Thursday

7th Jul 2022

Opinion

How austerity measures may kill states - and the EU

  • Commission president Barroso called the member states to take steps to secure financial stability, growth and job creation. (Photo: European Commission)

“Discipline must be accompanied by convergence and responsibility must be matched by solidarity", European Commission President Barroso said on Wednesday (18 April) during his address at the European Parliament's plenary session in Strasbourg.

In times of increasing unemployment and poverty in Europe, Barroso called the member states to take steps to secure financial stability, growth and job creation. With this in mind, the Commission presented two new Communications: “Employment package” and “Growth for Greece”.

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As always, time will judge whether these new initiatives will prove to be effective – but reaction and concrete measures are needed now.

Eurostat unveiled in its latest report that unemployment in Europe has again reached record numbers with Southern European countries being particularly hardly hit. Especially worrying is the on-going increase of youth unemployment. Spain alone has a 50.5 percent joblessness rate amoug its young people.

These data also expose the weak side of the current austerity measures for which Portugal provides a good example: Despite the fact that the Troika (EU, IMF and ECB) has positively assessed Portugal's programme of economic reforms, it's economic situation is alarming.

According to Eurostat and the latest interim forecast of the European Commission, Portugal's real GDP contracted by 1.5 percent in 2011 and is expected to further decline by 3.3 percent in 2012. Its unemployment rate was almost 14 percent in 2011 and is expected to further increase this year. The youth unemployment rate in February 2012 already exceeded 35 percent,with no apparent signs of economic recovery in sight.

It is difficult to imagine a worse impact than austerity measures on economies already hit by economic slowdown. With economic activities halted, neither employment nor state income is generated and public spending cuts prove completely ineffective (given that the parameter used to measure public deficit, the GDP, continues to fall). It is a vicious circle.

But voices calling for a revival of stimulus measures are getting louder. At the last European Summit – although the Fiscal Pact was signed- there was recognition that the EU needed to move beyond austerity measures. The conclusions of the European Council praised the “recent measures taken by the ECB as regards long-term lending to banks." Experts agree that further ECB intervention will take place in the foreseeable future and in the long term.

Of course, such scenarios give rise to concerns that the Eurozone is rushing towards inflation and - especially when it comes to demands for a real transfer union - that incentives for reducing state deficits could vanish.

Yet what are the alternatives when it becomes evident that apart from the economic consequences, the socio-political impact of the austerity measures may be devastating? What actually remains of a state when its citizens do not have jobs, when public coffers are empty and productivity is down?

When this happens citizens often deploy their last democratic weapon and turn against themselves, letting extremism and totalitarianism rise. Not without a certain irony, current measures originally meant to save Europe (“If the Euro falls, Europe will fall!”), may lead to the very opposite: to the rise of radical anti-Europeanism.

The current one-sided austerity measures not only do not help to bring deficient countries back on track, but endanger the structure of the entire state and of the EU itself.

More and more voices are calling for change in Europe, for further economic integration and for creating a genuine transfer union through the collateralising of debt.

The latest statements by French President Nicolas Sarkozy on changing the rules of the ECB and concentrating part of its activities on growth stimulation go into the same direction.

But it is unclear whether the momentum for change is really here yet. The answer lies with politicians in richer northern states.

The writer is Secretary General of the Confédération Européenne des Syndicats Indépendants

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

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