Voters across Europe punish the promoters of austerity


B00Mer
#1
Voters across Europe punish the promoters of austerity but where the continent goes is unclear




PARIS - The day after Francois Hollande rode to power in France on a slogan of "change now" the conversation in Europe is already different: Austerity has become a dirty word.

In Greece, political parties who reject the extreme belt-tightening required by international bailouts were the big winners in parliamentary elections. German voters in a northern state ousted the coalition led by Chancellor Angela Merkel's conservative party, which has pressed the case for austerity.

And France, of course, elected Hollande, its first Socialist president in more than a decade and one who has promised more government spending to stimulate the economy.

"Austerity can no longer be inevitable!" he shouted in his first speech after Nicolas Sarkozy conceded Sunday night. The question remains whether Germany — which is Europe's economic powerhouse driving the austerity agenda — will allow at least some countries in the eurozone to spend more freely in the face of a recession that is spreading across the continent.

Rising uncertainty over how Europe's handling of the debt crisis may change in the weeks and months ahead has made investors nervous. Stock markets were volatile on Monday, falling sharply in the morning and recovering in some countries by the close.

The sharpest selloff was in Greece, where the main stock index plunged almost 7 per cent. The euro briefly spiraled to a three-month low against the dollar, hitting $1.2972.

More turmoil in the eurozone would affect the global market, particularly countries like the U.S. whose financial system is intertwined with that of Europe.

As investors become nervous about the future they pull back on their investments, hurting economic activity, while drops in stock markets drain wealth from savers.

American exporters would suffer if sagging confidence in Europe shrinks the value of the euro against the dollar. Exports have been one of the U.S. economy's few strengths since the recession ended three years ago.

The most nerve-wracking development occurred in Greece, where political parties that backed two bailouts lost their majority in Parliament. That opens up the possibility that Greece's new leaders could renege on commitments made to secure the country's massive rescue loans — or even decide to leave the euro. The conservatives will try to put together a new government, but there's a good chance they could fail — and that would usher in another month of financial chaos before new elections.

Merkel pressed Greek leaders to stay the course.

"Of course the most important thing is that the programs we agreed with Greece are continued," she said Monday.

But Greece isn't the only problem. The 17 countries that use the euro — and 9 other European countries — agreed in March to a fiscal compact that seeks to make countries balance their budgets. But as Europe's economy gets weaker, the public and politicians are growing weary of the budget-cutting that is required to make this fiscal compact work.

Eight of the 17 eurozone nations are already in recession and unemployment across the bloc rose to 10.9 per cent in March — its highest ever.

If investors pull back from Europe amid uncertainty, its growth policies will have trouble making headway — and that could also drag on the global economy.

The U.S. and European Union are important trading partners and each consumes a large portion of the other's exports. With unemployment skyrocketing in Europe, consumption is flagging and that will have a knock-on effect on the U.S.

The American and European financial systems are also heavily intertwined, and U.S. money market funds still have significant exposure to Europe.

Over the past two years, France and Germany have steered Europe through the debt crisis — though not always well — and declared an end to the flouting of deficit limits that led Europe into the debt crisis.

But the crackdown could not have come at a worse time — with the world economy slowing — and propelled Europe into a vicious austerity spiral. Cutting spending — which meant laying off state employees and ending stimulus programs — further slowed nations' economies and produced less tax revenue, which meant more cuts were needed to meet deficit targets.

Now a backlash has begun and for many, Hollande is its leader.

The new French leader has promised to end the negative loop, demanding that the fiscal compact that targeted spending be re-negotiated to include measures to promote growth. Many economists have long advocated for a greater emphasis on growth, but that idea seemed to gather steam among European policymakers only as Hollande promoted it.

"At the moment that the (French vote) result was proclaimed, I am sure that in many European countries, there was relief, hope," he told supporters in his central hometown of Tulle.

