EU Leaders to Rethink Austerity Strategy
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The European Union summit opened on Thursday where leaders will try to find a difficult balance between fiscal tightening and growth, as thousands of anti-austerity protesters took to the streets yesterday demanding an end to austerity cuts in response to the region’s worsening socioeconomic crisis.
European leaders gathered in Brussels yesterday, for once under little financial market pressure, with differences over austerity and how best to tackle the social costs of the debt crisis set to dominate.
The European Union summit opened on Thursday where leaders will try to find a difficult balance between fiscal tightening and growth, as thousands of anti-austerity protesters took to the streets yesterday demanding an end to austerity cuts in response to the region’s worsening socioeconomic crisis.
European leaders gathered in Brussels yesterday, for once under little financial market pressure, with differences over austerity and how best to tackle the social costs of the debt crisis set to dominate.
The two-day summit will give EU leaders a chance to discuss budget policies, with signs that France, Spain and Portugal could be given more time to meet their deficit goals as long as they maintain a debt-cutting trend.
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Budget cuts are at the centre of the eurozone’s strategy to overcome a three-year public debt crisis but they are also blamed for a vicious cycle where governments cut back, companies lay off staff, Europeans buy less and young people have no little hope of finding a job.
European Commission President Jose Manuel Barroso admitted that while the EU had made some progress in reform and recovery, the socioeconomic situation in some countries had reached a breaking point.
“Indebtedness of the public and private sectors has been reduced in a number of member states. Exports are increasing in several countries which had large trade deficits before. And this is certainly good news,” he said. “But, as I said earlier, the reality is that at the same time, this may co-exist with still worrying figures in terms of growth and, namely, on unemployment.”
Leading economists say the greatest threat to the survival of the eurozone now is now a social implosion rather than market-driven factors such as the record high borrowing costs seen in 2010 – 2012.
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Much of the debt problem has been dealt with by the European Central Bank’s pledge to do “whatever it takes” to defend the currency, bringing bond yields down. EU leaders are now working out how to tackle the social repercussions.
Speaking as he arrived at the summit, Greek Prime Minister Antonio Samaras said growth is now the “number one problem” in Europe, “because lack of growth creates unemployment.”
“In Greece this is even more severe because we suffer from the highest unemployment rate in Europe. So we realise how important the meeting is today,” he said.
[quote] Unemployment has soared over the past three years in Greece, which was forced by its lenders to implement drastic austerity cuts, with a current jobless rate of around 27 percent. Youth unemployment, however, stands at a staggering 60 percent. [/quote]Ahead of the meetings, member states had agreed on an “appropriate mix of expenditures and revenue measures” to be pursued, as well as “short-term targeted measures to boost growth and support job-creation.”
Leaders will spend the next two-days redefining the balance between austerity and growth but there are hopes of greater leeway for stimulus spending. Germany, the EU’s strongest economy, has long taken a hard line on austerity but Chancellor Angela Merkel said yesterday that youth unemployment should be the focus of summit.
According to Merkel, the funds to reduce youth unemployment across the EU were already in place, but they need to be earmarked better. “The money is there and now the money must go to people so that young people in Europe can get jobs,” the chancellor said.
Amid heavy security, the summit coincided with an anti-austerity rally nearby the meetings that organisers said drew 15,000 demonstrators. A statement from the European Trade Union Confederation, which organised the rally, urged a “change of direction.”
“Austerity is not working,” said the confederation in a statement. “It is driving the economy into recession and forcing the most vulnerable citizens into poverty.”
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