Thursday, May 30, 2013

Austerity and "competitive fitness" in Europe

Profil columnist Peter Michael Lingens comments on the austericide policies of German Chancellor Angela "Frau Fritz" Merkel in Perfekt gespart – Wirtschaft tot 25.5.2013. He quotes fellow Profil columnist Georg Hoffmann-Ostenhof's label for Frau Fritz' policies, which she prefers to call sparen (saving): kaputtsparen.

He debunks the claim that excessive social spending caused the current euro crisis with the following history of state spending as a percentage of GDP from 1995 to 2007, the last year before the onset of the current depression in Europe:

Austria: 56.5% to 48.4% (not yet a "crisis country" like Greece or Italy)
Spain: 44.4% to 38.8% (definitely now a crisis county)
Eurozone as a whole: 53.2% to 46.1%

Lingens observes that from those figures, it would be more plausible to assume that decreasing state spending was the cause of the crisis!

He observes that it wasn't until the various governments bailed out banks that were failing and threatened their countries' entire banking system that the debt problem became so serious. But that leaves an awful lot out, such as the speculative attacks against the bonds of countries like Spain and Italy, the massive movements of capital from richer to less rich eurozone countries and the later reversal of that flow, and the particular problems of a currency zone.

But he states the basic notion of stimulative spending in a recession in a brief, accessible form:

Betriebswirtschaft – und daraus resultiert das Verständnisproblem – unterscheidet sich hier prinzipiell von Makroökonomie: Ein Einzelner, der spart, kann damit reich werden – aber wenn viele oder gar alle sparen, muss es die Wirtschaft umbringen.

[The economics of a business {microeconomics} - and a problem in understanding comes out of this - is basically different from microeconomics: A single person who saves can get rich that way - but if many or even all save, that must kill the economy.]
Lingens also takes account of the fact that the falling demand for German exports in southern Europe is now having visibly bad effects on German exports. The same is beginning to be seen in Austria, which also has a heavily export-oriented economy. And there is little prospect of replacing those customers with developing countries like China.

Frau Fritz is now talking up special programs aimed to reduce youth employment in the countries so badly hit by her austericide policies. It's a little like slashing someone's arm several times and then putting a band-aid on one of the cuts. Anna Giulia Fink und Robert Treichler report for Profil (Europas Abkehr von der Sparpolitik bleibt Wunschdenken 28.5.2013) on how austericide is making conditions much worse in southern European countries like Greece, Italy, Spain and Portugal that are most heavily hit by Frau Fritz' policies and killing any near-term prospects for recovery. They comment on the remarkable lack of any effective resistance to the austerity policies. Not even from French President François Hollande who got elected in 2012 on an anti-austerity program and has since been pretty much useless, worse than useless actually, in generating any alteratives. Meanwhile, the EU (read: Frau Fritz) is pushing even further austericide measures. In the name of competitive fitness, a current buzzword for hardline neoliberal economic policies.

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