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

Senior Marketing Manager - Central London - £50,000

£40000 - £50000 per annum: Ashdown Group: Marketing Manager (Campaigns, Offlin...

Head of Marketing - Acquisition & Direct Reponse Marketing

£90000 - £135000 per annum: Ashdown Group: Head of Marketing (B2C, Acquisition...

1st Line Service Desk Analyst

£27000 - £30000 Per Annum: Clearwater People Solutions Ltd: Our client who are...

Trainee Recruitment Consultant - Birmingham - Huxley Associates

£18000 - £23000 per annum + Commission: SThree: Huxley Associates are currentl...

Day In a Page

Read Next
Norovirus the food poisoning bug that causes violent stomach flu  

A flu pandemic could decide next year’s election

Matthew Norman
J. Jayalalithaa gestures to her party supporters while standing on the balcony of her residence in Chennai. Former film star Jayalalithaa Jayaram is one of India's most colourful and controversial politicians  

The jailing of former film star Jayalalithaa Jayaram is a drama even Bollywood couldn’t produce

Andrew Buncombe
Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?
Royal Ballet star dubbed 'Charlize Theron in pointe shoes' takes on Manon

Homegrown ballerina is on the rise

Royal Ballet star Melissa Hamilton is about to tackle the role of Manon
Education, eduction, education? Our growing fascination with what really goes on in school

Education, education, education

TV documentaries filmed in classrooms are now a genre in their own right
It’s reasonable to negotiate with the likes of Isis, so why don’t we do it and save lives?

It’s perfectly reasonable to negotiate with villains like Isis

So why don’t we do it and save some lives?
This man just ran a marathon in under 2 hours 3 minutes. Is a 2-hour race in sight?

Is a sub-2-hour race now within sight?

Dennis Kimetto breaks marathon record
We shall not be moved, say Stratford's single parents fighting eviction

Inside the E15 'occupation'

We shall not be moved, say Stratford single parents
Air strikes alone will fail to stop Isis

Air strikes alone will fail to stop Isis

Talks between all touched by the crisis in Syria and Iraq can achieve as much as the Tornadoes, says Patrick Cockburn
Nadhim Zahawi: From a refugee on welfare to the heart of No 10

Nadhim Zahawi: From a refugee on welfare to the heart of No 10

The Tory MP speaks for the first time about the devastating effect of his father's bankruptcy
Witches: A history of misogyny

Witches: A history of misogyny

The sexist abuse that haunts modern life is nothing new: women have been 'trolled' in art for 500 years
Shona Rhimes interview: Meet the most powerful woman in US television

Meet the most powerful woman in US television

Writer and producer of shows like Grey's Anatomy, Shonda Rhimes now has her own evening of primetime TV – but she’s taking it in her stride
'Before They Pass Away': Endangered communities photographed 'like Kate Moss'

Endangered communities photographed 'like Kate Moss'

Jimmy Nelson travelled the world to photograph 35 threatened tribes in an unashamedly glamorous style