August 17, 2012
As the European holiday season draws to a close, I suspect that many EU leaders are loath to return to work. A lack of appetite, given the current economic context, would be perfectly justified.
Leading economists on both sides of the Atlantic have noticed that neither austerity measures (the EU’s case) nor monetarist remedies (the USA’s quantitative easings) could reignite economic growth. Meanwhile, both austerity fatigue in southern countries and rescue fatigue (The Economist) in northern Europe are rising to alarming levels.
After three years of austerity, the Greek economy is about to clock up another year of negative growth. None of the country’s prior engagements have been fulfilled, with the latest pledges of the Nea Demokratia government looking more like an exercise in PR, meant to delay the inevitable while securing additional EU-IMF loans.
To be sure, austerity coupled with the privatisation of state assets (such as the national railways) is the wrong answer to Greece’s agony. State companies could stop hemorrhaging money simply by appointing professional management teams to improve their economic performance. The biggest problem facing any Greek government lies in an inability to collect taxes from businesses and well-off citizens. In 2010, former Prime Minister George Papandreou stated that a few thousand identifiable individuals owed the state around 30 billion euros in back taxes. One year later, his Finance Minister announced that only about 1 billion euros were recovered from that source. With business operators refusing to hand over even the VAT they collect from tourists, let alone profit tax, the health of Greece’s public finances has no real chance of improving any time soon.
Geoeconomists have until recently believed that the European Union’s position was going to be challenged by equally powerful actors, like China or the United States. Alas, its economic pre-eminence is sadly being destroyed by member countries from its periphery that simply refuse to play by EU rules, or that are incapable of improving their economic performance.
Thus, the public debt crisis has now spread to Spain and is threatening to engulf Italy, as well. Worse still, bailing out these two countries could prove mission impossible, as the resentment of northern European taxpayers is on the rise. The Rajoy government would much prefer to have Spanish banks rescued without its own involvement. In truth, ailing banks should be nationalised rather than bailed out, but in many parts of Europe neoliberal ideology still seems to beat economic common sense.
The latter is the reason why neoliberals have so far given François Hollande a frosty reception. Their secret hope is that the new French President could be engineered into the mould of the New Left. The political legacy of the Clinton- Schroeder – Blair troika is, however, an ugly one:
By 1999, the USA witnessed the birth of a new underclass, the working poor, as chronicled by Business Week at the time. Similar labour reforms, benefitting Big Business alone, were undertaken by Gerhard Schroeder in 2004. As a result, Germany can today boast a few million workers who live under the poverty threshold, earning around 2 euros an hour… To help Big Business increase profits even further, the Clinton Administration deregulated financial markets, thus making the 2007-2008 financial crisis possible.
Whilst the neoliberal era is reaching its logical end, European politicians are duty-bound to make the transition to fully state-led capitalist systems. With its long history of dirigisme and a well-trained managerial class, France is eminently well-positioned to lead Europe into such a direction. Thus, the kind of selective nationalisation policies undertaken – perhaps prematurely – by the Miterrand government in the 1980’s look increasingly pragmatic and necessary today, when employment and growth, not rising profits, are key to economic survival.Florian Pantazi