being a structure created for market interests. The European project has been hijacked by the economic powers that are dictating economic recovery policies. The balance between the market and the state (or the EU in this case) has been clearly broken, with the markets having engulfed democracy. The EU crisis is the best evidence of the crisis of the capitalist system.

EU's role in managing the crisis and the shortcomings of the European Monetary Union (EMU): Both the EU and the EMU are paying the consequences of an incomplete project. When things were going well, with widespread economic boom, the EMU model worked well. But in the current times of recession it has become clear that other steps crucial to robust economic integration were not completed. The responses to the crisis showed no clear vision, allowing the logic of austerity and national adjustments to prevail over that of the needed further integration.

Positive values and hopes for the future: >

In a globalised world, the EU can be a powerful player only united; the positive hallmarks of the European project should be strengthened.

The European Parliament, the most progressive European institution, should play a more decisive role in European decision-making.

The EU should contribute to the advancement and harmonisation of both civil and social rights (including labour law, where harmonisation should be done towards the highest not the lowest standards). The EU represents a frame that aspires to the logic of equality of opportunities for all.

The European single market has allowed for businesses to flourish and for the EU to establish itself as a global economic power.

Green proposals for a stronger European Union discussed in the workshop: We need a new model for Europe, based among others on: 1.

Greater European federalism and political union: >

For a stronger EU we need to move towards greater political union, leading to greater solidarity. We must go beyond the logic of the nation-state, to a truly federal structure.

There should be a direct administrative relationship between the EU and the citizens, for instance by having a direct communication with the European Commission for the allocation and implementation of certain projects financed by European funds, without the mediation of Member States.

European leadership has to be promoted, by giving citizens the chance to elect the EU President. The European Green Party's role is vital to ensure a European debate, and thus the EGP should also put forward a candidate for the presidency of the European Commission. The introduction of transnational lists in the European elections would be a big step forward to the de-facto Europeanisation of the elections.

The Future of Europe - Perspectives from Spain

A new constituent process should be started, calling for a European Convention 2.0.

To move forward we need driver of change. So far, the driving force has been the member states, but now the driving seat should be passed on to the European citizens. The European project should be rebuilt from the bottom- up and centred on citizens, while breaking the logic of EU being the mere sum of state governments. The barriers that still exist (administrative, legal, civil laws) to facilitate mobility inside the EU should be removed. Europe needs to be taught and explained it must become part of common school curricula, much in the same logic that Germany and France used education to end past hostilities.

Europe in the world: >

At European level, there should be more instruments to permit action and effective coordination in foreign policy

Spain can play a leading role in strengthening the relations with Latin America and the Mediterranean countries.

Subsidiarity: >

Rebuilding the EU can only start at national level. Going beyond the “market-only” logic of the EU starts also by electing more progressive, less nationalistic governments.

It is necessary to return to Tocqueville's thesis about the importance for democratic control of local authorities and their role in the creation of today’s Europe.

Strengthening the social domain and setting the basis for a European welfare state: >

It is essential to combat fraud and tax evasion in Europe. We have to shame the UK and Luxembourg (and others) for their unsupportive practices.

Citizenship at the centre: >

To increase social cohesion, the European Social Model should be rescued from ostracism.

Conclusion

The EU has to ensure a quality welfare system for all its citizens ensuring basic high-quality and affordable public services (especially health) throughout the Union. This has to be the EU guarantee.

The EU must also be the guarantor of pensions, so that the free movement of persons (used to work in other EU countries) is not penalised.

The European Union in its current state is far from the Green vision of a strong and united continent. Nowadays’ Europe is not driven by the same principles that were once its driving force: the expansion of peace, democracy, social justice and the welfare state. On the contrary, the EU has a lot of responsibility for the current situation especially in Spain, not only for the roots of the crisis, but also for its management.

Taxation: >

Taxes should be harmonised, while extending the European budget to allow more investment at European level.

So far, the European institutions have fallen short of expectations and in trying to resolve the crisis they have deepened the democratic legitimacy struggle that has always been questionable in the eyes of the Union’s citizens. Despite these negative trends, the seminar showed there is still confidence in the European project. If steered in the right direction, putting social welfare ahead of market interests, the EU might still achieve the European dream of freedom, peace, democracy and prosperity.

The Future of Europe - Perspectives from Spain

The article was written by Alejandro Sanchez, director of the EQUO Foundations, with contributions from Fernando Rodrigo and Marc Gimenez Villahoz. © Green European Foundation The views expressed in this article are those of the authors’ alone. They do not necessarily reflect the views of the Green European Foundation. With support of the European Parliament. Green European Foundation asbl 1, rue du Fort Elisabeth 1463 Luxembourg Brussels Office: 15 rue d’Arlon, 1050 Brussels, Belgium Phone: +32 2 234 65 70 - Fax: +32 2 234 65 79 E - mail: info@gef.eu - Web: www.gef.eu