Austerity havoc in Europe

Austerity havoc in Europe

May 8th, 2012 in Opinion Times

The United States under the Obama administration has managed to steer the economy out of the Great Recession of 2007 and back on a growth path by injecting some measured stimulus spending -- chiefly tax cuts for the broad middle class, and phased assistance to state governments over the past three years. That has kept the bottom from falling out in education and vital state services and state employment, while nurturing consumer confidence and 26 straight months of private sector job growth.

Europe could have been learning from that example. But it chose to go in the opposite direction toward harsh budget slashing and forced "austerity" to reduce the federal debt of the European Union's members as an antidote to the recession. That's the same recipe that America's Republicans now propose.

It has been disastrous.

In the same period since the horrific banking collapse that nearly pushed the western world into a gripping depression, most of Europe -- under the austerity mandated by the EU's economic giant and its banking paymaster, Germany -- has struggled on the fine line between economic stagnation and double-dip recession, if not fallen back hard into the latter.

That dire trajectory has shoved Greece, Ireland, Portugal, Spain and Italy into increasingly deep recessions and bitterly high unemployment. More recently, the solid Dutch have found themselves in a recession that caused the government to step down. And on Sunday, the backlash caught up with France.

On the heel's of Greece's ballot rebellion against the government, French voters threw out President Nicolas Sarkozy, and elected a new president from the Socialist party for the first time in 31 years -- all to avoid a harsher veer into recession and deeper pain from rising unemployment and steep cutbacks in health care and education.

The drift in France from the center-right approach of austerity has to alarm Germany, which, as the biggest contributor to the European Central Bank, has been unwilling to grasp two core realities that challenge its "austerity first" dogma. One is that its export-led economic juggernaut can't remain strong if its fellow EU members can't afford to buy its products. The other looming reality is the undesirable end of pushing less affluent EU members to abandon the EU and its common euro currency, and defaulting on its ECB loans and bonds altogether.

It's too soon to forecast the shrinkage or demise of the EU and the euro, though a lot of analysts are raising that flag. But the fact of the matter is that the austerity push -- which has also riven Great Britain under the same recessionary pains and electoral anger -- is turning its economic victims into intensely angry citizens who are ready to torch the government (sometimes literally: see Greece) out of despair over the lack of jobs, food, health care and classrooms in the self-perpetuating downward cycle of austerity and economic decline.

There's a lesson here for Democrats, Republicans and American voters. The only thing keeping American voters out of the desperation that plagues Europeans is the careful piloting of Obama and the slender Democratic majority in the Senate, which has managed to steer clear of the extreme austerity measures that Republicans want to impose, and its consequences.

If Republicans win in November, and impose the Ryan budget passed haughtily by the House, the austerity advocates could easily change direction toward the current European model. Then, its disaster could become our reality.