The Counter Productive Austerity of a Dysfunctional Europe
I find the situation in Europe to be increasingly dire. Since the crisis in Greece erupted, the policy in Europe has been of austerity in exchange for loans from European institutions and the IMF. The policy does little to resolve the crisis that initially wrecked Greece and now ravages Portugal and Spain. It is a policy to buy time, to avoid a breakdown in the financial system. But behind any stalling tactic there is an objective, to hold off long enough for some force to support the first response with a lasting solution. In Europe, this reinforcement of the initial austerity policy was supposed to be a greater Europe, a Europe of deeper integration. Greece, Portugal and Spain have let their economies crumble all to hold out for this ultimate and final rescue. This deeper, integrated Europe, however, seems to be nothing but an illusion for which Southern Europeans have paid a deep and painful economic cost.
I am increasingly convinced that Germany won’t commit to a fiscally integrated Europe. All the austerity packages in Greece, Portugal and Spain were interpreted as Germany holding their feet to the fire, for those countries to prove their commitment to budget discipline. It was a high price to gain Germany’s confidence but it was a price carried for nothing as no such confidence has been earned. Take the most recent “bailout”, this of the Spanish banking system. Spain after several austerity packages asked for Europe to share the cost of rescuing its banks. Instead, Germany insists that money be lent to the Spanish government, placing the debt burden from the bank rescue entirely on the Spanish state. This debt burden is now bringing Spain to the brink of either defaulting or asking for IMF and EU assistance.
Europe is nearly out of bullets to fight the crisis. Any ammunition left may only buy it weeks or months at best. Political paralysis has taken hold, from Lisbon to Athens, all the way north to Berlin. The constitutional court in Lisbon struct down a major policy piece of austerity for 2013, leaving the conservative government scrambling to bring the “bailout” program back on track. In Greece, further austerity is being demanded by the country’s creditors but the coalition government fears the social explosion to be provoked by the measures. In Berlin, Merkel is increasingly powerless as she faces mounting parliamentary and constitutional hurdles if she is to attempt deeper fiscal integration in Europe.
This merely addresses the political and financial aspects of the European crisis. The social crisis is quickly coming to the front as the largest challenge to policymakers. In Greece, a defeated political class has lost support to the neo-Nazi Golden Dawn party and the left-wing SYRIZA party. Italy is seeing a similar dynamic as an unelected technocratic regime turns voters away from the two main parties who have enabled this government to exist. In Spain, long standing regionalist movements have strengthened with the loss of confidence in Madrid, a majority of Catalans for the first time supporting independence from Spain.
Much is at stake in Europe, including the post-Cold War peace and stability long taken for granted as permanent. Illusions of European identity are quickly being lost. Europe is broken and it appears helpless in battling the daily episodes of this crisis, let alone altering or preserving the European Project’s long term ambitions.