Tuesday, 8 June 2010

Proportionate Reactions?

Across Europe, intersting new ‘packages’ age being unwrapped and the contents inspected. However, unlike in the past decade or so, we aren’t ripping off the paper to uncover expensive, extravagant gifts – we have instead been handed our lump of coal reserved for naughty children the world over.These are the austerity packages of 2010 Europe.

However, is this huge and sudden drop in expenditure within our nations acceptable, or even helpful? If you look to countries such as Spain, Greece and Germany, where the outlined cuts are huge, the answer from the people is a resounding NO. The Spanish and Greek are striking, while the Germans will remain at work (because they are German, and such hot-blooded reaction is not in the nature of out Teutonic brothers), but they will grumble VERY loudly. The breakdown of each fiscal plan varies, with Spanish cuts falling heavily of public sector jobs, and German on social welfare, while Greece is going all-out, with pay cuts, increased retirement ages and a crackdown on tax evasion. Other European countries are similarly trying to reduce their defecit problems, but it is these three countries which appear to be the current hotspots. Greece and Spain both have huge debt which is spiralling out of control, while the German situation is considerably better; a deficit of 3.1%of the country’s GDP, projected to rise to 5%, against Spain and Greece’s 11%+ and 13.6% respectively.

So why such harsh measures? Clearly, in countries with the largest budget defecits (the U.K included, at over 11%) huge cuts and possibly tax increases need to be made, and it seems that even with the strikes and protests, these plans will go ahead. Theofficial EU limit for budget deficits for member states is 3%, and given the number of countries with debt far beyond this level, things can clearly not continue in the same manner as always. The projected 5% public sector Spanish pay cut IS harsh, and it WILL cause problems for all kinds of people, but a situation in which firefighters and ambulance workers are going on strike is both dangerous and iresponsible. While the defecit problem may be that of the Government of each individual country, can we not also see how this unrestrained spending has been a feature of our economic life for some time now, in our own individual households? How many people across the EU are suffering because they haveoverspent on credit cards? How many people take expensive holidays or buy luxury electronics equiptment that they cannot afford because they have been conditioned and encouraged by credit companies the world over that it is their RIGHT to have those things? These personal and international debt crises are too similar to avoid comparison, and while measures should have been taken earlier to prevent the need for what is now happening, they weren’t. There is nothing we can do about that. By all means, we should air our grievances now and demonstrate our anger at the polling booths in elections, but when vital services begin to strike, nothing helpful can be achieved. I feel badly for the Spanish and Greek people who will have to deal with undeniably huge reductions in salaries, investment and pensions, but I really do believe that the next few years of thrift will set us on a better path for the future.

Of course, not everyone lives beyond their means, and the austerity packages will mean that there is a hard slog ahead for everyone in order to put things right. This is the reason why many German people are furious at the measures that are going to be taken to reduce their national debt. Germany was one of the first European countries to emerge from recession, and while I have been living in the country I have seen the pride of those who never stopped trying to save and work hard as their country led the way for the rest of Europe. The bailout plans for Greece were seen largely as unfair; a punishment for economic sense. Now, the plans laid out for massive savings by Angela Merkel’s coalition government have caused even more outspoken anger. Ulrich Schneider of the social justice organisation Paritätische Wohlfahrtsverband said that the package showed “unbelievable cold-heartedness”, as it would hit the poorest citizens, especially young single mothers, the hardest. Merkel explained the cuts by emphasising Germany’s potential to be a great role model for those countries that have larger debt problems, and to demonstrate that borrowing on a large scale in not necessary in order to successfully run a country. This idea worked when Germany came out of recession, so why not now in reducing debts? It is a nice idea, but what about those unemployed people who cannot get a job because of the very financial crisis we are trying to mend? They will have less money than ever, and no chance of employment. Unlike Spain, where the main issue is pay cuts for those lucky few who are still in their jobs, the German plan targets the weakest, and is undeniably unfair. By all means, focus on removing people who do not need it from the benefit system, postpone the building of the Stadtschloss palace in Berlin, and tax nuclear power, but heavily cutting child benefits to people on a single wage? Somehow it just seems to me that this reaction is too much.

Germany is not in crisis in the same way as Spain, Greece, the UK or Ireland. So why are the cuts some of the most significant in Europe?

C xx

1 comment:

  1. After the re-unification of Germany, West Germany pumped huge amounts of money into the former East: Although Germany's defecit is 'only' 3.1% their level of National Debt is very high: around 80%. In this sense, they have to be just as prudent as the rest of Europe. But if they were not prudent, who would guarantee the Euro and hence the entire EC? (Not to say that cutting benefits for single mothers is correct.)