European Central Bank President Mario Draghi called for a "growth compact" even though that institution has long demanded fiscal discipline. The Dutch government, long a supporter of such discipline, fell over the issue of too much austerity and too little growth. And even Germany, the primary architect of austerity, has said a growth pact should be drawn up.

Still, concrete proposals for stimulating short-term growth have been few. European officials have talked about boosting funding for the European Investment Bank, and economists have urged making more targeted and aggressive use of EU structural funds for infrastructure projects such as roads.

Yet with a budget only around 1 per cent of EU gross domestic product, the EU's prospects for large-scale spending are limited.

Jeffrey Bergstrand, a professor of finance at the University of Notre Dame, said Germany is going to have to shift on the subject of stimulus. Even though its economy is the largest — and among the strongest — in Europe, it can't thrive if no one else is.

"Merkel has to be paying attention to (unemployment) because Germany, unlike the United States, is very, very reliant on exports, and exports tend to go to your neighbours," he said. "She will have to listen. She will have to give."

Germany has long maintained that it made painful cuts and reforms after the reunification of its East and West while other nations kept spent beyond their means.

But economists argue that Germany reaped the benefits of all that spending, too, since it sells goods to eurozone countries. And at any rate, Germany is one of the few eurozone members that can spend a little more because its economy is strong and its deficit is in check.

Despite this new divergence between France and Germany, that relationship will remain central to a solution to the crisis. Merkel and Sarkozy were so close they were known as "Merkozy" — and the big question now is if there will be a "Merkollande" in Europe's future.

"There can be some short-term friction when they have to adjust to each other," said Laurence Boone, chief European economist at Bank of America Merrill Lynch. "But it doesn't seem to me that there is an alternative, because Spain and Italy are not strong enough."

Merkel called Hollande immediately after his victory and Hollande campaign manager Pierre Moscovici said his boss would head to Berlin shortly after his inauguration on May 15.

Hollande's decision to follow through on campaign promises of jump-starting the French economy by investing in infrastructure and buoying small businesses will determine how bumpy the road ahead is.

He has promised to keep the deficit in check by also raising taxes on the wealthy and closing some corporate loopholes — but some investors say that will kill the very growth he hopes to foster.

"Hollande's platform of anti-austerity is not really anti-austerity; it's really anti-growth," said Jeffrey Sica, president of U.S.-based Sica Wealth Management, which has over $1 billion in assets under management. "Whether it's taxation or regulation or however they're going to raise revenue ... they're going to shift the blame to business and to other higher income levels."

If he does start wildly increasing spending, France will no doubt see its borrowing costs rise — which could make his policies untenable and prompt a shift back to austerity. It was those rising borrowing costs that eventually forced fellow eurozone nations Greece, Ireland and Portugal to seek bailouts.

Some are hoping that Hollande will turn out to be more pragmatic.

"Adieu, election campaign. Bonjour, reality," read an editorial in Germany's daily Sueddeutsche Zeitung.


source: Voters across Europe punish the promoters of austerity but where the continent goes is unclear - Winnipeg Free Press


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couple of good comics that sum up Europe's problems below







--------------------------------

Goodnight democratic EU, Goodmorning German EU

 
PoliticalNick
+4
#2  Top Rated Post
It's about time that the punishment fit the crime so hopefully as all these governments that gave billions and trillions to the banks and wealthiest people in the world get voted out the replacements will also cut off their pensions and benefits. It would be nice to see all forms of ongoing security for them removed and maybe have them forfeit their assets too. Let them get real jobs and go live among the masses that they made pay for all these criminal bailouts and austerity.

I can only hope that this kind of political movement spreads like wildfire and makes it to north america soon.
 
gopher
+2
#3
I must confess to not understanding the politics and elections going on in Europe at the moment. But I do find it interesting that right wingers in the USA and the media here all say it is socialism that has caused the present problems there. By contrast, when I see RT, DW, or BBC they say the problems arise from wealthy elites escaping taxation and market manipulation by the wealthy that has caused these problems. This is why socialists are enjoying electoral successes whereas conservatives are losing. Very interesting how Europe reports it so differently from USA media.
 
