Reforming finance

Joint document: an analysis of the situation

Within the context of a Europe that has grown and equipped itself with stronger legislative and policy tools, such as the Lisbon Treaty, social rights, although they have gained a greater political importance and a clearer legal recognition, continue to be extremely fragile, while social justice remains an objective still to be reached, all the more so since Europe is going through the most severe crisis since the 1930s. Europe: rich but unequal. In the European Union, one of the richest regions in the world, 17% of the population (e.g. 84 million people) are at risk of poverty. Economic growth has widened the gap between the rich and the poor; changes in the labour market have put low-skill workers at a disadvantage. The consequences are: an instable and vulnerable economy, and destabilized communities. “Continuing on the current path is not sustainable”.The crisis: the fruit of wrong policies, priorities and values. In the Report, the Churches strongly underscore that “The economic crisis has not occurred by chance, it is the result of political choices. It is the fruit of a flawed financial and economic system, of erroneous judgements made by decision-makers in the financial system and by governments”. And they add that “25 years of prosperity have made economists, governments and the general public succumb to a seductive belief in a stable, efficient and self-regulating market where money generated more money and wealth more wealth. The desire for wealth became reckless and short-sighted during the time of the greatest prosperity ever seen in Europe”. The result is that “the world economy became strongly influenced by a speculative financial system, unfair to citizens who make their living solely from work. This is the basic failure that has to be redressed, before any recovery of the economy can be sound and stable”. In addition to this, trust in the institutions and the system has collapsed, and “it is a crisis of values that we discover to be at the root of the current financial and economic crisis”. This crisis in fact reveals “that means and ends of economic policy have been turned around”: growth, competitiveness and the market are not ends in themselves, but means to improve the well-being of people and to ensure social cohesion. Priorities should be reordered in order of importance, so that the well-being of people and the preservation of creation are ensured. The crisis: the most vulnerable are the hardest hit. The Churches have underscored that “the social impact of the economic and financial crisis has dragged more people into poverty, and the situation has deteriorated for people already in despair. Millions of people have lost their jobs, or had to accept a reduction of their salary, or to take up precarious jobs. As public finances have been hit hard, the social benefits level has sometimes been reduced, and cuts in social spending have worsened the living conditions for vulnerable groups. Over-indebtedness of individuals and families is becoming a widespread problem in many countries. Unemployment among young people has risen dramatically and is threatening the future of a whole new generation. The full impact of the crisis has not yet been seen, nor have the long-term structural, cultural and spiritual effects of the crisis”. What is the answer? “Billions of Euros have been spent on bailing out bankrupt banks to make the financial system work again. This is money that future generations of taxpayers will have to re-pay in the coming decades. Billions of Euros have also been spent in order to reinforce the credibility of sovereign debtors, members of the Euro-zone, in the eyes of the financial markets. This is in glaring contrast to the little amount that has been spent on protecting people from the devastating social consequences of the crisis. Governments are cutting back on social and health care services and in social safety nets that in time of crisis should be guaranteeing people access to their social rights. From a purely economic perspective, the social costs of the crisis might be seen as the tragic but inevitable consequences of market forces. If we accept this explanation, we betray the common good and learn nothing about the crisis”. The crisis is “about flaws and wrong decisions within the economic system, but also about the moral legitimacy of the system and its values”. According to the Churches, it would therefore be necessary to reform finance, in the sense that it should be subjected to regulation by the States so as to serve social needs and the real economy. The relation between the state and the market should be rebalanced; the governments should exercise their responsibility when the market does not respect human rights and the common good. “When the market disregards human rights and the common good, governments must exercise their responsibility”.

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