Austerity explained: a pocket guide to the EU crisis

by ROAR Collective on December 17, 2012

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By blaming the crisis on public spending, politicians’ and bankers’ only solution was to impose austerity. This has predictably worsened the debt crisis.

Excerpt via the Transnational Institute in Amsterdam.

“We are punishing the innocent through austerity, and we are rewarding the guilty because the banks are continuing to receive huge privileges and subsidies from our governments. That is why we must defeat this austerity treaty, and all the measures that come with it unless we want Europe to be retrograded to, shall we say, the 19th century.”

Susan George, President of the Board of the Transnational Institute, author of Whose Crisis, Whose Future?

Austerity measures have never worked, and have led growth to collapse across the EU. Greece witnessed its battered economy shrinking by 6.2% in the second quarter of 2012, and is forecast to enter its sixth straight year of recession in 2013. Austerity means less national income from taxation, reducing governments’ capacity to pay back spiraling debts, leading to even higher debts.

Even the International Monetary Fund (IMF) has warned against austerity measures during recessions, saying they will cost the UK an extra £76bn (€94bn) by 2015. Additionally, speculators have encouraged doubts about certain countries’ abilities to pay, causing rates of interest to soar for countries like Greece and Portugal, making their debts completely unaffordable.

“If you diet when you are sick, it’s quite probable you’ll get a lot sicker so it’s not a good idea.” Nicoletta Batini, one of the authors of the IMF report, on austerity during recessions

Download the full EU Crisis Pocket Guide via the Transnational Institute.

{ 2 comments… read them below or add one }

Jerome Roos December 17, 2012 at 19:47

I urge everyone to read through the above pocket guide, which provides an excellent break-down of the real reasons and fundamental injustices behind the European debt crisis. The pocket guide is an important example of the commendable work the people at the Transnational Institute have been doing over the decades to resist the cultural hegemony of neoliberal ideology and the structural reality of corporate globalization.

On a more personal note, however, I feel that the solutions proposed at the end of the report are perhaps a bit reformist and unlikely to be very popular with the movement itself, which has largely abstained from forming explicit demands upon the political class. Furthermore, I believe these proposals are unlikely to be very successful without a wholesale abolition of interest-bearing private lending, i.e. a full-on nationalization of the banking system and a restructuring of all private banks into democratically-run and 100% communally-owned cooperatives or credit unions.

Most critics would counter that such revolutionary change is blatantly impossible, and they would probably be right, but I’m afraid that the reforms proposed in the pocket guide are equally impossible as long as private financiers maintain control over the money supply — and thereby retain the principal source of their structural power over government. Either way, this is just my own opinion, one that I am arriving at through my own research on the history of financial crises and one that I would be happy to discuss with our readers and the people at the TNI in further detail.

For now, I urge everyone to read the pocket guide, to form their own opinion, and to contribute to the transnational conversation on how to emerge out of this crisis. Do we want to save the present system by “putting finance back under public control” — or as Keynes put it, to pursue the “euthanasia of the financier” — or do we wish to pursue a more radical and revolutionary break with the fundamental logic behind private lending at interest in the first place, thereby undercutting the very roots of private control over the money supply, the political system, and social life?

Share your thoughts!

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dave December 18, 2012 at 22:28

“A bit reformist,” Jerome? That said I disagree with you that these reforms are impossible [and that revolutionary change is also]. The Left has occupied itself with civil rights issues for far too long. Not that these are unworthy of our attention, but whether Chavez gets to build his superhighway thru indigenous territory or not is not going to advance the cause. We should pursue a course which will weaken capitalism and to help us survive overcome the reaction that is sure to follow. This to me is the far wiser strategy, and these reforms do corral capital a bit, inhibit its ability to strike at us directly. You are, of course, correct that it isn’t enough, but a good start I think.

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