Cabbagesandking
+1 / -1
#4
Quote: Originally Posted by gopherView Post

I must confess to not understanding the politics and elections going on in Europe at the moment. But I do find it interesting that right wingers in the USA and the media here all say it is socialism that has caused the present problems there. By contrast, when I see RT, DW, or BBC they say the problems arise from wealthy elites escaping taxation and market manipulation by the wealthy that has caused these problems. This is why socialists are enjoying electoral successes whereas conservatives are losing. Very interesting how Europe reports it so differently from USA media.

It is true about Greece and thee tax avoidance as National sport. This whole European situation is beginning to look like the revolt of the Left against thirty years of Right Wing dominance that has failed dismally both socially and economically.
 
The Old Medic
+3 / -1
#5
"Right wingers" in France, Greece, Great Britain and the rest of Europe would qualify as extreme leftists in the USA.

The whole European system is one of the government insuring cradle to grave sustenance for everyone, and constantly providing more and more benefits for those that don't work. In most of those countries, they have multi-generational families in which no one has ever held a job, yet they enjoy paid vacations, nice cars and all the perks of the working people.

France will spend itself into oblivion, just as Greece has already done. Greece will soon find itself unable to borrow anything, from anyone, and it's economy will shatter. It will become a 3rd world nation.

If France tries to spend its way into prosperity, it too will soon find itself unable to borrow. Then, its economy will also collapse, and the prospect a a very real revolution will rear its ugly head.

Do the wealthy in many European countries attempt to avoid taxation? Absolutely, because in all too many of those countries, the taxation of the wealthy is obscene. If they actually paid all of the taxes that the government attempts to get, in several countries they would actually pay more than 100% of what they earn in any given year.
 
damngrumpy
+3
#6
This is only the beginning. Other leaders facing elections now understand the people
have had enough. For almost a decade we have been giving special privilege to the
banks and corporations. If governments and the ordinary folks on main street are
expected to live in austerity, then its time the folks with the limos did the same. The
average middle class person doesn't make in a year what the investment broker gets
in a bonus.
It is time for the rich to pay their share for the cost of society plain and simple.
When there is trouble in the workplace we demand the trade union movement act in
a responsible manner and when they don't we legislate behaviour and declare their
service essential. It has come time to expect big business to do the same. I am not
on the back of small business they are contributing and taking significant risk while
providing jobs etc. Big business and banks let the little guy pay the bills and that is
no longer good enough. We also have to ensure our place in the world. That means
no more fat free trade deals with dictatorships and those who would simply undercut
our society. Business is playing nations off against each other and they benefit from
free trade deals not the rest of us. These deals are havens for cheap wages and
sweat shops and its time we regulated our business community both in terms of their
stock market activity and their over all structure. Governments with b*lls can do that.
 
Cabbagesandking
+2 / -1
#7
Quote: Originally Posted by The Old MedicView Post

"Right wingers" in France, Greece, Great Britain and the rest of Europe would qualify as extreme leftists in the USA.
The whole European system is one of the government insuring cradle to grave sustenance for everyone, and constantly providing more and more benefits for those that don't work. In most of those countries, they have multi-generational families in which no one has ever held a job, yet they enjoy paid vacations, nice cars and all the perks of the working people.
France will spend itself into oblivion, just as Greece has already done. Greece will soon find itself unable to borrow anything, from anyone, and it's economy will shatter. It will become a 3rd world nation.
If France tries to spend its way into prosperity, it too will soon find itself unable to borrow. Then, its economy will also collapse, and the prospect a a very real revolution will rear its ugly head.
Do the wealthy in many European countries attempt to avoid taxation? Absolutely, because in all too many of those countries, the taxation of the wealthy is obscene. If they actually paid all of the taxes that the government attempts to get, in several countries they would actually pay more than 100% of what they earn in any given year.

