Eu workers to pay the bill for the financial crisis

Eu finance ministers again preach wage moderation, this time to fight inflation

At the meeting in slovenia, the economic and financial affairs council (ecofin) urged workers to exercise wage restraint so as not to further fuel inflation. The eu finance ministers in brno have thus clarified who is to pay for the financial crisis. While wage restraint has long been preached by companies and banks in spite of high profits, so as not to damage the tender seedlings of growth, it is now being used to curb inflation. Thousands of trade unionists demonstrated for higher wages in the slovenian capital on saturday, and globalization critics called the declaration of intent to fight financial crises, such as the establishment of "stability groups", as a bad joke.

Eu workers to foot the bill for financial crisis

"Working lunch" of eu finance ministers at brno castle. Image: eu2008.Si

It is astonishing how differently the same meeting is evaluated in different eu countries. In germany, for example, it is reported that the "eu finance ministers are pampering trade unions" and the european central bank (ecb) had reason to regard the relatively high wage settlements in germany. In spain, the media consistently focus on the fact that the clear demand for wage restraint was made in brno. For ecb chief jean-claude trichet loves no doubt about where the journey is headed: "restraint in wage negotiations is extremely important to return to price stability in the face of alarmingly high inflation."

And he was not alone in this. There is no end in sight to the upward trend in prices, said luxembourg eurogroup chairman and prime minister jean-claude juncker. In order to prevent inflation from accelerating further, trade unions should be vigilant. Therefore, he and his spanish colleague pedro solbes agreed that wage settlements had to be in line with productivity growth. Eu economic and monetary affairs commissioner joaquim almunia admitted at the meeting that the eu may have to raise its previous forecast of 2.6% for 2008. The always announced inflationary prere in the spring is not in sight, instead the annual inflation in the euro zone had reached in march with 3.5% the highest level since the introduction of the euro (inflation rises).

Eu economic and monetary affairs commissioner joaquim almunia. Image: eu2008.Si

German finance minister peer steinbruck also joined in the chorus, only he was masking his words with possible wage increases in the future. Employees were naturally then entitled to participation, "where we are dealing with an economic upswing". But it has existed, only it has not reached all layers of society. And it’s the same message again, as in the period of low growth rates, while banks and companies wrote record profits. Thus, employees are being asked to pay either through inflation or through wage restraint and, in addition, are being asked to pay through tax money for losses incurred by banks such as ikb, so far to the tune of about 17 billion euros.

Now, the eu finance ministers are mainly concerned with finding the so-called "second-round effects" to avoid inflation in order to limit its rise. Because there seems to be no interest in containment. There is no other way to explain why the ecb has moved so far away from its target of below 2%. Since the outbreak of the financial crisis in the usa, it has been said that growth in the euro zone is not in danger. Once again, juncker said that the economic trend in the eurozone is satisfactory, but why doesn’t the ecb raise key interest rates to ensure price stability?? After all, many employees in europe have been suffering real income losses for a long time because of high inflation.

Perhaps they are just trying to explain away the emerging crisis. This has been done in the usa for a long time. But in view of the poor data, most recently the sharp rise in unemployment, hardly anyone still denies the fact that the u.S. Is in a recession. Now, even with the "professionals" arrived that the domino effect, for example, has been working for a long time, and "spain’s economy is going down". It is feared that "the cooling economy in large parts of the euro zone is dragging germany down with it". Economy minister solbes is already putting spaniards in the mood for cuts in services for 2009.

Using the spanish example, it can be predicted that the policy will only exacerbate the real estate crisis, because more and more families will no longer be able to service their mortgage loans. A scenario similar to that in the u.S. Is emerging, according to former federal reserve chairman alan greenspan. The international monetary fund (imf) predicts that real estate prices will fall by up to 20%.

The banks now want to demand new collateral from the borrowers, because their homes can no longer cover the often 100% borrowed sum. This is possible because the socialists (psoe) have not laid a hand on the absurd credit system that allows the banks to roll all the risks onto the consumers. So it is of no use to them that the ecb is keeping key interest rates stable, because its loans are tied to euribor, which has reached a new record for the year. So it is possible that spanish banks and savings banks posted new record profits last year despite the financial crisis. With almost 20% growth over the previous year, they have brought in more than 30 billion net profit. But here, too, a banking crisis is in the offing if the hemming and hawing continues at current growth rates. And that’s predictable if workers’ wages don’t finally rise in real terms.

Summer: "we have a very high backlog demand for wages in germany."

And this is what the spanish trade unions have been demanding with colleagues from all over europe. 35 kilometers away from the meeting place of finance ministers, more than 10 people demonstrated in ljubljana on saturday.000 people (35.000 according to the organizers) for higher wages. The head of the german trade union confederation (dgb) criticized the interference of finance ministers and the ecb in the autonomy of collective bargaining. "We have a very high backlog demand for wages in germany." workers and employees had to be given a fair share of corporate profits, he demanded. Sommer also pointed out that higher wages stimulated the economy, which had a positive effect on the economy.

The protests were organized by the european trade union confederation (etuc) and 50 trade unions from 30 countries took part. At the rally, etuc general secretary john monks also rejected the demands of the finance ministers. Instead of preaching about modest workers, they should provide stability on the crisis-ridden financial markets. "We want an end to speculation and reckless greed on the financial markets". There were calls for an early warning system for financial crises and for uniform international standards instead of voluntary commitments.

The finance ministers adopted a declaration of intent for cooperation between the financial supervisory authorities, according to which in the future there should be closer cross-border cooperation in the eu for the prevention and management of financial and banking crises. For this purpose "cross-border stability groups" be created for all financial institutions with significant cross-border activity, because a failure of one of these financial institutions could put the entire financial system in distress. But this is only a "voluntary" body for representatives of the central banks, the financial supervisory authorities and the finance ministries.

The globalization-critical network attac reacted to the resolutions with sharp criticism. The resolutions missed the requirements in an unbelievable way. "We are currently experiencing probably the worst financial market crisis since the 1920s and thus the obvious failure of neoliberal financial market liberalization. A completely new financial order is needed", said stephan schilling of the nationwide coordinating group. The alternative ecofin meeting called for breaking the dominance of financial markets over the real economy and bringing them back under democratic control. This requires a reduction of the massive global inequality in the distribution of wealth, the introduction of a tax on all capital and foreign exchange transactions, and decisive action against highly speculative financial market players such as hedge funds. There are also calls for a special tax on capital income and corporate profits to pay for the costs of the financial market crisis.

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