Violent protests are a reminder that Europe’s economic woes have not gone away

 

Share

In Britain, thanks to the wiles of George Osborne, one lucky punter’s enormous lottery win and the projections of modest economic growth, the past week has been dominated by often quite frivolous talk – the Lamborghini hypothesis – about wealth and how to spend it.

So the huge protests in Spain at the weekend against its government’s austerity policies, involving hundreds of thousands who had marched from all corners of the country, are a rude but timely reminder of the true situation that Europe, not excluding Britain, is still in.

In all the countries on the eurozone’s southern fringe, recovery has been palsied where it is present at all. The draconian economic policies mandated by the so-called troika of the International Monetary Fund (IMF), the European Central Bank (ECB) and the European Commission, in return for rescuing national banks, are still having a crushing impact. But aside from the political consequences of those policies, there remains a graver danger: that austerity will fail to bring the patient round.

Unemployment remains unacceptably high in all these countries: 24 per cent in Spain and Greece, 16 per cent in Portugal, nearly 13 per cent in Italy. At the same time, many tens of millions of people are affected by the swingeing cuts to social budgets mandated by the troika, whose “dictatorship” was one of the main targets of the marchers’ anger. As the size of the protesting crowds indicates, these policies, imposed year after year, are socially corrosive, sapping morale and draining reserves of hope and self-esteem. The organisers of Spain’s protests crystallised this fact when they called them “marches of dignity”.

But beyond the cruel social impact, the long-term danger of Europe’s austerity medicine is that it will not work. These economies are still either stagnant or shrinking – Greece’s shrank last year by 6.4 per cent – and both government debt and the deficit are still stratospheric: the IMF estimates that in Italy government debt is more than 130 per cent of annual GDP.

The fear that Europe is treading in the grim footsteps of Japan, which suffered two “lost decades” of stagnation after failing to recover from the bursting of the economic bubble in the late 1980s, has not gone away. Instead it has returned: the ECB hopes to raise inflation across the eurozone to 2 per cent, but last week it was revealed that in the year to February 2014 the figure was a mere 0.8 per cent. Europe could yet become locked in a spiral of lowering prices and wages, as Japan was. When the greatest challenge economies face is bringing down private and public debt, deflation only makes it worse.

The eurozone’s crisis was apparently solved at a stroke in the summer of 2012 when the ECB’s president, Mario Draghi, declared that the bank would do “whatever it takes” to preserve the euro. Rather extraordinarily, this was sufficient to take the heat off the currency and banish fears that it could suddenly fall apart.

Yet the contradictions that precipitated the crisis have not gone away:  the fact that the euro has caused economies not to converge, as was the intention, but to fly apart; and that when weak economies are dragged into cohabitation with much stronger ones, swingeing cuts to national budgets are one of the very few and very blunt tools at their governments’ disposal.

The United Kingdom can count itself lucky that it was Brown the sceptic not Blair the enthusiast who ended up getting his way on the currency question. But if Europe, much our most important trading partner, falls prey to chronic deflation, that will be cold comfort.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Recruitment Genius: Care Workers Required - The London Borough of Bromley

£15000 per annum: Recruitment Genius: This homecare agency is based in Beckenh...

Recruitment Genius: Sales Executives - OTE £50,000

£25000 - £50000 per annum: Recruitment Genius: Are you passionate about Custom...

Recruitment Genius: Sales Executives - OTE £50,000

£25000 - £50000 per annum: Recruitment Genius: Are you passionate about Custom...

Recruitment Genius: Client Relationship Assistant / Business Support

£18000 per annum: Recruitment Genius: Are you willing to give fantastic Custom...

Day In a Page

Read Next
Jed Bartlet (Martin Sheen) and Sam Seaborne (Rob Lowe) in The West Wing  

You don't need to read Aaron Sorkin's leaked emails to realise he's a sexist — just watch The West Wing

Tom Mendelsohn
A still from 'The Interview' starring Seth Rogan (right) and James Franco  

The Interview: If a film being cancelled is an outrage, what does that make the 200,000 North Koreans living in death camps?

Mike Harris
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas
La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

Deaf community outraged by La Famille Bélier

The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
10 best high-end laptops

10 best high-end laptops

From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
Susie Wolff: A driving force in battle for equality behind the wheel

Susie Wolff: A driving force in battle for equality behind the wheel

The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

'No abs Adam' plans to muscle in on Usain Bolt's turf

After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
Calls for a military mental health 'quality mark'

Homeless Veterans campaign

Expert calls for military mental health 'quality mark'
Racton Man: Analysis shows famous skeleton was a 6ft Bronze Age superman

Meet Racton Man

Analysis shows famous skeleton was a 6ft Bronze Age superman
Garden Bridge: St Paul’s adds to £175m project’s troubled waters

Garden Bridge

St Paul’s adds to £175m project’s troubled waters
Stuff your own Christmas mouse ornament: An evening class in taxidermy with a festive feel

Stuff your own Christmas mouse ornament

An evening class in taxidermy with a festive feel
Joint Enterprise: The legal doctrine which critics say has caused hundreds of miscarriages of justice

Joint Enterprise

The legal doctrine which critics say has caused hundreds of miscarriages of justice
Freud and Eros: Love, Lust and Longing at the Freud Museum: Objects of Desire

Freud and Eros

Love, Lust and Longing at the Freud Museum