Budget-Cutting is Killing Europe
By Mike Andrew
When Europe plunged into economic crisis more than four years ago, the IMF and the European Central Bank had one answer – austerity! Beginning with Greece, Eurozone members were ordered to cut social spending, lay off public sector workers, and privatize national assets.
While draconian budget cuts were supposed to be the road back to prosperity, economic reports for the first quarter of 2013 show that austerity measures are having exactly the opposite effect. In fact, budget-cutting is killing Europe.
“The misery continues,” Carsten Brzeski, senior economist at ING bank in Brussels, told Reuters. “Almost all major countries except Germany, are in recession, and so far nothing has helped stop this downward spiral.”
Consider the facts:
- Nine of the 17 countries in the Eurozone are in recession: Spain, France, Italy, Finland, Netherlands, Portugal, Cyprus, Greece, and Slovenia.
- On average, the regional GDP fell 0.2% in the first part of 2013 compared to the previous quarter, and 1% in the previous year.
- The Eurozone has been in recession for six consecutive quarters, the longest recession since area data began to be recorded in 1995.
France’s GDP fell 0.2% in the first quarter of 2013, the second consecutive quarter of decline. In the previous year, French GDP fell 0.4%.
Italy, the third largest economy in the Eurozone, recorded its seventh consecutive quarter of decline, the longest since data started being recorded in 1970.
The poorest countries were, of course, the hardest hit.
Greece’s economy shrank by a catastrophic 5.6% in the first quarter of 2013. Spain’s declined by 0.5%, and Portugal’s by 0.3%.
Unemployment in Greece and Spain is now over 27%. By comparison, unemployment in the US in 1932 – the worst year of the Great Depression – was 23.6%. Cuts in unemployment benefits have left millions of workers destitute.
In both countries, almost two-thirds of workers under 25 are out of work, with no alternative but to emigrate to find a job.
Austerity advocates in the US – from Congress to the state legislature – might take notice.