‘The European Union is not a bank’ | Iratxe Garcia-Perez

The success of the German SPD in last week’s elections gave new impetus to European social democracy. What does a centre-left Chancellor mean for Europe at this moment? With the Stability and Growth Pact coming back into force in 2023... would Olaf Scholz take a ‘kinder’ view of fiscal policy: by supporting the need to tolerate deficits, in EU states hard-hit by the Covid-19 pandemic?

First of all, maybe it is important to understand where we are right now. Europe’s response to the Covid-19 pandemic was very different to its response to the 2008 financial crisis. And the main difference is that – unlike the austerity we saw in the case of the 2008 crisis - European governments have today decided to put people at the centre of their response, with a solidarity-based Recovery Plan.

Germany had a strong role in this agreement; along with other countries, such as Spain, Italy and France. In fact, this new, solidarity-based approach was pushed by finance minister [and S&D’s candidate for Chancellor] Olof Scholz within the German government; and this is very important, because it can send a clear signal of how we can work within the European Union, under a new government led by the Social Democrats.

Maybe it is too early to say whether the fiscal rules themselves will change or not; the discussion is open, as we know perfectly well. But maybe it is a good opportunity to understand that the deficit, alone, cannot be the only instrument. We can include other issues, such as the ‘golden rule’ on social and environmental investment: whereby this type of investment is excluded from national deficits, for example.

In any case, I think there are different ways in which a new Social Democratic government in Germany can influence Europe’s response for the better. But it’s very early to say, from now, precisely what will happen; or even who will be the minister responsible for finances in the new government. It could be someone from the Greens, or the Liberals… we shall have to wait and see.

But I do think there will be a difference; and that a new German government can influence the EU in a good direction.

EC Voice-president Frans Timmermans recently sounded an ominous, oft-heard warning on climate change: ‘our children will be fighting over water’. But what are the S&D’s actual priorities when it comes to climate change, and what does it expect European governments to do within the next years?

Of course, it is a top priority: because at this moment, the fight against climate change is not an option. It is an obligation. We have no choice: it is necessary if we want to safeguard this planet for future generations. The question is, how will we do it?

We already have a clear commitment, in the form of the Climate Policy. But this Climate Policy also needs to have a social dimension. This is very, very important. It is necessary to make a strong transformation in our economies, in our industry, in all countries of the European Union. And to do this, we have to think about the people who have the most needs; and who will be impacted the most.

Some of these transformations will bring about changes in, for example, the labour market; or new measures to support renewable energy, or energy-efficient buildings. And some people will obviously face more problems than others, when adapting to these new realities.

That concern is also true of countries, not just individuals. A small island nation like Malta – which relies heavily on imports – may be disproportionately affected by (among others) the proposed EU measures to curb shipping emissions, for instance…

That is the question. What is the right way to do this? Clearly, we need to build a common position: because there are different perspectives, depending not only on the countries concerned – with their unique geographical circumstances – but also on individual sectors. What will happen, for example, in the transport sector? The aviation sector? And in various different industries?

So I think we need to find a common position, so that the necessary transformation is achieved: but supported by a strong social fund.

Migration has also been an important subject for the S&D in this external meeting. The Maltese government is often criticised, justifiably, over its attitude to migrants; during COVID-19 it financed private boats to keep rescued migrants out of Maltese waters for weeks on end. Does the S&D condemn such games on human rights; or does it agree with the Maltese government’s argument that we are really suffering from a lack of European solidarity when it comes to the rescue and relocation of asylum seekers?

I agree that there is not enough solidarity, at this moment, from Europe on the issue of immigration.  Because immigration is a situation common to all of Europe; it’s not a problem only for some border countries like Malta, Italy, Greece or Spain. That’s not the case: because when one immigrant is in any of those countries… it means that they are in Europe.

So we need a common European policy on immigration, based on solidarity: solidarity between different member states; and also, solidarity with the people who come here [to Europe] for different reasons… be they economic reasons, or human rights issues in their own countries.

But it is unacceptable that some countries have to receive all this pressure, without any help from other member states. It is necessary, then, to find a common position; and we are prepared, as a group, to push for this in the European Parliament; and to remind some of those countries - which do not support a common policy – that they have to do it, because the EU is a political project. It is not only an economic project: we also have common values… and solidarity is one of the most important of those values.

Malta is often criticised for its role in enabling the shifting of profits generated in Europe to minimise tax exposure: sometimes to just 5%. The S&D has supported the OECD push for a 21% global rate. But what do you tell Maltese MEPs when they refuse to support the stand for common corporate taxation in the EU? Do you see this opposition to tax harmonisation as ‘unfair play’ by the Maltese?

