Austerity policies undermining rights within the EU

A UN rights expert has decried the impacts of austerity policies undertaken in the EU in response to the financial crisis, saying that these measures have undermined economic, social and labour rights within the bloc.

by Kanaga Raja

GENEVA: Recent austerity policies are undermining economic, social and labour rights within the European Union and are hitting the most vulnerable, the United Nations Independent Expert on the effects of foreign debt and human rights, Juan Pablo Bohoslavsky, has said.

This conclusion was highlighted in an end-of-mission statement following his recent official visit to EU institutions to assess the response of these institutions and of EU member states to the sovereign debt and financial crisis from a human rights perspective.

The rights expert undertook the official visit to Brussels from 30 May to 3 June, and his findings and recommendations will be detailed in his full report to the UN Human Rights Council in March next year.

Adverse effects of austerity

In his end-of-mission statement released after his visit, Bohoslavsky (who is from Argentina) said he is deeply concerned about a paradigmatic shift that is undermining the previously balanced approach of ensuring economic stability, equality and social cohesion, in favour of a disproportionate focus on budgetary stability.

“Austerity policies have unfortunately all too often gone hand in hand with an undermining of economic, social and labour rights within the European Union hitting the most vulnerable. In parallel, inequalities in income and wealth have increased within Europe. In addition to these outcomes, austerity measures do not appear to have led to full financial and fiscal stability in all countries.”

The rights expert noted that in response to the crisis, many EU states resorted to austerity measures to address excessive public deficits and unsustainable public debt. After the global financial crisis unfolded, 25 of the 28 EU member states were at some stage put under the Excessive Deficit Procedure of the EU, which kicks in when a state has a public deficit above 3% of GDP or is unable to bring its debt-to-GDP ratio below 60%.

In addition, Cyprus, Greece, Hungary, Ireland, Latvia, Portugal, Romania and Spain were experiencing serious difficulties in relation to their financial stability and had to implement economic adjustment programmes as a condition for receiving stand-by support or loans from European institutions and the International Monetary Fund (IMF).

According to the Independent Expert, there are currently about 21.4 million unemployed in the EU, 4.7 million more than in 2008, before the global financial crisis spread. More worryingly, nearly every second unemployed has been without a job for more than 12 months and long-term unemployment has remained high in countries that underwent adjustment programmes (for instance: Greece 72.1%, Portugal 57.4%, Ireland 56.2% of all unemployed persons).

The percentage of persons in the EU who report unmet medical needs and say seeing a doctor is too expensive for them, has also increased after 2009.

“Disappointingly, in one of the most affluent regions of the world, poverty has been on the rise,” said the rights expert. About 121 million people in the EU-27 are at risk of poverty or social exclusion, 4.7 million more than in 2008, and their number has in particular increased in Greece, Italy and Spain. Children and women in Europe are more at risk of poverty and social exclusion (27.8% and 25.2% respectively) than the total population (24.4%).

“In this context, it will be difficult to reach the target the European Union has set for itself, to reduce the number of people at risk of poverty and social exclusion by 20 million people by 2020,” he said.

“It is paradoxical that when social protection was most needed, social spending was often reduced. In some countries, in an effort to ensure the repayment of public debt, public health and social protection expenditures were excessively slashed,” he added.

According to the rights expert, the core question here is why this type of expenditure was particularly targeted by conditionalities. “These cuts were often made in public health and social protections systems that already were deficient to ensure that those most in need would receive treatment or benefits.”

The case of Greece

In Greece, which Bohoslavsky visited in December 2015, the overall social protection budget stood in 2009 at €44.2 billion. In 2014, only €35.7 billion was spent, a cut of 19.3%, while at the same time the number of persons unemployed or living in material deprivation dramatically increased. Public health expenditures in Greece were reduced from €16.1 billion (2009) to €8.3 billion (2014), an unprecedented decrease of 48.6%. Poor patients are now relying on solidarity clinics run by volunteers to receive essential medical services.

“There is a widespread belief that billions of taxpayer money has been used or provided in the form of guarantees to rescue Greece from defaulting.” According to the rights expert, the amounts were indeed large, but in reality the financial assistance provided through European financial institutions returned to a very large degree to international lenders, who had provided Greece until 2009 with loans without fully following due diligence standards in order to check whether the country would be able to pay back its debt.

In total, €215.9 billion was disbursed under the first and second adjustment programmes from 2010-14. However, a recent study published by the European School of Management and Technology in Berlin suggests that only a very small fraction – €9.7 billion or less than 5% – ended up in the public budget of Greece; 64% of the disbursed loans was just used to pay back the existing debt and interest, €37.3 billion or 17% was used to recapitalize Greek banks, while €29.7 billion or 14% of the amount was used to provide incentives for investors to engage in the Private Sector Involvement (PSI) in March 2012, a haircut of the Greek debt. Through the PSI, private debt was converted to a large degree into public debt.

Looking at these figures from a human rights perspective, the rights expert said he was inclined to ask: Who has been given priority? Who has mainly benefited from the financial support? While bailing out banks and stabilizing the financial system, was enough done to reduce poverty and unemployment in Greece, Spain, Portugal and elsewhere? Were economic and social rights given the needed priority to ensure that everybody within the EU can live in dignity?

