BACKLASH IN EUROPE
In France Sarkozy swept from power and voters in Greece punish parties responsible for painful austerity measures
May 07, 2012
(INTERNATIONAL) -- Voters in France and Greece essentially created a new political roadmap Sunday in a powerful man-on-the-street backlash against the German-led “cure” for the Eurozone’s debt crisis -- painful austerity cuts for that average man and woman on the street who feel they are being made to pay for the sins of Wall Street and their high and mighty politicians.
Greeks march recently in Athens to protest government mandated austerity measures.
In France, voters swept Francois Hollande into the Presidency, throwing out the current President Nicolas Sarkozy and bringing the Socialists back into power in that country for the first time in 17 years.
Along with Germany’s Angela Merkel, Sarkozy was a chief architect of Europe’s push to restore confidence in the euro through tough fiscal discipline but no real plan for the growth side of the economy.
In contrast to Sarkozy, Hollande plans to focus on economic growth. He, along with many average citizens believe that the almost myopic focus on spending cuts has resulted in nothing but recessions and soaring unemployment in Europe.
And angry voters in Greece handed the taste of defeat to the traditional political parties in that country that were in lock-step with the harsh fiscal terms of Greece’s international bailout – stringent austerity measures designed to prevent Greece from defaulting on its massive debts and exiting the euro currency bloc.
However no single political party won enough votes to form a government, raising the possibility of new elections within months and more uncertainty for global markets on how Greece will deal with its crisis.
The voting left centrists in Athens scrambling to form a new government against the newly strengthened ranks of the far left and right.
The voting results in France and Greece follow a few tumultuous weeks in which the Dutch government fell and Britain’s Conservative led coalition took a beating in local elections over the ongoing debate about austerity vs. stimulus plans to re-charge economic growth.
THEY ARGUE EUROZONE ECONOMIES ARE BEING DRIVEN INTO THE GROUND
Opponents of the strict austerity measures argue that the only thing they are doing is driving Eurozone economies further into the ground.
There are some economists such as Nobel Prize winning American economist Paul Krugman who believes the world is witnessing “the apparent determination of European leaders to commit economic suicide for the Continent as a whole.”
Krugman, who wrote about the Euro crisis in mid April thinks we are watching in slow motion this regional version of economic suicide as European leaders, “Double down on their failed policies and ideas. And it’s getting harder and harder to believe that anything will get them to change course. Consider the state of affairs in Spain, which is now the epicenter of the crisis. Never mind talk of recession; Spain is in full-on depression, with the overall unemployment rate at 23.6 percent, comparable to America at the depths of the Great Depression, and the youth unemployment rate over 50 percent. This can’t go on — and the realization that it can’t go on is what is sending Spanish borrowing costs ever higher,” wrote Krugman in the New York Times.
European leaders have decided they can cut, cut and cut their way to fiscal solvency with no serious plan for the production side of the equation and no investment in production.
Krugman says that prescription for health – coming mainly from Berlin and Frankfurt – is insane.
Now it appears voters in France and Greece agree with him
“Europe has had several years of experience with harsh austerity programs, and the results are exactly what students of history told you would happen: such programs push depressed economies even deeper into depression. And because investors look at the state of a nation’s economy when assessing its ability to repay debt, austerity programs haven’t even worked as a way to reduce borrowing costs,” says Krugman who adds that European leaders seem determined to drive their economy — and their society — off a cliff.
Krugman’s piece can be read here
Meanwhile there are some who think the voter pushback in Europe may foretell what is on the horizon for the U.S. where government spending and the nation’s deficit have emerged as major election-year issues.
The presumed Republican nominee Mitt Romney has vowed he would come into office with a sharp ax to cut the deficit at a much faster pace than President Obama.
But in looking at what has happened in Europe where a voter backlash has brought down leaders in Italy, Spain, Ireland, Portugal and now France and Greece, as well as a glance at recent job growth numbers in the U.S. which seem to indicate the economy has stalled, getting the American people to embrace and accept more economic pain than what they have already endured may make new austerity measures in the U.S. a very hard sell to voters.
In a weekend Op-Ed piece published in the Sky Valley Chronicle and written by former U.S. Labor Secretary Robert Reich about the American economy, Reich wrote, “No set of policies between now and Election Day are likely to expand the economy. To the contrary, government at all levels continues to contract, acting as a fiscal drag when government needs to be doing the exact reverse – boosting the economy through additional spending. In 2013, when spending major cuts are scheduled, we’ll fall off a fiscal cliff.”
Reich believes President Obama needs to state loud and clear that he won’t support additional spending cuts until the economy is showing clear signs of improvement.