23 May 2012

Austerity medication – does it cure or kill the patient?

When I got to Madrid I turned on the TV and found a comedy programme. Angela Merkel – a man in drag, inevitably – was on the phone to a bearded chap who was doing everything he could to curry favour. That was Mariano Rajoy, the Spanish Prime Minister. The papers were full of how the two had gone on a boat trip together at the G8 meeting in Chicago – cue: endless jokes about loveboats.

Angela Merkel
German Chancellor Angela Merkel

Most Spaniards seem less enamoured of their German counterparts. A column in the centre-right newspaper El Mundo was all about the war. “Seventy years on, the nation of Beethoven and Goethe gets its pride from victory in the third world war, the war of economics and markets,” wrote Luis Maria Anson, a member of the Royal Spanish Academy. “Angela Merkel has more real power over Europe than Hitler.”

Bitter medicine

That made me jump. Invoking Hitler isn’t done lightly in Europe – at least it shouldn’t be. Yet even the economist at a Madrid brokerage whom I met was clear that when the austerity medicine the Spanish government is administering – partly at the behest of the Germans – has cured the disease, we may find that the patient is dead. Spaniards are suffering so acutely from unemployment and the cutbacks in social provision, it’s hard to see how they can get the economy moving again. The debt is being reduced, but the economy is frozen, and middle class Spaniards are falling into poverty.

That’s made clear by a coalition of Spanish non-governmental organisations who submitted a report to the UN  this week. They’ve pulled together statistics which show the social and human cost of austerity – families who can’t pay the mortgage and are not only thrown out on the street but remain in debt indefinitely, a growing gap between rich and poor and massive cuts in health and education.

The Committee calls on Spain to:
• review austerity measures to ensure protection of economic and social rights, particularly for the poor, children, women, the disabled and unemployed adults;
• adopt and implement a national strategy against poverty, including measures to mitigate the effects of the crisis;
• legislate to allow ¨dacion en pago¨ whereby mortgage defaulters satisfy outstanding debt by giving up their home, currently left to the discretion of the banks;
• express concern at reforms that deny access to public health services to irregular migrants and calls for budget cuts;
• ensure sustained and adequate investment in education and combat high school drop out rates which are more than twice the EU average; and
• urge the government to avoid any further backsliding in labour rights protection and strengthen efforts to reduce unemployment.

Students see bleak future

Last night I interviewed students demonstrating against education cuts. All said they would be looking for opportunities overseas – they saw no future in Spain. Some talked of going to Germany, others to Latin America or the UK. Spain is not Greece. There’s no talk of default or falling out of the euro, but the students and their teachers question why the government is spending money on bailing out the banks at the same time as implementing a 20 per cent cut in the education budget.

They also question whether these harsh austerity measures will benefit Germany in the long run. Of course, Spain and other countries that got deep into debt need to rebalance their economies, but if they don’t grow they will drag down the whole euro zone. “Maybe we’re going to hell,” said Irene Lozano, an independent Deputy in the Spanish Assembly. “But if we do, we’ll take Germany with us.”

Follow Lindsey Hilsum on Twitter: @lindseyhilsum

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6 reader comments

  1. Marianne says:

    A very thought-provoking if deeply depressing article. These young Spanish students moving overseas are effectively being dispossessed of their country, and they won’t receive equal status with indigenous populations abroad. If or when they return, Spain will no doubt be in the hands of multi-nationals with not the slightest interest in anything Spanish, unless it earns them loads of dosh. If economics is really a science (and if Karl Popper was wrong, afterall), can we have a more ‘scientific’ analysis of the true causes of these crises in Greece and Spain, please? When I hear Greece being compared with an un-employed teenager by a ‘senior economist’ I know that Karl Popper was absolutely right. Would she blame the earth for taking twelve months to orbit the sun, when the journey could be reduced to six months if the earth wasn’t so lazy?

  2. William Taylor says:

    Lindsey hits the nail on the haed. The ordinary people of Spain, Ireland, Greece and Italy are suffering due to reckless loans given by northern European banks, particularly Germany’s, but France’s and Britain’s also. The fact that domestic banks lost trillions is the cause of Europe’s problems, as the banks that gave the loans want full repayment. That is public money needed to run the state for the people and should not be given to greedy bankers. They should not not loaned to those who could not pay back. Why should a nation state take on private banks’ debts?! Where the loans not insured?! Germany has too much power in the EU and it is time the poorer European nations grouped together and renounce the policy of states paying for greedy speculators and private banks. Merkel is a bully as are the conservative German polity.

  3. Marianne says:

    So many commentators seem to assume that the euro is a doomed currency and an artificial construct that was never going to work. Well, the United States has suffered a very serious financial and economic crisis – largely attributable to corruption and malpractices on Wall Street. Nobody is proposing that the US should abolish the dollar and that individual states have their own currencies, or that the poorer, less productive states leave the United States unless they ‘pull their socks up’. Shouldn’t the EU leaders be looking a little more closely at how the US economic model works? The dollar is now an established currency. Its continued existence is never brought into question – nor is union of American states. The causes of Europe’s crises seem to have a very similar origin to that of the US and Britain – corrupt and incompetent financial and corporate practices on a huge scale over more than two decades. The matter of which currency was or is used is largely a red herring.

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