Rift opens among Eurozone leaders over Germany’s insistence on austerity
With new signs of economic trouble emerging, what has been a guiding European economic principle for several years is facing open revolt.
As Europe confronts new signs of economic trouble, national leaders, policy makers and economists are starting to challenge as never before the guiding principle of the Continent’s response to six years of crisis: Germany’s insistence on budget austerity as a precondition to healthy growth.
France this week stepped up what has become an open revolt by some of the eurozone’s bigger economies against Chancellor Angela Merkel’s continued demands for deficit reduction in the face of slowing growth.
The disagreement looms over European Union leaders as they meet at least three times this month, starting on Wednesday in Milan with discussion of high unemployment, particularly among the young, and the question of how to get Europe’s economies moving again.
The rapidly evolving debate holds the potential to be a turning point after a long period in which Germany and Ms Merkel have dominated European economic policy.
“After going along with the damaging strategy of austerity in the hopes that Germany would eventually moderate its position, countries are now saying, ‘Enough is enough.
There are no signs so far that Ms. Merkel or German companies are likely to yield. The steps being sought by France and other advocates of change remain relatively modest — in essence, just slowing the pace at which they cut their budget deficits.
A number of European nations, like Finland, are strong backers of austerity. And for all their summit meetings, European leaders have no big new plans for restoring growth, like the stimulus legislation passed in the United States in 2009 that is credited with helping to keep the recession from being deeper and longer.
Critics of austerity say that more government spending would increase demand for goods and services in Europe and help avert a dangerous fall into deflation, a downward spiral in wages and prices that can cripple an economy for years.
At least for the moment, Berlin appears unwilling to deviate from its plan. In the German view, Wednesday’s meeting is about unemployment, and any discussion of budget deficits can wait as scheduled for late October, when a new European Commission — the E.U.’s administration — is supposed to be in place.
Outside Germany, however, alarm bells are ringing. Bernadette Ségol, leader of the European Confederation of Trade Unions, said Tuesday that the emphasis on budget rules was hindering attempts to pull out of problems that first appeared with the global financial crisis of 2007-8.
“Europe’s disastrous response to the crisis — austerity — has led Europe to a social crisis and to within sight of a political crisis,” she said, according to Agence France-Presse. “Europe does not need more austerity; it needs new policies.”
Source: NYT- Rift Opens Among Eurozone Leaders Over Germany’s Insistence on Austerity
