Wednesday, May 15, 2013

Austerity's fruits in Europe

Eurostat reports in a news release of 03/15/2013:

GDP fell by 0.2% in the euro area (EA17) and by 0.1% in the EU27 during the first quarter of 2013, compared with the previous quarter, according to flash estimates published by Eurostat, the statistical office of the European Union. In the fourth quarter of 2012, growth rates were -0.6% and -0.5% respectively.

Compared with the same quarter of the previous year, seasonally adjusted GDP fell by 1.0% in the euro area and by 0.7% in the EU27 in the first quarter of 2013, after -0.9% and -0.6% respectively in the previous quarter. [emphasis in original]
Euronews reports, Eurozone slips into its longest ever recession 03/15/2013:

Meanwhile in Greece, Striking vendors hand out free food in Athens Reuters Video 03/15/2013:

Jon Henley reports for the 'Recessions can hurt, but austerity kills' Guardian, 03/15/2013:

In a powerful new book, The Body Economic, [David] Stuckler and his colleague Sanjay Basu, an assistant professor of medicine and epidemiologist at Stanford University, show that austerity is now having a "devastating effect" on public health in Europe and North America.

The mass of data they have mined reveals that more than 10,000 additional suicides and up to a million extra cases of depression have been recorded across the two continents since governments started introducing austerity programmes in the aftermath of the crisis.

In the United States, more than five million Americans have lost access to healthcare since the recession began, essentially because when they lost their jobs, they also lost their health insurance. And in the UK, the authors say, 10,000 families have been pushed into homelessness following housing benefit cuts.

The most extreme case, says Stuckler, reeling off numbers he knows now by heart, is Greece. "There, austerity to meet targets set by the troika is leading to a public-health disaster," he says. "Greece has cut its health system by more than 40%.
As the health minister said: 'These aren't cuts with a scalpel, they're cuts with a butcher's knife.'" [my emphasis]
And there were clearly alternatives:

Stuckler seizes on Iceland as an example of "an alternative. It suffered the worst banking crisis in history; all three of its biggest banks failed, its total debt jumped to 800% of GDP – far worse than what any European country faces today, relative to the size of its economy. And under pressure from public protests, its president put how to deal with the crisis to a vote. Some 93% of the population voted against paying for the bankers' recklessness with large cuts to their health and social-protection systems."

And what happened? Under Iceland's universal healthcare system, "no one lost access to care. In fact more money went into the system. We saw no rise in suicides or depressive disorders – and we looked very hard. People consumed more locally sourced fish, so diets have improved. And by 2011, Iceland, which was previously ranked the happiest society in the world, was top of that list again."

What also bugs Stuckler – an economist as well as a public-health expert – is that neither Iceland nor any other country that "protected its people when they needed it most" did so at the cost of economic recovery. "It didn't break them to invest in programmes to help people get back to work," he says, "or to save people from homelessness. Iceland now is booming; unemployment is back below 4% and GDP growth is above 4% – far exceeding any of other European countries that suffered major recessions."
Those countries who have followed the austericide prescriptions of German Chancellor Angela "Frau Fritz" Merkel aren't finding it such a happy choice. France, under François Hollande's Socialist majority government that came to power last year promising to resist Frau Fritz' austerity demands saw its economy shrink by 0.4% in the first quarter of 2013 compared to Q1 2012.

Ann Pettifor writes about France's situation in The reason France has gone into double-dip recession Guardian 03/15/2013:

... the French have just entered double-dip recession, while we [Britain] have just escaped. But in fact, in recent years the French and British economies have performed pretty much similarly in terms of GDP "growth" (or lack of).

The real European news today should, though, focus not so much on France, and certainly not alone, but on the dire state of the eurozone and broader EU economies. And this has no correlation with the formal political orientation of the government (centre-left, centre-right or whatever).

There is now a group of 10 EU states, not including France or the UK, who have experienced an annual fall in GDP for each of the past four quarters. This "Austerity A10 Club" includes the usual southern Europe list of Greece, Spain, Italy, Cyprus and Portugal. But it also includes two central European countries – the Czech Republic and Hungary – and the northern bloc of Belgium, Finland and the Netherlands – the land of Jeroen Dijsselbloem, Dutch finance minister and chair of the Eurogroup finance ministers, fresh from the Cyprus bailout "triumph". [my emphasis]
The lack of correlation with type of government has to do with the euro currency trap, the dominance (or "hegemony") of neoliberal ideology among bothe conservative and center-left parties, and the factual dominance of Germany in the eurozone.

Speaking of Frau Fritz, a new book emphasizes the supposed influence of East German Communist ideology on her. (New Biography Causes Stir: How Close Was Merkel to the Communist System? Spiegel International 03/14/2013)

Frau Fritz is one of my least favorite politicians in the world right now. It will be near-miraculous if the European Union survives what she's done to it, and the euro even more so. But I've read biographies of her and made some attempt to understand how much the East German system influenced her current style. This book's claims sound pretty dubious.

I do think she does partially see Germany running the EU like the Soviet Union ran the Warsaw Pact. But I think her understanding of the experience of West Germany assimilating the eastern provinces after 1990 was a much bigger influence. I just saw a Nietzsche quote that probably reflects her outlook, except for the gender: "A statesman divides people into two types, first tools, second enemies. Really, then, for him there is only one type of people: enemies."

With current policies continuing, Wolfgang Münchau foresees a decade of stagnation for the eurozone (Euro-Krise: Die lähmende Herrschaft der Zombie-Banken Spiegel Online 15.05.2013) He's looking in particular at the exceptionally dim prospects for any kind of near-term banking union, which the eurozone has to have if it is going to survive in a manner that doesn't lay waste economically to Cyprus, Greece, Ireland, Italy, Portugal, Slovenia and Spain, to mention only the countries most seriously at risk right now from Frau Fritz' austerity hammer. The banks themselves are still too affected by the ongoing depression to contribute what they should to recovery through active lending. The recent lowering of rates by the ECB can contribute in only a very limited way, if at all, to improving matters now. (José Carlos Díez, Draghi y el helicóptero El País 03.05.2013) As Münchau writes, the European banks needed to be recapitalized. And they need to be recapitalized without leaving the national governments in countries like Spain and Italy on the hook for recapitalizing them via additional borrowing which is then penalized by EU requirements for even more crippling austerity measures.

Heckuva job, Angie, heckuva job!

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