Deficit reduction increases Europe’s deficit
By Mike Andrew
European austerity measures meant to reduce government budget deficits have proven to be stunning failures, according to new figures released by the European Union
Instead of reducing sovereign debt, the all-cuts austerity programs have actually increased deficits and reduced prospects that the poorest European countries will ever be able to lift themselves out of crisis.
The European economy as a whole shrank for the second consecutive quarter, officially marking the EU’s slide back into recession. For four consecutive quarters the European economy has contracted or shown no growth whatsoever.
Protesters filled streets in Lisbon, Madrid, Rome, and Athens as EU finance ministers made the announcement. EU-enforced austerity policies in all four countries have driven up unemployment and led to drastic cuts in wages and social security benefits, while failing to halt their slide into economic chaos.
Some 140 people were arrested in Spain, where the unemployment rate has jumped above 25%, and above 50% for workers under 25. In neighboring Portugal, employment stands at a record 15.8%.
In Greece, economic output declined at 7.2% annual rate as the country lurched into its sixth year of depression. Like Spain, Greek unemployment is now above 25% and nearly 60% for young workers. The actual existence of the country is at risk as the best educated and most enterprising young workers now emigrate en masse to Northern Europe or Australia simply to find work.
A newly announced EU/IMF “bailout” of Greece was barely sufficient to reduce the country’s debts from a staggering 144% of gross domestic product, to a “mere” 124% of GDP by 2020. Had it not been for that injection of EU money, the debt to GDP ratio was expected to rise to 189% by 2013.
The latest EU loan to Greece – some 44 billion Euros – will be sufficient for the government to pay its December bills, but not much more. The Greek government is now taking bids from private investors who hope to buy its postal system, railroads, and bus lines. Even the Acropolis may be leased out to a private tourism firm.
Across the EU almost 26 million people are out of work, and studies indicate that 116 million Europeans are at risk of falling below the poverty line as governments cut spending and benefits, lay off workers, and sell state-owned assets.