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The Progressive

Austerity is Killing Europe

The austerity fetish of those making economic decisions is killing Europe’s economy.

The last few days have provided further proof.

“Spain officially slipped back into recession for the second time in three years Monday, after following the German remedy of deep retrenchment in public outlays, joining Italy, Belgium, the Netherlands and the Czech Republic,” the New York Times reported this week.

And more bad news has followed.

“Britain slid back into recession in the first quarter of the year, according to official figures released Wednesday, undercutting the government's argument that its austerity program was working,” says today’s Times.

But those in charge seem to be eternally clueless.

“We must persevere,” said Mario Draghi, president of the European Central Bank.

Draghi’s obliviousness becomes more understandable when you look at his background. From 2002 to 2005, Draghi was managing director and European vice president of Goldman Sachs. His outlook represents that of a hard-hearted investment banker, more interested in listening to the concerns of the financial sector than of the people. Goldman Sachs has been a master of putting such folks in charge of the global economic system.

‘They’re simply the best at building political networks, and that has earned them the name ‘Government Sachs,’ ” Marc Roche, author of a book on the firm, explained to the New Internationalist magazine. “In Europe they stay clear of ex-politicians; instead they go for ex-European Commissioners and former central bankers. These work as door openers. They help the bank to get access to those in power, and they show them how the EU works.”

Ironically, this very same Goldman Sachs colluded a few years ago with the Greek government to hide the true extent of its debt.


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Calvin Trillin asked in The Nation:

In all the world—across the sea
Or in the tropics—could there be
One closed-door shady deal that lacks
Conspirators from Goldman Sachs?

But instead of Goldman Sachs, it’s Greek citizens who are getting punched in the stomach.

“Greece is heading for stagnation, but even that will look desirable compared with the hell the country will face in 2012-13,” University of London Professor (and Progressive contributor) Costas Lapavitsas writes in The Guardian. “Amid an unprecedented depression, the government is aiming for large primary budget surpluses, and there will be substantial cuts in investment and consumption. The prospects for economy and society are catastrophic.”

Indeed, the outlook for the whole of Europe is dire due to an appallingly misguided economic strategy.

“This represents a stunning failure of policy,” Nobel laureate Paul Krugman wrote a few months ago. “And it's a failure, in particular, of the austerity doctrine that has dominated elite policy discussion both in Europe and, to a large extent, in the United States for the past two years.”

There are ways out of this mess. Expansionary spending modeled on the American New Deal is one route. And an exit from the Eurozone for individual countries (such as Greece) is another.

There are indications of change. French President Nicholas Sarkozy is likely headed for impending defeat, with his replacement, Francois Hollande, signaling a possible course correction. And people are rising up all over Europe.

European policymakers need to get rid of their ruinous ideas—now.

Amitabh Pal

Amitabh Pal

Amitabh Pal is managing editor of The Progressive. He has interviewed the Dalai Lama, Mikhail Gorbachev, Jimmy Carter and John Kenneth Galbraith for the magazine.

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