EU austerity critic’s views gain credence | Financial Times
László Andor the European Union commissioner for social affairs carefully measures his words as he criticises the effectiveness of austerity in resolving the Euro crisis, but in an Irish context this is diametrically the opposite of what those in Labour, Fine Gael and Fianna Fail are arguing (and its stunning that in this they even disagree with Rajoy). Nice to know that the only people turning the screws on the Irish people are our home grown politicans – you have to ask why?
But the austerity versus growth debate has forced its way into the political discourse. In France François Hollande, the Socialist presidential candidate, wants to challenge the fiscal pact while Denmark’s Helle Thorning-Schmidt, prime minister, has called for targeted stimulus. The Dutch coalition is split over how to meet EU budget targets, while Spain has announced it will flout those targets, to Brussels’ great frustration.
Mr Andor says part of Europe’s problem stems not just from the high wages, and ensuing lack of competitiveness, of Greek or Spanish workers. The too-low wages of German workers has depressed demand, he argues.
“There is a European interest that, in countries where there can be wage increases, there have to be wage increases,” he says.
Having worked for the European Bank for Reconstruction and Development Andor ‘notes that in the developing world, short-term International Monetary Fund bail-out loans are accompanied by long-term World Bank adjustment programmes, giving countries time to get their fiscal house in order. No such policy exists for eurozone countries’.
“It’s very, very ironic that, in a third-world context, this approach to have short-term funding and also long-term support for structural adjustment was provided, while inside the European Union it was not the first idea to have both,” he says. What is needed, he argues, is a Marshall plan: project financing by the European Investment Bank, more public-backed direct investment and a long-term plan to improve competitiveness.
Some European policymakers have begun making similar noises around the need for growth initiatives. But after months of pro-austerity rhetoric dominating the corridors of Brussels, any change will almost certainly be slower than Mr Andor would like.
“Intellectually, there’s been clearly a strong bias for an approach that fiscal consolidation, as such, alone will do the magic,” he says. “[But] additional policies can deliver more and better.”
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