Posted from London – Coming to Europe one gets the impression that for all the reshuffling of heads of government and promises from other key heads of governments to solve the economic crisis, Europe remains in disarray and the future remains uncertain. Markets plunged, Italian and Spanish bonds’ interest rates rose to historic levels, and there is no consensus amongst the Euro zone governments on a long-term systemic solution. Indeed their policies seem designed to depress their economies and exacerbate recovery.
Among the many uncertainties is whether the new Greek and Italiangovernments will be permitted to carry out the needed reforms in such a way that they do not lead to further depression of their economies. Things do not look good at the moment. Our TV screen was showing a pompous Berlusconi after his fall indicating that he would stay in politics, implying he may come back. Just what Europe needs at this moment of deep crisis for his nation. At the heart of the European economic crisis is the total inability of the governments to recognize that austerity policies are counterproductive to solving both the debt problem and fixing the ever higher unemployment and stagnant growth.
German Chancellor Angela Merkel’s odd stance has been to both stand against giving the power to the European Central Bank to act as a lender of last resort to governments in distress, while at the same time she called for Europe to build a stronger “political union” to support the Euro. Confusion over German intentions thus remains. In the end, much of the blame or much of the praise will rest with Merkel and Germany depending on whether the crisis is solved or Europe falls into even greater disarray as it continues its policies of austerity.
Likewise for France’s President Nicolas Sarkozy, whose poll standing has plummeted. Like other nations, France faces serious debt and growth problems itself and seems for the moment immobilized by the political forces within the French society and government and anger both from the right and the left. The French economy just grew in the third quarter at the annual rate of 0.4%, while Germany the so-called “strong economy” grew at just 0.5% and the whole Euro zone grew at just 0.2%. So much for the results of “slash and cut” as a conservative policy for growth.
Prime Minister Cameron in his speech at the City of London’s Lord Mayor’s Banquet, focused on foreign policy especially the economic/financial crisis including the EURO Zone debt issue. The problem with the speech is the lack of acknowledgment of how disastrous his own austerity policy has been for Great Britain and especially for the middle class and the poor. The background of his speech was not pretty, either at home or in Europe.
Cameron tried to separate himself from the generation of UK leaders before him of the post WWII generation; his youth influence was in the post 1989 fall of the Iron Curtain. His focus seemed narrow, with self-serving generalizations, and it showed no recognition of the crisis being experienced by his people. He made disparaging remarks about the EU while saying the UK would not withdraw from the EU and wanted to influence it by withdrawing some of its powers. Confusing and unconstructive would be a fair assessment.
As noted, coincidently, at about the time of his speech in the City (London’s “Wall Street”) two government leaders, Cameron and Bloomberg of New York representing the rich, used police force to remove protesters of the “Occupy Wall Street” and “Occupy the City” (outside of St. Paul’s), showing again that the 1% are having their way, and that free speech and the protests of the 99% are being trampled on. None of this will solve the fundamental problems of either side of the Atlantic. As economic conditions get worse one wonders what the impact will be and whether people will feel even stronger that their voice is not being heard.
The resulting instability, loss of productivity, and ever higher unemployment will undermine the capacity of Europe and America to act effectively to deal with the host of challenges we jointly face in an increasingly dangerous and risky world.
More on these events and trends and their implications in the coming days. We welcome your comments.
By Harry C. Blaney III.