Sometimes, we have different positions within our group: not just with the Maltese delegation, but with others too. But we have the opportunity to discuss those differences between us, without any problems; and to try to find a common position.

If that is not possible, however: it is always necessary to accept the majority position. And for us as a group, fiscal policy is an essential tool to guarantee social justice. We need a strong, just taxation policy, if we want to guarantee a robust European budget; a strong [Covid-19] recovery plan; and to respond to today’s global challenges. Immigration, for example; public health; and the need for a strong social pillar, to fight against poverty.

There is a lot we can we do about all those things; but we need the resources. And a fair taxation policy is the best instrument, to guarantee social justice.

Government, however – and also the private sector, including the Malta Business Chamber – argues that tax incentives are the only way a country like Malta can compensate for the disadvantages of being such a peripheral destination, when it comes to attracting foreign investors. Don’t they have a point?

I understand this argument perfectly well; and we face the same issues with other countries, too. Or with particular regions of certain countries, which are also vulnerable because they are peripheral… such as the outermost regions of Europe.

But having tax incentives, in itself, is not a problem. Nor is it necessarily incompatible with the concept of a just tax policy. I think it is perfectly possible to look at the issue from both perspectives.

But what we want is a tax policy that guarantees social justice; and not competition. It should not be a question of how much countries can compete against each other, to have more opportunities. No; it should be about all countries having the same opportunities…

Do you think Malta has “exposed” itself, as a European state, when it insists on selling Maltese citizenship (even as other EU countries do in similar programmes), when EC president Ursula von der Leyen has declared that the Maltese should stop its ‘Golden Passport’ scheme?

As you are no doubt aware, we, as S&D, are against any ‘Golden Passport’ schemes: whether in Malta, or in any other member state. But I am aware that the government is introducing certain changes; and that has to also be taken into consideration. We shall have to wait and see what these proposed changes are; but as the European commission President stated, the scheme [in its present form] will have to be stopped, sooner or later...

What sort of changes do you think would make such a scheme acceptable? And is this something you are discussing with the Maltese delegation at this conference?

Clearly, it is necessary to introduce some criteria: for instance, to guarantee that the people availing of this scheme have, for example, spent some time in the country; and have made certain investments, and taken certain initiatives. But yes, this is a matter that we are currently discussing; and we will continue working with the Maltese government, to help it take the right direction.

Before this conference, you praised the Abela administration over its ‘rule of law’ reforms. How serious do you perceive Malta’s shortcomings on rule of law to have been, when compared with some more egregious situations in countries like Hungary and Poland? Has the EU been weak in taking action with these two states?

For me, it is very clear that we cannot place Hungary and Poland in the same category as Malta. Because the situation in those countries is very different. Both Hungary and Poland, for instance, are enacting new legislation which is aimed at curtailing rights – as has happened in the past – while the situation in Malta is, in fact, the total opposite.

We have to acknowledge that the current [Maltese] government is doing a lot of good work, to adapt local legislation to reflect European values and the rule of law. For example, the recent legislative changes regarding the separation of powers: to keep justice, and the courts, at an arm’s length from politics. This is very important, and I think that the Maltese government is clearly on the right track.

And it’s not just us, at the European parliament, who recognise this. The Venice Commission, for example, also acknowledged the work that the Maltese government is doing.

Is there more to be done? Yes, of course. Always. But it is important to support the governments which are, in fact, moving the right direction. There is, of course, also the question of whether some political groups want to use this issue to attack the government of Malta; and not just the government, but also – at the end of the day – the country as a whole.

Another thing I have to say is that, when the European Parliament asks certain governments to co-operate in its committees – with requests of information, for example – the Maltese government always co-operates: unlike other countries such as Hungary, or Slovenia…

Meanwhile, Hungary has just complained about what it describes as ‘blackmail’ by the EU: namely, the threat to make the Covid Recovery Fund package contingent on the recipient country’s respect for the rule of law. Do you agree that such important funds should be withheld, on that basis? and if so, isn’t there a danger that countries may ultimately be coerced into compliance?

We, as a group, have worked a lot on the legislative proposal to make a link between the European budget, and the rule of law. Because the European Union is not a bank; it is not a place where individual countries go, just to withdraw money.

The European Union is a political project. We share the same core values. And we cannot accept that some governments – and now we are talking about ‘governments’; not ‘countries’ – can attack, and undermine those common values and principles: such as human rights, dignity and equality.

So it is very clear, for us: if some countries decide to not respect the rule of law… they cannot use European resources. They have to choose.