“Poverty levels and the increase of inequality experienced in those countries make me feel that this is not the case,” he said.

In his view, Greece’s debt, currently estimated at around 180% of GDP, is highly unsustainable. The IMF recently published a scenario that Greece’s debt-to-GDP ratio will further increase to about 250% by 2060 if no frontloaded debt relief is provided.

Debt relief is currently under discussion in the form of maturity extensions, payment deferrals and lower fixed interest rates. However, in the view of the Independent Expert, this would be “too little, too late”, especially for the thousands of people who have suffered in the last years. Postponed debt relief will not restore confidence in the Greek economy nor promote much-needed investment.

Bohoslavsky was similarly worried about the short- and long-term human rights impacts of the latest austerity package passed under pressure from international lenders by the Greek Parliament on 20 May, which includes further cuts to pensions to the tune of €3.6 billion and an increase of the value added tax (VAT) to 24%, which hits poorer people more forcefully than the more affluent.

The package includes across-the-board spending cuts should Greece fail to reach agreed primary surpluses in the future, surpluses that have been considered unrealistic for Greece by the IMF due to its very high structural unemployment. “Such across-the-board spending cuts are unlikely assessed in relation to their social or human rights impact. They would repeat past mistakes, further undermine the Greek economy and deepen the economic and social rights crisis within Greece,” the rights expert underlined.

Human rights obligations

“My point is that obligations under human rights law should be a legitimate and necessary constraint when designing and implementing macroeconomic policies ... My point here is to stress that irrespective of the macroeconomic policy chosen, there is a need to ensure that human rights are fully respected and that nobody is left behind,” Bohoslavsky said.

While EU member states are primarily responsible for adherence to their international human rights obligations, international institutions, including the EU, its bodies and financial institutions, are not beyond the reach of international human rights law, the Independent Expert stressed. This applies to international organizations, including multilateral financial institutions, such as the IMF and the World Bank.

“When making policy recommendations or setting binding conditionalities for providing loans, institutions and bodies of the European Union have – at an absolute minimum – to respect international human rights treaties to which all their Member States have become a party.”

The rights expert reminded all EU member states (including euro area states acting as international lenders) that they are bound by the International Covenant on Economic, Social and Cultural Rights and other relevant core human rights treaties they have ratified. “States parties to the International Covenant on Economic, Social and Cultural Rights would be acting in violation of their obligations under the Covenant if they were to delegate powers to an international organization (e.g. the ESM [European Stability Mechanism] or IMF) and allow such powers to be exercised without ensuring that they will not infringe on human rights.”

Bohoslavsky noted that the EU has developed several guidelines and tools for carrying out social and human rights impact assessments. “However, when it comes to macroeconomic policies in the context of financial crises, human rights standards have so far not been explicitly used as benchmarks to assess economic reform programmes. It is therefore deplorable how little lending conditionalities were formally assessed on their potential harm to human rights-holders before they were implemented.”

The rights expert welcomed the fact that the European Commission has undertaken for the first time, in August 2015, a social impact assessment for the third economic reform programme currently implemented in Greece. Regarding it as “a first step in the right direction”, he however said that this assessment, produced on short notice, does not have the ambition to assess the economic reform measures against international human rights standards.

“Economic reform programmes should not only undergo social, but also human rights impact assessments that live up to their name. Such assessments should be carried out in consultation with affected rights-holders and civil society and be more than tick-box exercises in order to be meaningful.”

In addition, he said, evaluations of past reform programmes should not only assess whether they managed to reduce budget deficits, restore debt sustainability or enhance economic growth, but whether they ensured a fair and equal distribution of the burden of adjustment within society.

“We need to put the human person back into the equation, as the economy should serve the people, not vice versa. Therefore, it is absolutely relevant to know to what extent economic and social rights have been successfully protected in the context of adjustment policies, what gaps exist and who is most affected by lack of protection of their rights.”

The Independent Expert said that this exercise would not only allow learning from past mistakes to be better equipped for the future, but ensure that identified infringements of social and economic rights can be addressed and corrected.

“No credible argument could be made that what should be done externally for the benefit of rights holders outside the European Union cannot be done internally, for the benefit of its own EU citizens and residents.”

Rather, said Bohoslavsky, a human rights-based approach should guide country-specific recommendations to EU member states in the field of macroeconomic policy and the lending policies of European institutions to their own EU member states.

“States need sufficient fiscal space to ensure that they can protect and progressively realize economic, social and cultural rights. Debt obligations should never take preference over human rights.” It is therefore equally important to combat tax avoidance and tax evasion to prevent states falling into a debt trap and to ensure that they have sufficient revenues at their disposal to uphold economic and social rights.

“It is time to revive social rights within the European Union,” the Independent Expert also said. In his view, some recent initiatives from the European Commission, such as the European Pillar on Social Rights, will contribute to this aim. “I have stressed during my visit that such a pillar needs to be based on a solid foundation.”

This foundation should not only reflect the social acquis of the EU, but also build on the international human rights obligations of EU member states and the recommendations emanating from international and regional human rights mechanisms, Bohoslavsky concluded. (SUNS8266)                                         

Third World Economics, Issue No. 619/620, 16 June – 15 July 2016, pp18-19