Investing: Shared Prosperity for the Many

Public spending: money is not a finite resource

Across much of the Federal Republic of Germany, the prevailing understanding of monetary and fiscal policy is outdated and wrong. It sees the state as one economic actor among many, one that has to manage with scarce resources. We reject this picture. Artificially limiting public spending mainly benefits a capitalist class, while harming the middle class, the poor and the planet.

We want to use the possibilities of modern monetary policy to create well-paid, meaningful jobs, to invest in forward-looking technologies and industries, to fight the climate crisis, and to put the social systems on a secure footing, for good and for everyone. Our society faces great challenges, but a shortage of money is not one of them.

We know that labour, natural resources, people’s health and that of our planet are finite resources. Money, by contrast, is not a finite resource, at least not for states with monetary sovereignty. We can afford what we want to do. In the eurozone, monetary sovereignty has been curtailed by political decisions, yet there is already considerable room for manoeuvre today, which we want to use. In the medium term, we want to abolish the artificial constraints of the euro system.

Contrary to common assumption, government deficits are not inherently bad. Money created by the state does not have to be paid back. Government deficits are therefore gains in prosperity for the population. A state’s spending is our wealth. The real deficits are not a state’s balance sheets, but the deficit of good jobs, the deficit in environmental protection, the deficit in educational justice, and the democratic deficit caused by extreme wealth inequality.

A massive increase in public spending is absolutely necessary for social, ecological and economic reasons. The only limit is actual inflation. Because there is no excessive inflationary pressure in the eurozone despite the expansionary monetary policy of recent years, massively increased public spending is both possible and sensible. The goals of such a policy must be price stability, full employment with reduced working hours, social progress, and the protection of ecosystems and the climate. To protect the eurozone against inflation caused by supply shocks, we are working to remove acute bottlenecks and we support building up European and local production capacity.

Rethinking the rules of budgetary policy

We stand for striking the debt brake from the Basic Law without replacement, ending the European Fiscal Compact, scrapping the European deficit limits and all other monetary and fiscal rules that needlessly restrict the state’s ability to act. We also want to make it possible to finance public spending directly through the European Central Bank. By contrast, we consider private banks acting as intermediaries between states and the central bank to be unnecessary.

Achieving immediate progress through pragmatic solutions

We will implement creative workarounds if the measures above lack the necessary majorities. For example, public investment companies or development banks (such as the KfW and the Landesbanken) can be instructed to expand their activities in social and ecological areas considerably. The finance ministry can also expand its financial room for manoeuvre despite existing deficit limits, by means of tradable tax credits.

Refinancing existing debt through the ECB

To provide immediate relief to the eurozone states, including Germany, and free up fiscal room for manoeuvre, we advocate fully refinancing their existing debt through interest-free loans from the ECB.

Fundamentally rethinking VAT

States with monetary sovereignty do not depend on tax revenue to fund their spending, and this applies to VAT as well. Taxing companies’ turnover needlessly hampers both their purchasing power and that of consumers, and so has a negative effect on the economy. Unlike taxing company profits, it also does nothing to counter market imbalances or social inequality. We therefore argue that, in future, VAT should only be levied to steer consumption, on certain goods and services that are harmful to health, for example. All other forms of business should be exempt from VAT. To continue guaranteeing the sovereignty of the federal states, we want to replace the rule that entitles the Länder to a share of VAT with constitutionally protected direct payments from the federal government to the Länder.

Securing municipal finances for the long term

Municipal services must always be secured and available to everyone. That is why we want to put municipal finances on a secure footing for the long term. Municipal budgets should be financed through per-capita allocations, rather than through volatile local tax revenue and fees that rise and fall with the economy. We want to give particular support to small municipalities through higher per-capita allocations. The federal government should provide the federal states with the necessary funds for this. Social spending that fluctuates with the economy should not be part of municipalities’ obligations, but should be paid directly by the federal government. We want to relieve heavily indebted municipalities through refinancing by the federal government.

