Troika: Socialist inaction cause of high unemployment

“The economic and financial crisis has highlighted the fragility of public finances, and in other cases of the banking systems in certain countries. The social and economic situation has deteriorated and unemployment has increased. Jobs would not have been lost if Socialist governments had not closed their eyes to the crisis and acted sooner”, explained the Portuguese MEP Regina Bastos, after the vote in the European Parliament’s Employment Committee on the employment and social aspects of the role and operations of the Troika with regard to Euro area programme countries.

“Our goal was to make the Report objective, realistic and constructive, and avoid summary judgments of the Troika”, stated the EPP Group Shadow Rapporteur Regina Bastos. “We cannot ignore the fact that the social situation in the four countries visited by the Troika was already very difficult, as they were facing bankruptcy, and inaction would have had drastic consequences.”

Given the incapacity of these countries to honour their responsibilities and to avoid bankruptcy, financial assistance was requested from the EU Member States in the Euro area, the European Commission and the International Monetary Fund. The following economic adjustment programmes were urgent responses to urgent situations. Moreover, the European Institutions and the IMF were not prepared, nor had the right tools to address these problems. The lack of time to perform the adjustment programmes and the inadequate characterisation of the economies of the Member States were the main causes for the increase in the social situations in these countries.

In this context, austerity measures should provide a balanced solution between economic growth and employment, the implementation of structural reforms and fiscal consolidation in the Member States. That said, the direct and indirect social consequences of the economic crisis and economic adjustment programmes should be investigated and action should be taken in particular in combating poverty and creating jobs, not losing sight of the objective of ensuring the sustainability of the public finances of these Member States.

"Reforms have stopped the destruction of jobs, putting the economy back on track and able to reduce unemployment and poverty. Following the turmoil caused by the implementation of the economic adjustment programmes and the necessary structural reforms, it's time to get back on the path of job creation and sustainable growth", concluded Regina Bastos MEP.

Noteworthy positive economic indicators

In Portugal, the unemployment rate fell for the tenth consecutive month and 120,000 jobs have been created over the last 6 months. The Bank of Portugal has sharply revised (upwards) its growth outlook for the Portuguese economy in 2014 and anticipated an increase of 0.8% of GDP. According to Eurostat data, the number of people at risk of poverty (26% to 25.3%) and the inequality of income distribution have declined in Portugal. Given this positive data, it appears that Portugal will complete its programme of economic and financial assistance on 17 May.

We also stress the case of Ireland: three years after its appeal to the European Union and the IMF, it officially left the financial assistance programme in December last year and returned to the debt market without further aid. At the end of 2013, Ireland emerged from recession after registering growth of 0.4%. Official estimates for 2014 predict growth of 2%. The unemployment rate remains high, at 12.1%, but has fallen consecutively and is at its lowest since 2010.

Spain also approved an austerity budget for 2014, with spending cuts in Ministries, a salary freeze in the public sector for the fourth consecutive year, and a new calculation for pension increases. Reforms implemented by the Spanish Government to fight the crisis and unemployment over these past two years are beginning to show positive signs. After two years of recession, the Spanish Government announced that Spain will create net employment this year and that the economy will grow by around 1%, despite the difficulties still being felt on the labour market.

Austerity measures not the prerogative of the Troika

In 2013, France adopted its toughest budget in 30 years without the intervention of the Troika. In 2014, the Socialist French Government adopted more austerity measures with cuts in public expenditure of €15 billion and with a heightened tax burden for families due to an increase in VAT.