Rising Backlash Against EU Austerity (6/6)     Print Email

As the eurozone debt crisis mounts and spreads, the austerity policies put in place by the worst-hit European countries are taking a political toll that could limit leaders’ decisions in their ultimate choices about Europe’s future.

Those choices have become stark. One path involves more austerity, more inter-European help and more EU financial integration. The alternative is an inevitable onset of defaults by some eurozone governments and at least partial dissolution of the union. This fork in the EU road was laid out clearly this week by the Financial Times’ Martin Wolf, who concluded with this question: “How will the politics now play out? I truly have no idea. I wonder whether anybody does?”

What people do know is that, increasingly, the political cost of austerity policies is taking a heavy toll. Already, governments are falling – as they have in Ireland and Portugal and now seem set to do in Spain, where the Socialists lost heavily last month in local elections throughout the country.

Across Europe, there are signs of a seismic political shift (usually to the right, but also within political parties) favoring movements that are skeptical or outright hostile about more national sacrifices for EU solidarity.

In elections on June 5 in Portugal, voters followed a recent trend of rightward movement in Europe, providing gains for the conservative Social Democrats (PSD) and unseating the Socialist-led government responsible for enacting an austerity program and accepting a $114 billion bailout deemed necessary to prevent default. The PSD has signaled its intentions to honor the terms of the bailout agreement – without so far signaling any new tactics in handling the challenge.

As the political clock ticks against continuing austerity, there are increasingly visible movements of backlash. In Spain, the ruling Socialist government, which has championed austerity, suffered heavy electoral reversals in local elections last month. A loss had been expected, but not such severe defeats. Beyond the ballot box, protest movements have appeared in the streets of Spanish cities, notably a big, well-publicized open-ended sit-in in downtown Madrid.

Prime Minister Jose-Luis Zapatero told voters that his austerity plan had spared Spain from the need for a bail-out of the kind taken by Greece, Ireland and Portugal. But voters – apparently conscious of  ongoing Spanish problems, including the 45 percent unemployment rate among youth under 30 – repudiated Socialist candidates, even in some traditional center-left strongholds.

Even at the other end of Europe, in Slovenia, a relatively prosperous little neighbor of Austria, voters have refused massively to raise the retirement age from 62 to 65. In a referendum on June 5, over 70 percent of voters rejected the proposal. Slovene Prime Minister Borut Pahor had stressed the importance of a “yes” vote for Slovenia to “remain the master of its own destiny”, warning that a “no” vote would take the country one step closer to losing control over its fiscal health.

Politics are also making things worse in Greece, which is falling behind on its own recovery plan. Now the Greek government has failed to agree on the terms of a new austerity package that is required under its bail-out terms, and the International Monetary Fund is now threatening to withhold fresh help. That funding (12 billion euros) will undoubtedly be made up by the EU. But Greece will still need a second bail-out (of between 30 and 65 billon euros) – and, for that, both the EU and the IMF will require proof that Athens is implementing tougher reforms. But austerity seems to be getting harder to enforce. After their stormy debates this week Greek parliamentarians had to be ushered out the back door of the building to escape a mob of protestors out front in the city’s main square. At the peak of negotiations on a new bail-out round on June 5, some seventy thousand Greek protestors – who call themselves the “indignants” – demonstrated against new austerity measures, notably cuts in public sector jobs. (Over ten percent of the Greek workforce is employed by the government.) So far, Socialist Prime Minister George Papandreou has vowed to press ahead with accelerating reforms, despite the threat of defections in his own party’s ranks. If reforms stall, Greece risks losing financial help from its EU-IMF partners, opening the way to a default.

In a bid to reduce its debt load, Greece has announced a plan to sell off 50 billion euros worth of state-owned assets over the next three years. But many analysts doubt that the sale will bring in that much money. Distrust of the Greek authorities’ performance surfaced in a suggestion by the Netherlands and Luxemburg that Greece entrust the privatization process to an “international agency” (a plan with similarities to the way Germany handled the sell-off of the state assets it acquired when assimilating East Germany). This controversial idea – which the European Commission opposes as an infringement of Greek sovereignty – has incited vehement protest among Greeks.

