AT THE HEART of the European Union lies a single guiding principle that, if unaltered, will ultimately destabilise and destroy both the euro and the EU.
That principle is written into the single paragraph aim of the European Central Bank:
“We in the Euro system have as our primary objective the maintenance of price stability for the common good.”
In accordance with this outlook we find a brace of policies which have been constructed around the idea that unemployment is a fair price to pay for low inflation.
Around the world, central banks are required to ensure the stability of their respective currencies. After all, a stable currency is key to achieving a stable economy, which, in turn, helps ensure a stable currency. And so forth.
In the case of Ireland and the eurozone, the European Central Bank (ECB)is tasked with this job. But there’s a problem at the core of the ECB rulebook.
The rules of the ECB make it very clear that there is only one issue which it considers to be a threat to the stability of the euro: inflation. The ECB is precluded from considering the issue of unemployment as a threat to the currency. The obvious difficulty arising from this approach is that, too often, the policies required to protect the euro from inflation aren’t conducive to job creation. Indeed, they are directly creating unemployment.
The eurozone is currently governed by goals which fail to recognise that unemployment is profoundly economically damaging and politically destabilising – or that joblessness has a devastating human cost.
Right now, at a time when the EU is undergoing an appalling unemployment crisis – including a devastating youth unemployment rate of 24 per cent – the ECB is actually pursuing policies which make this very real economic and political crisis worse. Instead, their attentions are firmly trained on a non-existent inflation crisis.
The ECB is totally out of step with other central banks on this issue. Last week the Bank of England made it clear that it would be prioritising unemployment in its monetary policy decisions. The US Federal Reserve (Central bank) has also stated that when it comes to the stability of its currency, employment rates are critical – as it says in its mission statement:
“The Federal Reserve conducts monetary policy to foster its statutory objectives of maximum employment, price stability, and moderate long-term interest rates.”
Current ECB rules fail to recognise that having mass unemployment across Europe and an entire generation facing life without opportunities is, in itself, a major threat to economic stability.
Pursing policies which exacerbate the problem is reckless and it sends a clear message to the citizens or Europe, and in particular the younger generations of citizens, that their prospects are not considered to be a priority by the institutions of the European Union.
This, in turn, compounds the image of the EU as a bureaucratic monolith that is out of touch with the citizens of Europe, as a set of institutions that prioritises placating the markets and ratings agencies at the expense of the people they purport to represent.
To be fair, the ECB are not just a bunch of one dimensional bad guys with cigars and limos; they are, rather, working within the strict confines of the mission statement they were given by the governments of Europe.
Crucially, the governments of Europe need to broaden out the goals of the ECB to make them similar to those of the US Federal Reserve. They need to recognise the human, economic and political threat associated with unemployment and a lack of opportunity for its citizens.
It is economic madness to imagine that the only threat to the stability of the euro is inflation when unemployment rates are soaring across many areas of the continent. With youth unemployment rates hovering around 60 per cent in some euro zone countries and with a quarter of all young people jobless in Europe, unemployment must supersede inflation as the primary threat to stability. Expanding the mission of the ECB with a remit to maximise employment will release the institution from its austerity straitjacket and will allow it to pursue policies prioritising employment, policies that have been embraced in both the UK and the US by their central banks.
Overall, the EU has had a hugely positive effect on Ireland and Europe. It is in our interest for it to survive and for the euro to survive but not at any cost. An EU which fails to prioritise the economic needs of its citizens is sowing the seeds of its own destruction. Changing the remit of the ECB is a critical next step in its survival.
Tiernan Brady is an MA in International Relations and one of the directors of GLEN –The Gay and Lesbian Equality Network. He is writing in his personal capacity.
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