Currency: democratising the euro

Through monetary union, the member states of the eurozone have largely given up their monetary sovereignty. At the same time, there is as yet no European statehood, so the citizens of the euro states have lost control over their currency to an elite of bankers and officials. We want to change this. We want to democratise the euro by placing monetary policy fully in the hands of elected parliaments.

We acknowledge that the Federal Republic of Germany has played, and continues to play, a decisive and leading role in the de-democratisation of monetary and fiscal policy in Europe. We further acknowledge that the Federal Republic has used, and continues to use, its economic and political power to blackmail eurozone member states and to force through neoliberal reforms and austerity. We are aware of the suffering and misery into which this policy has plunged millions of people across Europe, and we stand in solidarity at their side.

We reject the prevailing neoliberal, market-neutral paradigm of the European Central Bank. Monetary policy must aim at sustainability, social security and prosperity for all of Europe’s citizens.

Respecting the economic sovereignty of our neighbours

Germany must not be Europe’s taskmaster. We demand an end to Germany’s coercive economic policy. Never again should the Federal Republic take part in forcing other states into neoliberal reforms and austerity. Democratically legitimated parliaments must regain full control over fiscal policy at their level of responsibility.

Reversing forced privatisations

Europe’s infrastructure is not an insolvency estate. We are committed to returning to public ownership formerly public enterprises that were privatised under austerity measures and sold off to Germany, for example Greek airports sold to Fraport AG.

Making the ESCB transparent and democratic

Our goal is a Federal Republic that champions the democratisation of the euro and of the European System of Central Banks (ESCB). Opaque and informal bodies with great power, such as the Eurogroup and the Troika, must not exist. Like every other policy field, monetary policy too must be subject to public and democratic control. The broad lines of European monetary policy should therefore in future be controlled and steered by the European Parliament. Day-to-day business should be handled by a finance minister appointed and overseen by the European Parliament. Until that is the case, meetings of the Eurogroup should be streamed live online, to allow at least a minimum of transparency.

Reorienting monetary policy

The Federal Republic should push for new rules for the European Central Bank. We support a new mandate for the ECB, consisting of price stability and full employment with reduced working hours, social progress, and the protection of ecosystems and the climate. Through the European Parliament’s power to set policy guidelines, it should be possible to task the ECB with contributing to an active, modern and ecologically sustainable European industrial policy, by means of strategic appeals (window guidance), financial incentives or direct market intervention. To dismantle the so-called carbon bubble in the banking system, the ECB should no longer accept fossil-fuel assets as collateral. The prevailing idea of a so-called non-accelerating inflation rate of unemployment (NAIRU), which claims that a certain level of unemployment, a kind of reserve army of the unemployed, is always needed to avoid inflation, we consider a poor (and false) indicator that plunges millions of people into undeserved poverty and hopelessness. It should no longer guide the ECB’s actions.

Restoring macroeconomic balance

We aim to reduce the economic imbalances within Europe by significantly strengthening German domestic demand and introducing a European Clearing Union (ECU). Within it, countries with large trade surpluses would be charged penalty payments, which in turn would benefit countries and regions with trade deficits. In the medium term, this would balance trade flows within the EU single market and create equal prosperity across all regions of the continent.

A common fiscal policy at EU level

We are committed to expanding the common European fiscal policy, under the control of the European Parliament and a European finance minister elected by the European Parliament. This includes, in particular, the ability to fund spending through deficits, as well as to levy taxes. In the long term, we will create the conditions needed to found a united European Republic.

Safeguarding the state monopoly on currency

To ensure the state’s ability to act and to prevent speculative bubbles, we firmly reject any weakening of the state monopoly on currency in the eurozone in favour of competing private-sector currency alternatives (so-called stablecoins). We therefore want to ban exchanging and paying with stablecoins. Instead, the digital euro and an e-wallet from the European People’s Bank should make digital payments easier. To tackle the enormous electricity consumption of proof-of-work cryptocurrencies such as Bitcoin, we want to ban exchanging and paying with them as well. Blockchain applications that promise a genuine social benefit we want to support in research and implementation.