Indeed, Greek voters’ discontent toward political leaders has reached a new peak. A recent poll by the Greek newspaper To Vima reveals Greeks are more and more hostile to their democracy, with 30 percent of respondents asking for a government of “experts and technocrats” and 22.7 percent saying that they prefer “a powerful leader whose actions would not be hindered by Parliament” – in other words, a dictatorial-style of government.  Polls show only single-digit support for mainstream conservatives or socialists.

More broadly across Europe, governments are trying to maintain the idea that austerity can eventually produce an economic turnaround. President Barack Obama stressed this theme on his visit to Ireland in late May, praising the Irish for their acceptance of austerity in striving to climb out of their debt crisis. “I know it’s a hard road, but it’s one that the Irish people are more than up to the task in achieving,” he said – implicitly holding up the Irish as an example for other debt-burdened nations in Europe.

The markets seem unconvinced that austerity can succeed in saving Ireland or other peripheral European economies from default. On the day Obama spoke, rumors spread that the debt contagion may be spreading beyond Spain to touch Italy and also Belgium. All of these countries have governments that are in trouble: Belgium, in fact, has been unable to put together a government for nearly a year. Even in Britain, where the economy seems to be recovering, there have been unusually strong protests against cuts to health care – and even student riots in London against the conservative government’s  steep hikes in tuition in state universities.

The case against austerity is not just a populist protest: it is supported by some economists, who argue that the budget cuts are making it harder to create jobs and generate growth – with the result that Spain, for example, risks having a “lost generation.”  A leading advocate of this view, the Nobel laureate U.S. economist Paul Krugman, challenges the idea that austerity “will somehow make things better instead of worse” in the face of mass unemployment. Krugman says that this is tantamount to believing in the “confidence fairy” – a magic creature who would restore consumption and hiring and growth. So far, Krugman says, this “fairy” has not shown up or worked its spell. So Spain remains stranded – with no recovery in sight for its main economic drivers, tourism and construction.

Despite the level of frustration, Spanish demonstrations have not turned violent: protest leaders stress the need for non-violence, apparently inspired by the successful popular uprisings in Egypt and Tunisia. Their placards have slogans such as “From Tahrir to Madrid to the World – World Revolution” or “Real Democracy Now.” Like the protesters in the Arab spring, the Spanish indignados seem motivated by a feeling of “anger, lack of opportunities, and the sense that they’ve been deprived of their future.”

Beyond Spain, the social unrest in response to austerity policies seems to be a trend all over Europe. Finland’s political landscape has shifted strongly to the right with recent major electoral victories for the eurosceptic True Finns party, which opposes any bail-outs in the name of European solidarity. Germany’s Chancellor Angela Merkel has had problems selling the idea of such bail-outs to her voters. Austria, the Netherlands – and even Denmark – have seen gains for anti-EU parties. Even in France, the chauvinistic National Front party under Marine Le Pen represents a rising current on the extreme right.

Of course, the impact of the current EU approach – austerity for debtors and loans from richer EU countries – has political costs in donor countries, too. If the trend continues, it could cause a steady demand for more bail-out funds. That would effectively turn the EU into “a transfer union” – and something “the European population is simply not ready for” according to Roland Berger, a well-known consultant in this field.

What all these developments have in common is a growing anti-government and anti-EU mood and attitude. (There are parallels with the Tea Party in the U.S., but the problem seems graver in a potentially fissiparous EU.) Commenting on these trends, the Financial Times warned recently that these movements may signal a “fundamental shift in the way politics is played.” Even short of an upheaval, the newspaper said, the phenomenon should at least send a strong signal to leaders that austerity and economic hardship carry a heavy price both in political and economic terms, and that there is a limit to how long citizens are willing to sacrifice without having visible progress.


Georgio Comninos is an Editorial Assistant for European Affairs