26th Sep 2021

Barroso, Rehn 'unfairly criticised' for eurozone austerity

  • Jose Manuel Barroso finishes his job as EU commission president on Friday. Olli Rehn is now a member of the European Parliament (Photo: Lisbon Council)

As Jose Manuel Barroso steps down as European Commission President (31 October), one of his few left-wing colleagues says that he was unfairly labelled as an austerity ideologue during his time in office.

Laszlo Andor, a Hungarian economist in charge of social policy since 2009, said that it was member states who were fixated on slashing public spending and that the commission itself had few powers - especially at the beginning of the financial crisis - to change anything.

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"I don’t think the commission pursued austerity at all," he told this website, adding that Barroso and Olli Rehn, in charge of economic affairs until summer this year, were "unfairly criticized because the European Council sets the political priorities."

Barroso, a centre-right politician, and Rehn, a liberal, became synonymous with austerity measures, particularly as the commission helped oversee the tough reform programmes that accompanied loans to euro countries.

"I think the obsession with fiscal consolidation was on the side of the European Council, which in 2010 and 2011 lost many of the remaining centre-left governments," said Andor.

He said the real question was why the EU went into a second recession when the US and other parts of the world went into a recovery.

"What is largely responsible for this is the pro-cyclical fiscal and monetary policies in 2010 and 2011, as well as the failure to deal with the banking crisis quickly enough."

He noted that the commission was neither responsible for the fiscal policies of countries with surplus accounts (which started budget consolidation) or the decision by the European Central Bank to start raising interest rates "when we were not yet on safe ground".

"These steps or these elements came together in 2010-2011 and by the summer of 2011 it was practically decided that there would be a second recession."

He also hits out at the Germany-led response to the crisis.

It is “not a smart way” to govern a Eurozone beset by economic imbalances “if the deficit countries are pushed to internal devaluation and the surplus countries just exist on having big surpluses. This is the worst outcome.”

“It is very good that Germany now introduces the minimum wage but I would say this is too late and too little,” he added.

The commissioner, who says his portfolio has been beefed up because it is now a fully-fledged part of the strengthened economic governance dossier, noted that the commission put several controversial ideas on the table.

"It's not because of the commission that this was not discussed when it was not yet too late," he says, referring to stability bonds, the common issuance of sovereign bonds for euro states.

He is also downbeat about the extent of the changes made to shore up the eurozone in event of another crisis.

"With this very modest banking union, the problem is not resolved," said Andor, who believes that a fully fledged fiscal union remains the ultimate answer.

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