This year at the 1st of January, with the creation of the monetary union, the duties and responsibilities for the entire monetary policy of 11 countries of the EU have been transferred to a single central authority, the European Central Bank in Frankfurt.
Monetary policy is one of the most important instruments of economic policy. The smooth functioning of money transfers, the effectiveness of the credit system and the internal and external stability of the currency depend on the proper supply of money for the economy. The strategy of monetary policy therefore has a very strong impact on the development of the economy and employment within the monetary union.
According to the experiences of the last years and the statements of the president of the new central bank, Wim Duisenberg, the future looks dull. From this perspective the ECB does not contribute to the reduction of unemployment in the EU. Already during the preparations of the monetary Union the policy of the German Bundesbank has been responsible for unemployment to have reached those high levels which are characteristic for the EU since the beginning of the 90ies [Since 1978/79 (Reagan/Thatcher/Kohl(1982)) unemployment in the EU has been high, but increased even more in the 90ies. (The translator)]. According to official statistics ca. 17 million or about a tenth of the people able and willing to work do not find a job in the EU. The main reason for this is that the monetary policy, which Germany has also imposed upon other countries already before the monetary union, has restricted the supply of money sharply and by this has narrowed the perspectives for sales of the companies and reduced overall economic growth. The conditions which have been fixed in the Treaty of Maastricht before 1991, as condition for joining the monetary Union due to German insistence, aimed only to reduce inflation and at the limitation of public expenditure. The stability of employment, of insurance, of social security where ignored in this treaty.
This prehistory is a heavy burden for the further development of the Euro zone. If there is no change of the course of economic and monetary policy unemployment will not be reduced but continue to increase. At the end there is the possibility that the monetary union proclaimed as a qualitatively new step on the way to the integration of Europe turns out to be an enormous dividing agent.
On the other hand this is not an unavoidable destiny. The protest and resistance against the neo-liberal economic policies, who's central points are private property of means of production, free markets and stable prices, have strengthened. In the large countries of the EU - Italy, the United Kingdom, France and finally also Germany - the conservative governments have been defeated in the elections and have been replaced by social-democratic or red-green coalitions.
The governments of the EU have proven over the last years: the united concentration in favour of a common objective can mobilize tremendous energies and achieve great successes. The objective though, the fulfilment of the convergence criteria of Maastricht was totally biased and counterproductive. Today it seems not to be very realistic, but nothing contradicts similar intensive efforts of the EU - not only the countries of the monetary union - for the abolishing of unemployment to achieve progress and successes as well - for example the reduction of unemployment within the next 3 years. This is not an esoteric dream but the well founded position of more than 450 economists of all countries of the EU who have presented last December a memorandum in several countries of the EU with the title: 'Full Employment, Solidarity and Sustainable Growth - Old Challenges, New Possibilities of Economic Policies'.
There is demonstrated that and how unemployment can be reduced substantially within a reasonable period of time by a combined coordination of expanding financial policies (employment programs, third sector, labour market policies), monetary policy and reduction of working hours and that there are effective ways towards new full employment where all people able and willing to work shall find an employment according to their abilities who's compensation suffices to maintain their proper living.
For the ECB this urgently needed change of economic policy does not mean the loss of its special duties and responsibility for monetary policy. But this means that it can not conduct its monetary strategy totally unconcerned and independent of the democratically legitimated priorities of economic policies. The demand for total independence of the central bank is nonsense and hostile to democracy.
For the next months and years to come for economic development and employment much depends upon integrating monetary policy into a strategy of economic policy who's objectives are full employment and a social constitution for Europe.
Prof. Dr. Jörg Huffschmid, University of Bremen.
Member of the association 'Arbeitsgemeinschaft Alternative Wirtschaftspolitik', Germany
EURODOS Disarmament and Social Progress