Until recently, Brussels has supported primarily frontload austerity measures. When President Hoover tried similar policies in 1930s America, a severe recession morphed into a devastating Great Depression. Is Europe following in the footprints?
On Monday (11 March), the President of the European Commission Jose Manuel Barroso, urged the EU leaders to stay the course on debt reduction and economic overhauls.
Fascism had its roots in Europe, during the 1920s and 1930s, in massive economic failures in which the financial elites failed to recognize the political consequences of unemployment. While history may not repeat itself so neatly, the emergence of new political parties speaking for the unemployed and the newly poor could lead to governments who enclose their economies from the world and manage their performance through directive and manipulation.
The European Central Bank on Thursday left its benchmark interest rate at a historic low of 0.75 percent, after President Mario Draghi insisted that the political gridlock in Italy had little bearing to the region’s overall financial stability.
While Europe’s leaders shy away from the word, the reality is that much of the European Union is in depression. Indeed, it will now take a decade or more to recover from the losses incurred by misguided austerity policies – a process that may eventually force Europe to let the euro die in order to save itself.
NEW YORK – The outcome of the Italian elections should send a clear message to Europe’s leaders: the austerity policies that they have pursued are being rejected by voters.
The European Union has failed to seal a deal on the Basel bank rules, reported Bloomberg on Wednesday, after members disagreed on how far to go in curbing bankers’ bonuses, with negotiations to continue next week.
Despite rhetoric last week that there had a “clear majority” supporting caps on bankers’ pay, negotiations broke down due to stiff opposition from Britain, home to the region’s financial capital.
The European Central Bank has been advised to hire around 2,000 additional bank supervision staff, if it wishes to properly fulfil its new role as the bloc’s top banking watchdog, reported the Financial Times on Monday.
The recommendation was reportedly based on a consultancy study, submitted to ECB President Mario Draghi and the ECB executive board last month, that called on Frankfurt to rapidly expand its resources and clout in order to protect its own reputation.
British Prime Minister David Cameron announced on Wednesday that he will offer British citizens a vote on whether to stay in the European Union – provided he wins a second term – adding that while Britain did not want to retreat from the union, public disillusionment with the European project was at an “all-time high”.
The European Union should not be blamed for the tough austerity policies adopted by its member nations, said European Commission President Jose Manuel Barroso on Thursday, describing the links between the EU and fiscal consolidation as a “myth”, while expressing sympathy for those who may have suffered under slower economic growth.
For close to three years, the primary focus of European leaders has been to solve the region’s banking and sovereign debt crisis, which have caused a serious weakening of the economy and created massive unemployment in some countries. The same leaders however faces a larger problem in 2013: how to manage the social unrest across the continent as a direct consequence to the [mis]handling of the economic crisis.
The tail risks of a Greek exit from the eurozone or a massive loss of market access in Italy and Spain have been reduced for 2013. But the fundamental crisis of the eurozone has not been resolved, and another year of muddling through could revive these risks in a more virulent form in 2014 and beyond.
