Protestors demonstrate in Greece in December 2008
Photo by how will i ever via flickr
As Europe stumbles out of the recent rubble of the Austerity-imploded Irish economy, it’s logically impossible to understand why European politicians still continue to parrot the same rhetoric on deficits, cuts and savings. Spain, Portugal and Italy slide ever closer to that same precipice over which Ireland has fallen. Mass unemployment, lower wages and homelessness are already visible; monetary policy will not help people out of this crisis.

Last Wednesday, the European Council (the leaders of countries in the EU) called for further measures to save the Euro. It agreed that it would be in full compliance with the European Central Bank (ECB) regarding how to deal with countries that are forced to default. The ECB has ensured that countries forced to default cannot bill foreign creditors who may have caused the problem in the first place; this means the burden of paying back debt is placed on citizens of the defaulted country, not the richer banks and hedge funds that may have caused the default in the first place.

Government spending has not been the problem. In 2009, Spain, Ireland and Greece had amongst the lowest rates of taxation in Europe (as a proportion of GDP). Greece also spent proportionally less of its GDP on public spending that year (44.6% as compared to the EU average of 46.6%). Simply put, these countries were not overspending, but undertaxing.

Even if the deficit may shrink temporarily through austerity measures, it will only do so through chopping off the legs of GDP. As the EU has demanded that eurozone deficits remain below 3% of GDP, any reduction in GDP will only counterbalance a reduction in the deficit. In other words, cuts instead of investment in the middle of a recession will not work.

Yet austerity measures agreed on by the EU and national governments will only encourage further job losses, reduce income for the poorest and a lead to reduced and less efficient services. They call the idea a ‘jobless recovery‘, which somehow increases GDP and solves the deficit problems but miraculously does not include the key players of an economy – the people.

In Spain, the EU has forced through a plan to reduce the national deficit to 6% (from 11.1%) of GDP this year. Through austerity policies this will mean housing benefit cuts of 20%, unemployment to reach 19.3% next year (including around 50% youth unemployment), ‘final’ unemployment benefits removed, and investment in long-term assets like infrastructure cut by 30%.

In Ireland, the new European Central Bank/IMF budget pushes through cuts in disability and carers benefits of 8%, the minimum wage will be cut by over 10%, tax brackets will be lowered by 10% (making the poorer pay more) and to top it all off, corporation tax remains at 12.5% and air travel tax drops from €10 to €3.

In Greece, with ECB/IMF loan of €110 billion, 50 public companies will face salary cuts of 10% while labour markets will become utterly deregulated, meaning minimum wages are ‘up for negotiation’. Job security and the benefits of a welfare state will vanish, with the worst aspects of the Washington Consensus implemented within the boundaries of Europe.

None of these cuts actually tackle the problem that created this deficit – the failure of government regulation of banks, hedge funds, bonus cultures, false auditing, etc. Instead all focus on the opposite – hurting the lives of those vulnerable, poor, young/old, and innocent.

Europe has lurched to the right, and the sufferers are all Europeans alike. We must remember that many economic and financial powers are more than British – they are European (if not global). As Greeks face tear gas against their opposition to cuts, as the Irish face an unreceptive government, and as people from all backgrounds and walks of like begin to stand up – we need to be standing with them.

If the power of trade unions was destroyed by Thatcher and scuppered by police action, we need to build our chains across Europe and reconnect international solidarity. The cuts are not just cutting the deficit, they are cutting off equity, equality and hope for our future.

We are not alone. We need to act together to solve this problem, and let us hope that we do.