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ORIGINAL FRENCH ARTICLE: Le traité de Lisbonne fauteur de crise

by Rosa Moussaoui

The Treaty of Lisbon: an Agitator of the Crisis

Has Nicolas Sarkozy forgotten all about his European Treaty?

Translated Thursday 9 October 2008, by Henry Crapo

The French head of state, who is posing as a critic of finance capital, wishes to continue to impose the Lisbon Treaty, which guarantees total liberty to movement of capital and an all powerful European Central Bank.

Monetary Crisis: The French president calls for measures refused by the European treaty that he imposed on the French people, and which he wants to ratify in spite of the contrary vote by referendum by the Irish people.

The European leaders have competed for severity, these recent weeks, in denouncing "the excesses of finance capital" and the "crazy idea" of total freedom for the market. In a period of intense crisis, these postures strive to make people forget the activism of the European Union in promoting the deregulation of the entire economic and monetary policy, now turned to supporting the financial markets, to the detriment of employment, of economic and human development

This ultra-liberal political program, at the base of the current crisis as it was in the case of previous crises, was inspired after the Reagan years in the United States by circles preaching "modernization" of finance, support of "innovation", and the taking of risks in this sector. This included free movement of capital, opening up of markets, and confidence in the virtues of "self-regulation" of these markets. A catechism popularized by, among whom the famous Group of 30, regrouping financiers and central bankers, including Jean-Claude Trichet, governor of the European Central Bank [1].

This dogma is inscribed at the very heart of the European treaties, especially in the Treaty of Lisbon, which Nicolas Sarkozy and his European homologues still hope to get adopted in spite of the evident failure of the economic and monetary policies that it codifies.

Let’s take a look back at a treaty
 [2]
in the service of finance capital:

The Sanctity of Free Circulation of Capital

Legislated in Europe in 1990, the free movement of capital has become one of the cornerstones of the Union. "The internal market consists of a space without internal boundaries, within which the free circulation (..) of capital is assured", stipulates ex-article 14 of the European Constitutional Treaty. In consequence, as article 63 (ex-article 56 of the ECT) states: "all restrictions on the movement of capital between member states, and between member states and third parties, are forbidden," and the Union is invited to create legislation in order to realize this objective. Any exception to this rule, qualified as "backward step", falls under the rule requiring unanimous approval, which makes it virtually impossible, in a Europe of 27 nations.

Article 66 (ex-article 59 of the ECT) specifies that "measures of safeguard" may be taken "in exceptional circumstances", but for a period not to exceed six months, when such measures are seen to be "strictly necessary".

This liberty from restriction to circulation of capital implies, according to article 58 (ex-article 51 of the ECT), "the freeing up of services of banking and insurance". This liberalization, added to article 60 (ex-article 53 of the ECT),
is one in which the member states should "make an effort to proceed to a degree over and above that which is obligatory". These measures are paired with those relative to the liberty of establishment, from which the financial services benefit, in the same way as other services. "Restrictions to the liberty of establishment (...) are forbidden," stipulates article 49 (ex-article 43 of the ECT).

These very strict measures provide total liberty to the financial markets, making nonsense of all these promises of "regulation" and "supervision"
of speculative movements, and prevent any restriction to the flux of capital, for example, by the imposition of taxes. They leave totally free the speculative funds whose operations, as profitable as they are questionable, lie at the origin of the present crisis. Combined with the quasi-banning of any fiscal "harmonization" in the European Union (again requiring unanimous approval), they render illusory all promises of a fight against "fiscal paradises".

Free and Unfettered Competition, or the All-Powerful Market

The principle of "free and unfettered competition", contrary to what president Sarkozy said at the close of negotiations on the Treaty of Lisbon, remains the core of the treaty.

Article 119 (ex-article 4 of the ECT) states that "the action of member states and of the Union involves (...) the establishment of an economic policy (..) in conformity with respect for the principle of an open market in which competition is free", a principle many times reaffirmed, and completed by protocol number 27 relative to the interior market and competition. This stipulates that "the internal market, as defined in article 3 of the treaty for a European Union, includes a system guaranteeing that competition is not interfered with".

Services and public enterprises are submitted to this doctrine of competition: "the member states, in their dealings with public enterprises and those enterprises to which they accord special or exclusive privileges, enact or maintain no measure at variance with the rules of the treaty", and "Enterprises charged with management of services of general economic interest, or having the character of fiscal monopolies, are submitted to the rules of the treaty, notably with respect to competition", states article 106.

All these measures are the basis for the directives for liberalization that, in opening the public sector to competition, encourage privatization or the adoption, by public enterprises, of private sector criteria of profitability. What is involved is the submission of all sectors of the economy and all human needs to the rule of the market, which will auto-regulate itself by the magic of "pure and perfect competition".

These measures enshrine, in fact, "the idea of the omnipotence of the market, which should be constrained by no rules", qualified as a "crazy idea" by Nicolas Sarkozy, last 2 September.

Finally, Article 107 judges "incompatible with the internal market (...) any aid provided by the states (...) which threatens to interfere with competition".

The establishment of rules of competition remains a domain reserved for the European Commission, which, together with the Court of Justice, has a power of sanction. These two institutions that have found nothing to say about using public funds in the recent plans for bail-out of failed European banks.

In a curious sleight of hand, the sums of money devoted to these bail-outs do not enter into the calculation of public deficits controled by the pact for stability, in contrast with social spending, which is the first target of budgetary rigor inscribed in the treaty.

A European Central Bank at the Service of the Financial Markets

The Treaty of Lisbon leaves intact the full powers of the European Central Bank. "Neither the European Central bank, nor any national central bank, nor any member of their organs of decision, may solicit or accept instructions from the institutions, organs or organisms of the Union, nor from the governments of the member states, or from any other organism", states article 130 (ex-article 108 of the ECT). "The institutions, organs, or organisms of the Union as well as the governments of member states undertake to respect this principle and not to try to influence the members of the organs of decision of the European Central Bank".

Which goes to say that this article makes meaningless all the pretences of the French government to redirect a monetary policy decided in Frankfort: the independent European Central Bank is the sole captain on board. It remains closeted with its monetarist policies that make "the stability of prices", that is, the fight against inflation, the unique objective of its monetary policies. "The principal objective of the European system of central banks is to maintain the stability of prices", says article 127 (ex-article 105 of the ECT). A mission henceforth inscribed among the objectives of the Union, which justifies the repeated calls by the European Central Bank for "wage restraint", and the maintenance of a "strong euro", which weigh on European exports.

Neither economic progress nor employment figure among its missions. On the other hand, it is planned that it will offer its help to the financial market, via operations aimed at putting at the disposal of financial institutions the liquidity that they require. (Protocol number 4 relative to the statutes of the ECB).

These refinancing operations are subject to no condition as to the destination of the credits, such as to financial operations or investments useful for economic development or employment. To modulate the conditions of allocation of these credits as a function of their destination would serve to discourage speculation and perhaps avoid these repeated crises.

[1See « Le système bancaire dans la tourmente », The Banking System in Torment, by Ibrahim Warde, in le Monde diplomatique for November 1998

[2The consolidated versions of the Treaty for the European Union and of the treaty on the functioning of the union may be consulted at the following address: http://eur-lex.europa.eu/


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