I will be the first to admit that my knowledge of economics is basic. Very. Basic. Beyond growth equals employment, investment equals growth, supply and demand, and the application of basic logic, I am off the map. I do also know, however, that the absence of the above equals unemployment, a fall in standards of living, and no money all round. Further, it seems to me that the entire purpose of maintaining an economy is to maintain and improve the standard of living for the public and in particular those living in (relative) poverty. The austerity measures imposed by the European Union on Spain and Greece are severe. Considering the severity of mismanagement and indeed fraudulent management they may be proportionate, and certainly in the long term austerity is necessary to correct the faults. However, the Greek and Spanish domestic economies have essentially been stripped and are preparing to rebuild from the ground up. Was the deprivation of more than 26% of the working and dependent population, of states totalling over 58.5 million people, necessary to maintain the solvency of the entire bloc?
The EU is demanding that Spain end the year with a 4.5 per cent of GDP budget deficit – cutting it from 7 per cent or more last year. That will require at least €30 billion ($38 billion) in savings via cuts or tax rises, that will further depress the economy.
”We do need to reduce the deficit, but the EU should be more flexible about the deadlines,” said Josep Comajuncosa, of the ESADE business school in Barcelona. ”Requiring a fast and drastic reduction of the public deficit could backfire. The deficit target should be pushed back one or two years” (Guardian via The Age, 26/1/13).
With more than a third of the Spanish budget wiped out by EU demands, roughly equivalent to the fraction usually devoted to healthcare, in addition to a 1.5% shrink of the economy forecast by the International Monetary Fund, other member states of the EU have seen a marked increase in the migration of Spanish citizens to their borders. Can the remainder of the EU keep up with their obligation to provide for these, from education to housing to healthcare, will the domestic crisis spread not only in terms of economics, but in terms of the availability of public services?
All to be speculated upon, but the theme seems consistent throughout: punitory.
So what is the aim in the swift annihilation and re-establishment of these previously developed western economies? As suggested in the quote above, why not extend the deadlines slightly, to allow individuals, families and businesses to maintain a low level of commercial activity as opposed to being forced to lock their doors? Surely the cost of re-establishing so many businesses is exponentially higher than the losses over the potentially longer period of stagnation. Further, surely the cost of social welfare for so many retrenched workers over the shorter period mandated by the EU is also much higher. Not only do these costs seem illogical, the EU is also shortening the period over which it receives interests on its loans to struggling states. From a purely investment point of view, this also seems to make little sense.
I certainly don’t make these points as an assertion that the economists at the European Commission’s disposal haven’t thought of them, nor that I am secretly an economic wunderkind. My point is that in light of these factors which seem reasonable to my untrained mind, it seems cruel and unusual to submit European citizens to such drastic changes in security of person, self-determination and access to basic economic rights.
The institution of the EU is not to blame for the situation the bloc finds itself in though.
It is not the fault of the authorities that a wrong has taken place, but by virtue of the social contract, or in this case Treaty of the European Union, they hold the responsibility to ensure both the punitive and corrective roles under the same contract. Another path though, and one which was almost considered when the discussion on allowing Greece to default on its loans, is that of insubordination by the states. The option is open to them to defy the terms set upon them by the EU. It may not be an easy path, but it is feasible id states maintain solidarity.
The point of explaining this in such terms is that it highlights the risk to the EU, as well as the power of the indebted states. It also outlines, more subjectively, the spectrum of severity and the framework of judgement available to the EU. So, what does the EU risk by imposing such harsh conditions on its members and their citizens? It risks not only its “ever closer union”, but a series of human rights issues, a further depressed economy and a long uphill battle to recover from self imposed decimation. All this must cause its residents and its members to ask: has the EU gone too far?