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Friday, January 18, 2019

Austerity’s painful fallout in Europe

by Linda S. Heard

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The US and Japan have differed from European nations over the best way to tackle the global economic crisis and are reaping rewards from their focus on financial stimulus that has resulted in growth. Europe, on the other hand, has adopted stringent austerity measures in order to repay fiscal debt. Not only have those measures been shown not to work, they have led to economic stagnation and extreme hardship for the less well off. It’s beyond time for the EU to go back to the drawing board says Linda S. Heard.

Europe has made a grave error in trusting economists who advocated killing jobs and growth in the name of deficit reduction. Our grandfathers may have told us “If you don’t earn it, don’t consume it” but The Economist terms austerity as “a deficit of common sense” and blames Germany’s Finance Minister Wolfgang Schäuble as well as Britain’s Chancellor of the Exchequer George Osborne for stubbornly refusing to U-turn on their “tough fiscal policy” on the grounds that easing-up would exhibit “a confidence-sapping loss of resolve.” Eventually, they will be forced to cut their losses but the longer they stick to their guns, the trail of victims will increase along with the potential for major civil unrest.

The main culprit of Europe’s woes is Germany’s Chancellor Angela Merkel who’s taken a “we’re alright Jack” position. Germany is one of very few EU countries that is doing respectably well but that should not give her the right to dictate terms to the less fortunate, such as Ireland, Spain, Portugal, Italy, Greece and Cyprus which are battling for survival. When Merkel was asked in April whether southern European countries could take much more of “German-ordered austerity” she insisted this was simply a matter of “balancing the budget” while telling her European partners to “do their homework”. France’s Socialist Party has accused Merkel of “egotistical intransigence”.

“Doing one’s homework” ought to be a five-minute affair given the glaring current situation. Nine of the 17 Euro countries are in recession and, in May, France fell into a triple-dip recession. Growth forecasts for most EU countries range from below zero to 0.5 per cent. Unemployment is soaring everywhere, hitting 27 per cent in Spain and Greece, 11 per cent in France and Italy, 14 per cent in Ireland – and almost 8 per cent in the UK. Youth are especially impacted. Sixty per cent of young people in Greece and 57 per cent of Spanish youth are jobless. Contrast those statistics with the US where in April the unemployment rate fell to a four year low of 7.5 per cent and Japan that boasts of a jobless rate of just above 4 per cent.

Merkel’s diktats to Cyprus not only impacted the island’s economic credibility but also set a precedent permitting EU governments to dip into savers’ pockets. Cyprus was pressured to avert bankruptcy and exclusion from the Euro zone with a 10 billion euro bail-out deal conditional upon the Cypriot government closing down the country’s second largest bank and a government levy on deposit accounts. Austerity is one thing but who could ever have imagined that the EU would condone outright theft!! It’s clear that Euro zone member nations are forfeiting their economic sovereignty to keep afloat. “Italy is dying because of austerity alone,” said Italy’s new Prime Minister, Enrico Letta.

People in Europe are literally dying as a direct result of cuts. Austerity has had a deadly impact. Suicide, crime and infant mortality rates have risen exponentially. Greeks from all socio-economic levels are feeling the pinch and with thousands of public sector lay-offs scheduled, there’s little sunshine in sight. Greece has witnessed massive spikes in homelessness, depressions, HIV infections (HIV has increased by 200 per cent due to cuts in prevention budgets), heart attacks and suicides.

Greek shopkeepers are shutting up shops or converting them into homes. Mothers are giving up their children to the state because they can no longer afford to feed them or dumping them in the street with notes pinned on to their clothing. Jobless professionals are moving away from cities back to their villages or islands to live with parents. There are growing queues outside soup kitchens. In Athens 250,000 rely daily on soup kitchens or food parcels provided by the Greek Archdiocese. For those who formerly enjoyed flourishing careers, this is a humiliating experience. Violent antigovernments street protests are weekly occurrences. Some, like businessman Apostolos Polyzonis who set himself on fire outside his bank and Dimitris Christoulas who shot himself in central Athens during the morning rush hour, demonstrated by sacrificing their lives in public. Polyzonis survived to explain his desperate act. “I had lost my right to be a free Greek,” he said. Christoulas left a suicide note accusing the government of making it impossible for him to live.”

In the UK the situation is only marginally better. Cuts in housing benefits are forcing low-income families to choose between eating regular meals and moving out of their homes. The Chartered Institute of Housing says a lack of affordable homes in cities will lead to “benefit ghettoes” springing up in poorer, less expensive parts of the country. The newly instituted “bedroom tax” on council tenants who have spare rooms was a step too far for 53-yearold Stephanie Botrill told to pay an extra £80 monthly in rent else face eviction. She killed herself on the M6 motorway after sending a note to her son that read “Don’t blame yourself for me ending my life. The only people to blame are the government.”

The UK charity Magic Breakfast alleges there are rising numbers of hungry children attending school with teachers reporting that many of their pupils are having difficulty concentrating in class because they haven’t been fed. The charity claims that one in four children receive only one hot meal a day, school lunches. Half of London’s teachers say they bring food into schools to feed starving kids.

A study by the Poverty and Exclusion Project found that 33 per cent of British households lacked at least three basic living necessities that included adequately heated homes, healthy eating and owning basic items of clothing. Moreover, the report stated that one in four adults skip meals in order to feed other family members.

Merkel and Osborne may turn a blind eye to the pain they’re causing, but the experts are now making themselves heard. IMF chief Christine Legarde has called upon Osborne to rethink his austerity program. And the IMF’s chief economist Olivier Blanchard says it’s time for the UK to consider Plan B. Legarde has asked EU countries to reassess harsh budget cuts. “We need growth, first and foremost,” she said. But when will the decision-making fat cats decide to listen?

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