Sunday

24th Jul 2016

EU chief defends austerity as criticism mounts

  • Nobody can defend austerity, but countries cannot increase spending, says Barroso (Photo: consilium.europa.eu)

EU commission chief Jose Manuel Barroso has come to the defence of more budget cuts to bring confidence back to southern economies, even as the IMF said the effects of austerity may have been underestimated.

"Nobody defends austerity in Europe, but can anyone tell governments to spend more? There is nothing more anti-social than high levels of debt," Barroso said Thursday (11 October) at a conference organised by Friends of Europe, a Brussels-based think-tank.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

He said austerity was not "imposed" by the EU commission - although the institution is involved in the so-called troika of international lenders in Greece, Portugal, Ireland and Spain - but that all the EU rules countries have to adhere to are "taken unanimously by governments."

"We have to put right the balance of responsibility. The reality is decisions are taken by the governments themselves," he said.

At the same time, he pointed out that the deficit and debt rules - known as the Stability and Growth pact - are "flexible" when it comes to worse-than-expected recession. Portugal and Spain have already been given an extra year to meet their targets.

"I think we can adapt and fine-tune in finding the right balance, but this cannot replace true fiscal consolidation, deep structural reforms and target investments," Barroso stressed.

Austerity policies in Europe have come under increasing fire, not only from the streets of Madrid, Athens, Lisbon and Paris, but also from the EU's other partner in the troika - the Washington-based International Monetary Fund.

In its latest World Economic Outlook the IMF admits that its growth forecasts had been wrong because it "underestimated" the negative effect of austerity measures.

IMF chief Christine Lagarde said Thursday at the IMF annual meeting in Tokyo that "more time" was needed for bailed out countries, rather than imposed cut-backs.

“That is what I have advocated for Portugal, this is what I have advocated for Spain, and this is what we are advocating for Greece, where I said repeatedly that an additional two years was necessary for the country to actually face the fiscal consolidation programme that is considered," she said, as quoted by the Financial Times.

Leading economics research institute Nomura agrees. According to chief economist Richard Koo, the budget cuts and structural reforms are like a diabetes cure for a patient suffering from pneumonia.

“The patient can have both, but the doctor has to cure the pneumonia first even if the treatments contradict those required for the diabetes,” Koo told Bloomberg on Wednesday. “In Europe, austerity is the only game in town," he added.

EU to tweak rules on Chinese 'dumping'

The EU Commission has tried to fudge the issue of whether China is a “market economy” amid efforts to protect European industry from cheap exports.

Court ruling puts Renzi bank plan in doubt

EU court ruling on bank bailouts has raised the likelihood of a political embarrassment for Renzi, months before a referendum puts his future and, potentially, Italy’s euro future on the line.

Stakeholders' Highlights

  1. Belgrade Security ForumMigration, Security and Solidarity within Global Disorder: Academic Event Agenda for 2016
  2. GoogleHow Google Fights Piracy: Creating Value While Fighting Piracy
  3. EJC"My Visit to Israel" - Opinion by MEP Lopez Aguilar, Chair of the EP Working Group on Antisemitism
  4. World VisionChildren Migrating, Out of School and at Work as Hunger Deepens in Southern Africa
  5. European Healthy Lifestyle AllianceStand-Up (and Exercise) to Prevent Chronic Diseases
  6. Centre Maurits CoppietersLaunches a Real-time News Hub Specialised in EU Stakeholders
  7. Dialogue PlatformFethullah Gulen Calls for International Probe Into Turkey Coup Allegations
  8. GoogleEU-US Privacy Shield: Restoring Faith in Data Flows and Transatlantic Relations
  9. World VisionWorld Leaders & Youth Advocates Launch Partnership to End Violence Vs. Children
  10. Counter BalanceReport: Institutionalised Corruption in Romania's Third Largest Company
  11. Access NowEuropol Supports Encryption. We Can Relax Now… Right?
  12. GoogleLearn about Google's projects across Europe on Twitter @GoogleBrussels

Latest News

  1. Munich attack might not have been terrorism
  2. A very British (and Corbynite) coup
  3. Poland 'changing for the worse' for Muslims and refugees
  4. EU aims to lift visas on Turks despite purge
  5. ECB in ‘bail-out’ of scandal-tainted VW
  6. EU failed to learn lesson from Brexit, Poland says
  7. UK accord on EU workers 'crucial', France says
  8. EU and US take different lines on Turkey crackdown