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October 4, 2022

Hard times for Europe

Last week brought news in what concerns the future evolution of the European continent. Of course, we are talking about its economic evolution, because in recent years the latter defined the path the European continent took and is about to take. The thing is the news is contradictory. Because it’s obvious that what happened in France from a legislative point of view means a certain course to be followed, the opposite of the one taken on until now. And, on the other hand, what is happening in Spain at government level means the continuation of the old course, even though the Spanish “street” expressed disagreement with it through the protests in which hundreds of thousands of people took part in approximately 80 cities at the end of the week. As can be easily suspected, the austerity vs. economic growth dispute is at the heart of it, a dispute that has been on the European debate agenda for well over two years. As known, from a theoretical point of view there are two large schools of thought. The first is that of austerity, obstinately promoted by the European conservative right-wing whose leader is Germany led by the government of Christian-Democrat Chancellor Angela Merkel. In line with this school of thought – founded and consolidated by the “Frankfurt school” – fiscal consolidation measures were implemented through massive budget cuts and the drafting of new labor regulations, measures that generated huge unemployment figures. Equally, massive bailouts took place, particularly in the case of Greece, but also of Ireland, Portugal and, more recently Spain. Despite these policies which were applied at European level, giving coherence to certain pan-European governance authorized through successive decisions taken by the European Council in this domain, the Euro crisis shows no signs of coming to an end. On the contrary, the austerity recipe hiked unemployment, drastically lowered standards of living and forbade economic growth. The thesis that “things first have to get worse before they get better” is no longer finding enthusiastic supporters. The second school of thought is the one that points to the fact that budget cuts made with macroeconomic balances in mind necessarily have to be accompanied by energetic and fruitful economic growth measures in order for the current crisis to be overcome without convulsions and large social suffering. It’s not useless at all to point out that this crisis is putting into question the very bases of European integration, the survival of the Euro currency being tightly linked to the endurance of the European Union. This school of thought found its political legitimacy in Francois Hollande’s presidential victory in France in May this year, which showed that the public opinion’s supportability threshold in the face of austerity had been crossed. Two events took place last week, proving the fact that this debate is still on the order of the day in Europe and its outcome will also mean the continent’s future option. However, these events have a practical political burden, hence surpassing by far the theoretical debate, because they mean the implementation of measures in order to rapidly leave the current course of financial-economic austerity. The first of these events, whose importance only time will reveal in its true significance, was the package of laws adopted by the French legislative on July 19, 2012, laws concerning the budgetary policy. Basically, these legislative decisions mean the reversal of the course that former President Nicholas Sarkozy’s right-wing policy started as early as 2007, a course based on economic austerity. The decisions include imposing a tax on overtime working hours, whose elimination by Sarkozy was meant to stimulate work and income but which the left-wing French legislative deemed to be an inadmissible burden given the EUR 30 bln loss to the budget. Hence, a measure thought to symbolize the labor liberalization policy initiated by Sarkozy – expression of a neo-liberal ideological orientation – was abandoned. Other measures adopted last week by the French legislative in order to find sources of budget revenues verify the widespread opinion that France’s new socialist government has started a systematic abandonment of the former president’s policy in this domain. The measures include those on imposing a tax on fortunes that surpass EUR 1.3 M, as well as others meant to tax huge incomes, which will raise the fiscal contribution of the rich and very rich several times percentage-wise compared to what it is now. As known, the European policy of recent years was dominated by the Merkel-Sarkozy couple, so that the media labeled the very engine of European evolution “Merkozy.” An anonymous commentator of the measures announced in Time Magazine grasped the essence of the event that took place in the French legislative last Thursday: “We have seen what the policies of the conservatives/neoliberals have done. Now we will see if the policies of the socialists are any better.” The second event took place in Berlin but had an immediate impact in Spain. Last Friday the German Parliament approved the bailout for Spain, a bailout agreed at the European Council at the end of last month. In exchange for the EUR 100 bln that the Spanish banks received, the right-wing government in Madrid has taken the commitment to cut EUR 65 bln from the budget and to balance it through austerity measures, in order to reach a budget deficit of 3 per cent. The announcement of these measures in a country in which unemployment has reached unprecedented levels in Europe and the massive salary cuts lowered the standards of living that were already at the limit of supportability generated ample protests at the end of the week. Commenting on the huge protests and the difficulties lying ahead for this country, Le Monde’s editorial on Saturday ended with the following words: “Spain should not be abandoned to its own fate” (Il ne faut pas abandoner l’Espagne a son sort). Hence, imposing extremely hard conditions on Spain without thinking about the ways in which they will be applied or fulfilled is considered the abandonment of a country towards which Europe has to show solidarity. What do the two events briefly summarized above tell us. First of all, that having France led by the socialists as a leader, the austerity policy promoted until now by Europe’s right-wing governments is facing an unprecedented challenge: being abandoned by one of the most important European countries and economies capable of imposing a new course on the continent’s history. Secondly, that the huge opposition against the policy of the Spanish government that is determined to apply the austerity recipe undoubtedly represents its popular delegitimization and the request to take a different course of evolution.Europe is undeniably at the crossroads.

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