Quote has been trimmed, See full post: View Post
Actually, medic, the high taxed European countries are the Northern ones that are doing very well: better than North America both socially and economically. They are leaving us in their dust with economic growth and the social programmes. Those "nany" states are the envy of the world with the most advantaged citizens.

Sweden has free education for its "high" taxes. Norway has close to the highest standards of living and, just announced, Norway ranks Number for one for the benefits of motherhood while Canada is 19th.

Real vacations in all; low poverty rates. Better healthcare.

In a pig's eye these things cannot be afforded. That Right Wing dogmas has ruled long enough. Wealthy countries can not afford not to have these things if they want to stay at the top. Low taxes are the cry of those who already have wealth and opportunity (and leisure) and don't want to share.
 
Walter
-1
#8
Quote: Originally Posted by PoliticalNickView Post

I can only hope that this kind of political movement spreads like wildfire and makes it to north america soon.

Don't worry, the Bamster only has about 7 months till he's out of the WH. He gave more to the banks than everyone else comined, but, of course, he did it for the right reasons.
 
B00Mer
+1
#9
Quote: Originally Posted by WalterView Post

Don't worry, the Bamster only has about 7 months till he's out of the WH. He gave more to the banks than everyone else comined, but, of course, he did it for the right reasons.

So you'll be disappointed when he wins another 4 years, just so he can piss on your parade.

Romney has a slight disconnect with real people.. very sad.. I don't think he has what it takes to win.. sadly, because I'm Rebulican. But most people do not like change.. Obama is the "safe bet" and people know Obama. People don't know Romney and I think he just does not connect with the school teacher, fire man, police officer..

Romney; "Everyone should live like this"

 
Liberalman
#10
The poor people are getting tired of the rich people telling them to feel the burn.

The best way for the countries to get out of this mess is renegotiate the terms and let them have poor credit ratings until they get back on their feet.

Better yet cut down the loan owing by 25 %
Last edited by Liberalman; May 8th, 2012 at 01:11 PM..Reason: more
 
IdRatherBeSkiing
#11
Quote: Originally Posted by LiberalmanView Post

The poor people are getting tired of the rich people telling them to feel the burn.

The best way for the countries to get out of this mess is renegotiate the terms and let them have poor credit ratings until they get back on their feet.

Better yet cut down the loan owing by 25 %



The problem with these countries is that they expect to live their socialist dreams on borrowed money. I recall my days of youth in SK the NDP governments of the time were heavy into social programs but also heavy into fiscal managment. There were no deficits or need to borrow. The minute you need to borrow, you are no longer the master of your programs or finances. This is what struck me as a huge difference to the Rae government in Ontario.

Bottom line for France is that unless your banker agrees with your game plan, he won't loan you any money. And sooner or later, you will run out of bankers.
 
Machjo
#12
Quote: Originally Posted by CabbagesandkingView Post

Actually, medic, the high taxed European countries are the Northern ones that are doing very well: better than North America both socially and economically. They are leaving us in their dust with economic growth and the social programmes. Those "nany" states are the envy of the world with the most advantaged citizens.

Sweden has free education for its "high" taxes. Norway has close to the highest standards of living and, just announced, Norway ranks Number for one for the benefits of motherhood while Canada is 19th.

Real vacations in all; low poverty rates. Better healthcare.

In a pig's eye these things cannot be afforded. That Right Wing dogmas has ruled long enough. Wealthy countries can not afford not to have these things if they want to stay at the top. Low taxes are the cry of those who already have wealth and opportunity (and leisure) and don't want to share.

you're correct overall, and you could add fiscal conservatism to boot with low government debt.

However, before the left pats itself on the collective back, consider that Sweden for instance has two-tier health-care and a voucher-school programme. In fact, the Swedish government owns a smaller percentage of the national GDP than even the US government!

