Our way vs. their way

The macroeconomic impact of a progressive economic strategy versus conservatives’ austerity-only

The Facts:

We can have growth, jobs and better public finances at the same time, but only if we decide the right economic strategy and implement it in cooperation. This is “our way”, a progressive economic strategy for Europe. We are proposing to reform the economy out of the crisis, instead of trying to cut it. The PES has proposed an ambitious 2020 strategy for a new, fair growth model. We are focusing on investments in innovation, green growth, education, the fight against social inequality and a tax on financial transactions, as well as budget consolidations. The conservatives and liberals have another strategy: ‘austerity-only’. They are now forcing the EU to “recommend” to its member states nearly 4% fiscal cuts over 2010-2015 on average, and far more for some countries.

The facts tell a very clear story, as documented by a new study initiated by the PES and made in cooperation with our progressive Danish research Institute[1].

Our way is better than the conservatives’ way for growth, jobs, and public finances. By 2015, our progressive strategy would translate in 8 millions more jobs and 4.5 percentage points more growth. By 2020 we can create a total of 12 million more jobs. We would do so for virtually the same result than the conservatives in terms of fiscal consolidation.

This background paper presents four ways that show the different macroeconomic forecasts for the EU under two scenarios:

    * A 2020 strategy – our way

    * Fiscal tightening – their way

1. GDP Growth

    * Following our strategy, the EU’s economy would growth by 10.9% over the next 5 years.

    * This is 4.5 cumulated points more than in the conservative strategy of ‘austerity-only’ over the period 2011-2015.

    * Our development would be sustained at medium term, with GDP growth 0.5 percentage points higher than current forecast for the period 2016-2020.

2. Employment

    * Our growth-friendly strategy would translate into large-scale job creations. In the next 5 years, our economic plan would result in 8 million more jobs in the EU.

    * In the same period, the ‘austerity-only’ approach would actually destroy a further 600,000 jobs.

    * Our new growth model would continue creating jobs over the second half of the decade. In total, we can create 12 million new jobs by 2020.

3. Unemployment

    * Our economic strategy would reduce unemployment to 8.4% by 2015. This represents 2.5 million unemployed less than today.

    * Over the same period, the conservatives would increase unemployment to 10.7%. This represents 2.8 million unemployed more than today.

    * By 2020, we would take unemployment down to 7.7%.

4. Public deficit and fiscal consolidation

    * Our strategy would have virtually the same impacts as the conservatives’ austerity only on fiscal consolidation. By 2015, we would reduce deficits to 2%.

    * Over the period 2016-2020, the consolidation would continue, as we would deliver an average deficit of 1.2%.

We are today – as we were yesterday –faced with a real choice: their way or our way. Growth, jobs and welfare makes the difference. Our strategy is the one that passes the economic test: we are the party of economic responsibility.

[1] “Ways out of the crisis”, report by the Economic Council of the Labour Movement, Copenhagen, 2nd of March 2011
 

For further information please contact Brian Synnott on +32 474 98 96 75 (brian.synnott@pes.org)