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EUROZONE CRISIS: the Great Depression

European leaders are great at introducing new laws, but for several years now they have been unable to resolve an economic crisis. Economic growth figures released recently by Eurostat sound like a death sentence; Europe, you are racing towards the abyss and the brakes have stopped working long ago.

In the first three months of 2013, the Eurozone economy shrunk by 1 per cent year-on-year, and the EU-27’s economy contracted by 0.7 per cent. Virtually everyone is in the red: Greece down 5.3 per cent, Cyprus, 4.1 per cent, Portugal, 3.9 per cent, Italy, 2.3 per cent, Spain down 2 per cent. Finland and the Netherlands also saw negative growth, while Austria stalled. France is now officially in recession. German growth was positive, but only in quarter-to-quarter terms. It is all despair and misery.

Sparkurs vs. Austerity

While Europe is gnashing its teeth and crying, others are leaving the stormy waters. The United States, for instance, vilified in the past by many European politicians because it was there that the global crisis began, brought about by the greediness and irresponsibility of US banks. And today – what an ingratitude – the United States is growing while Europe is shrinking.

In the first quarter 2013, the US economy grew by 2.5 per cent, unemployment was its lowest in four years, and the stock market was buoyant. The European Union has always looked down on the US as a country of predatory capitalism and social injustice. Europe, in turn, has always had its “social market economy” that protects workers and grants them all kinds of nice rights.

European leaders seem unable to break the cycle of recession and unemployment, despite public pressure to abandon the austerity regime imposed under German rule. Meanwhile, the EU’s influence in the world is on the slide”
 

For the last several years it had been the case of Europeans patronising the Americans on how to revive their economy. Now the roles have reversed. In a recent interview for the Spanish business daily El Economista, a high-ranking Treasury Department official suggested that the EU should follow the US example and stimulate the market instead of stubbornly clinging to the dogma of austerity and budget deficit reduction. Interestingly, many European politicians say the same but no one seems prepared to bang their fist on the table and oppose Berlin, for whom “demand stimulation” is tantamount to higher inflation (a taboo concept since the Weimar Republic’s hyperinflation) and more transfers from German taxpayers to the cash-strapped budgets of countries like Greece or Spain.

The southern countries are thus expected to tighten their belts and keep quiet. A chasm between Germany and the indebted southern EU member states is already evident on the level of language. In Ireland, it is austerity, in Spain, austeridad, in Italy, austerità, in France, austerité – all derived from the Latin austerus, meaning “strict, severe, ascetic”. A word of clearly unpleasant connotations. In Germany, in turn, it is Sparkurs – “savings course”. Something obviously reasonable, wise, and healthy. In Germany, if you manage your resources thriftily, you deserve utmost respect.

“Berlin’s policy is not motivated solely by pragmatism but also by fundamental values”, Ulrich Beck, a renowned German sociologist, explained in an interview. “Objections towards overspending countries are a question of morals. From the sociological point of view, such a position has its roots in Protestant ethics. But it is also a matter of economic rationalism. The German government adopts the role of a teacher who instructs the southern countries on how to reform their economies”.

Tra Nord e Sud il paradosso della crescitaLetters to Angela

Only this teacher is not much liked. To the extent that the last Eurovision contest saw Germany suffer a humiliating defeat: Natalie Horler, withGlorious, came only 21st among 26 contestants. Commentators at the German ZDF television channel had no doubts: “No one in Europe likes us anymore”. And they were probably not far from the truth.

The image of Angela Merkel dressed in an SS uniform has become a staple of Greek tabloid covers. But there has been a new trend too: politicians from certain countries have started writing letters to Chancellor Merkel, asking her to stop putting them through so many tests and exams. Begging her for understanding and leniency. But also suggesting that she is doing what she is doing to boost her chances in the Bundestag elections, scheduled for September.

Ms Merkel isn’t willing to mitigate the Sparkurs because that could alienate German voters. Duarte Marques, deputy of Portugal’s Social Democratic Party, argues in a letter to the German chancelor: “Germany is refusing to acknowledge the true consequences of austerity policy. It is an expression of opportunism, until now seldom encountered among the German elites. And unworthy of a country that once, under Helmut Kohl, had the courage to shoulder the responsibility for Europe – sometimes in defiance of its own public opinion. Mr Kohl belonged to a generation of statesmen that are hard to come by in Europe today”.

Shouldering European responsibility

“Now,” Ms Merkel is likely to be thinking, “not only am I a mean person, I’m also inferior to Helmut Kohl. Great”. Such letters can only irritate Berlin and cause it to actually stiffen its position. The idea of Germany “shouldering responsibility for Europe” is invariably translated in Berlin as meaning “Germany should give us more money”.

But it won’t. Neither to Portugal, nor to Greece, nor to anyone else. Only the Sparkurs – so praised by Ms Merkel – isn’t producing the expected results either. A Portuguese newspaper recently published a comparison of economic indicators from two years ago – when Portugal found itself in the troika’s tender embrace and was forced to introduce austerity measures – and now.

The figures are telling: unemployment is up to 18.2 per cent from 12.9 per cent; budget deficit has risen from 4.4 to 5.5 per cent of GDP; public debt is up from 106 per cent to 123 per cent of GDP. Hardly an improvement at all. No wonder that an estimated 240,000 people – 2.5 per cent of the population – have left Portugal since 2011. The RTP public TV channel recently aired a feature about Portuguese immigrant workers in the United Kingdom. An architect, a dentist, two male nurses, two female nurses: all happy to have been able to get out of the quagmire.

One of the young women is so excited about the prospect of working in a hospital in Northampton, 100km north of London, she is literally jumping in front of the camera. No one is thinking about going back home. Some will say, “One day, perhaps”. A sociologist speaking on the programme speaks of depression among young people and a mounting wave of emigration not only to Britain but also to Portugal’s erstwhile colonies: Brazil and Angola. One could actually imagine a Eurozone-advertising poster: “We’ll find you a job. In Rio de Janeiro”.

Catchy, isn’t it?

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Categorie:economy, politics, social

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