So there are always two sides to every story.

Add to that that Sweden does not even have minimum wage.
 
Cabbagesandking
#13
Sweden does, though, have a mechanism that amounts to minimum wage. It works where there is heavy unionisation. Minimums are negotiated by sector.

here are other problems with the Swedish model that, if rectified, could send it to the top.
 
gopher
#14
Quote: Originally Posted by Cabbagesandking;

It is true about Greece and thee tax avoidance as National sport. This whole European situation is beginning to look like the revolt of the Left against thirty years of Right Wing dominance that has failed dismally both socially and economically.

As you accurately reported on another post, it is Northern European countries with their higher tax rates that are enjoying the greatest standards of living and expansion. When taxes were higher under the Clinton years, we had the greatest expansion of the economy in the USA. Socialists have pointed this out in Greece & France and this is why they are gaining in political power while conservatives are declining.

Again, this is something forum right wingers and American media fail to point out. But the European media are ALL reporting this.
 
Machjo
+1
#15
Quote: Originally Posted by CabbagesandkingView Post

Sweden does, though, have a mechanism that amounts to minimum wage. It works where there is heavy unionisation. Minimums are negotiated by sector.

here are other problems with the Swedish model that, if rectified, could send it to the top.

Sweden does have codetermination legislation which is even better than minimum wage on a number of fronts:

1. In a recession, minimum wage simply legislates unskilled workers out of the market and does nothing about bonuses for upper management, whereas codetermination without minimum wage allows workers to negotiate their salaries downward if necessary, but better yet can also pressure upper management to take pay cuts too.

2. In good economic times, minimum wage does not allow workers to negotiate even higher salaries for themselves even when the company is making a killing, whereas codetermination legislation does give them more negotiating power on that front too.

Sweden got that one right, we got it wrong.

Quote: Originally Posted by gopherView Post

As you accurately reported on another post, it is Northern European countries with their higher tax rates that are enjoying the greatest standards of living and expansion. When taxes were higher under the Clinton years, we had the greatest expansion of the economy in the USA. Socialists have pointed this out in Greece & France and this is why they are gaining in political power while conservatives are declining.

Again, this is something forum right wingers and American media fail to point out. But the European media are ALL reporting this.

Strictly speaking though, sweden for instance is more of a social-corporatist than socialist country, with more private sector ownership of resources than even the USA as a percentage of GDP.

So if anything, it's social-corporatists, not socialists, who should gloat. Personally, I'd be more likely to vote for an NDP candidate if he were less of a labour-socialist and more of a social-corporatist.

And let's consider that Poland isn't doing so badly either in its growth rate under liberal-conservative governments, which again are not to be confused with the neo-conservatives in Canada.

If canada had a Swedish-style social-corporatist party on the left and a Polish-style liberal-conservative party on the right, then we'd have vote-worthy candidates to vote for on both sides of the spectrum.

Quote: Originally Posted by CabbagesandkingView Post

Sweden does, though, have a mechanism that amounts to minimum wage. It works where there is heavy unionisation. Minimums are negotiated by sector.

here are other problems with the Swedish model that, if rectified, could send it to the top.

Another point to make is that most labour-unions in Sweden follow a more social-corporatist, liberal-corporatist or christian-corporatist (depending on where they stand on the political spectrum) as opposed to labour-socialist philosophy as in Canada. As a rule, corporatist unions would rather work with management rather than against it, which might explain the popularity of codetermination laws in Sweden and Germany. In Canada, we tend more to support laws simply giving labour unions more striking rights since the labour-socialist philosophy is based far more on confrontation than collaboration.

So again, Sweden's economy is not socialist in the sense that let's say the NDP understands it. Most New Democrats would find the Swedish SDP to be too "capitalist" for their taste.
 
Cabbagesandking
#16
Interesting!
 
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