Friday, April 26, 2013

Light at the end of the austerity tunnel in Europe?

Patrick Smith thinks the recent IMF position may mark a turning point for the gruesome economic austerity in Europe European Austerity Does a 180 as Lagarde Weighs In The Fiscal Times 04/22/2013:

The IMF and the World Bank, notably by way of IMF Managing Director Christine Lagarde, have put in sharp focus the core components of a recovery strategy. It focuses on two questions:

  • What is the optimal degree of austerity, meaning contraction as opposed to stimulus? Up to what point is it necessary, and at what point does it become counter-productive — that is, when does it start inhibiting growth instead of fostering it? How does demand management fit in?
  • How much public debt—debt as a proportion of GDP — can a nation carry when it is in or near recession? What is the relationship, if any, between debt and growth? Is cutting debt so simple as cutting spending?
But there is no sign that the main source of the austerity demands, Germany and their Chancellor Angela "Frau Fritz" Merkel is backing off their program.

José Manuel Barroso came out publicly with a suggestion that it was time to back off some of the austerity. But he immediately faced punliv criticism from German leaders, including Foreign Minister Guido Westerwelle. (David Böcking, EU-Streit über Sparkurs: Wie Barroso sich kurz eine eigene Meinung erlaubte Spiegel Online 23.04.2013)

In this Klaus Stuttmann cartoon of 04/24/2013 German Finance Minister Wolfgang Schäuble discusses the situation with Frau Fritz:

As Frau Fritz reads about the German auto industry stagnating, Finance Minister Wolfgang Schäuble tells her, "How often I've preached to the southern Europeans: save, save, save - so that you can buy German cars! But nobody listens to me!"

Wolfgang Münchau has been a consistent critic of Frau Fritz' austerity program. But he argues in Warum Barroso falsch liegt Spiegel Online 24.04.2013 that Barroso isn't addressing the problem on an eurozone-wide scale, but rather as the former Prime Minister of Portugal. Münchau argues that without a common economic policy for the eurozone that encourages faster growth in the richer countries like Germany including higher inflation than at present, the euro currency trap will continue to crush economies like those of Cyprus, Greece, Ireland, Italy, Portugal and Spain. He comments that Germany's self-chosen austerity and the Fiscal Pact (which I call the fiscal suicide pact) that Merkel insisted that eurozone economies adopt have the result, "Wir haben uns durch Schuldenbremse und Fiskalpakt das wichtigste Instrument der makroökonomischen Steuerung in Krisenzeiten freiwillig entzogen." ("Throughout the fiscal brakes and the Fiscal Pact, we have freely removed the most important instrument of macroeconomic steering in crisis times.") The Fiscal Pact was an insane idea, effectively outlawing Keynesian economic stimulus during recessions and depressions.

The failure of Frau Fritz' European leadership, along with that of France and Britain in particular, has diminished the support for "Europe" (the EU) considerably in the EU countries with the largest economies, as Ian Traynor reports for The Guardian in Crisis for Europe as trust hits record low 04/24/2013:

After financial, currency and debt crises, wrenching budget and spending cuts, rich nations' bailouts of the poor, and surrenders of sovereign powers over policymaking to international technocrats, Euroscepticism is soaring to a degree that is likely to feed populist anti-EU politics and frustrate European leaders' efforts to arrest the collapse in support for their project.

Figures from Eurobarometer, the EU's polling organisation, analysed by the European Council on Foreign Relations (ECFR), a thinktank, show a vertiginous decline in trust in the EU in countries such as Spain, Germany and Italy that are historically very pro-European. ...

The most dramatic fall in faith in the EU has occurred in Spain, where the banking and housing market collapse, eurozone bailout and runaway unemployment have combined to produce 72% "tending not to trust" the EU, with only 20% "tending to trust".
But in our era of the dominance of neoliberal doctrines among both conservative and center-left parties in Europe and the US, the political system is increasingly disconnected from the level of discontent even over the most important issues among the publics they supposedly serve. As Colin Crouch writes in The Strange Non-Death of Neoliberalism (2011):

There is a widely accepted view that inequality does not matter provided nearly everyone (within the boundaries of a particular nation-state) is reasonably well off. Provided everyone has a sound and warm house to live in, does it matter if some people have vast estates and luxury yachts? Their yachts do not diminish our houses . But this misses the point about inequality of wealth: It leads to inequalities of power that reach out from one arena of society into many others in a concentrated, centralizing way. (p. 169)
Money talks, as the old saying has it, And, he writes, "At every point we find that democratic market societies under the influence of neoliberal ideas throw more and more power, influence and privilege at the extremely wealthy, especially the wielders of large corporate resources." Multinational corporations get great benefit from the EU structure. And the political elite in Germany, including to a shameful extent the leaders of the opposition SPD, are working for them, not for the well-being of the people of Europe, in supporting the current austerity policies.

Euronews reports on the now-record unemployment in Spain, as the depression there grinds on with no hope for relief in the foreseeable future under Frau Fritz' austerity fist, Spain's jobless total reaches a record six million 04/25/2013:

But for the public, there are always police available to deal with their protests, as we see in the one, Clashes in Madrid as Spain announces record jobless levels Euronews 04/26/2013:

Katrina vanden Heuvel describes the current austerity fog this way (Austerity doctrine is exposed as flimflam Washington Post 04/03/2013):

Sadly, austerity’s reign of misery continues, even as it has been demolished in theory and practice. President Obama has ceded ground to the austerity hawks, proposing cuts to Social Security and Medicare as means to reduce government debt. On the other side of the Atlantic, austerity is spreading economic contraction across Britain and the continent. The Federal Reserve is even under pressure to roll back its expansionist monetary policy. We will be freed of austerity’s grip only when those in power return to common sense, fact-based politics and when we hear much more from the unemployed and the immiserated and much less from bankers and their favored economists.
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