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Austerity: The History Of A Dangerous Idea
Canada has now been governed for some time by conservatives who allegedly care about deficits and debt, yet when the implosion of American banks dragged Canada into a recession, our government started spending far more, not less. Years later, we continue to spend into the red and our debt lurches ever higher. By contrast, even since the ascent of the Conservative Party in London, the U.K. has been biting a fiscal bullet. They have chosen to trim government spending in the hope of jump-starting future economic growth—in a word, austerity. According to Mark Blyth, this is a bad idea: “Austerity doesn’t work. Period.” Believing it only persists due to “epistemic arrogance and ideological insistence,” he sets out to trace the intellectual history of austerity, going back to its roots, from Adam Smith, David Hume and John Locke to more recent proponents like Joseph Schumpeter, Friedrich Hayek and current German leader Angela Merkel. Then Blyth gives us a decidedly discouraging historical tour of austerity in action, which among other things makes us feel sorry for Great Britain’s prospects.
Blyth, a professor at Brown University, is an unusually gifted communicator of complex economic ideas. But though he pens such colloquial sentences—“Iceland, in many ways, was Ireland on crack”—this book is most suitable for readers with at least an intermediate familiarity with macroeconomics. Blyth does not pause long to explain the importance of bond yields. Yet his book provides a rich background for understanding the policy options facing those who would solve the ongoing Euro-crisis. Blyth also revisits the momentous American decision to bail out its banks, which continues to prompt Republican murmurings about the necessity for belt-tightening. Insofar as the United States and Europe have a debt crisis, it is partly the result of a banking crisis. Bank bailouts created much of the debt that we hear so much hyperventilating about. As for puny Iceland, it chose to let its toxic banks go bust, and its economy is now doing rather well.
Blyth is too rigorous to be an ideologue. He thinks austerity measures have their place, but only under the right conditions. Now, apparently, is not such a time.
via Austerity: The History Of A Dangerous Idea – Bookmarked, Books – Macleans.ca.
The Irish bail-out programme: The meaning of exit
WHEN tapes of conversations between senior executives at the failed Anglo Irish Bank at the height of the financial crisis in 2008 were leaked in June, Irish credibility as a true penitent among the five bailed-out euro-zone countries took a knock. At last month’s European summit Angela Merkel, the German chancellor who calls the shots in the 17-state currency block, expressed her contempt for the bankers’ conduct, which included crass anti-German sentiment.
But any fears that this unwelcome reminder of past sins and sinners might upset Ireland’s path to exit from the rescue programme have been short-lived. This week’s review by the troika – the European Commission, the European Central Bank (ECB) and the IMF – concluded that Ireland should be able to leave on schedule by the end of 2013. That’s precisely three years after fiscal and banking woes forced the Irish to go cap in hand for €67 billion ($87 billion) of official loans from Europe and the IMF.
A punctual Irish exit has seemed likely for some time if only to show that the German-inspired programmes of austerity and structural reform can work. The worse things get in other bailed-out countries – Greece, Portugal, Cyprus and Spain (for its banks) – the more that Ireland is favoured. Thus Portugal’s recent political ructions, which has caused the planned inspection by the troika on July 15th to be postponed, have strengthened Ireland’s hand.
Moreover, Irish debt managers have deftly exploited chances to raise funds as Ireland’s fiscal credibility improved and its bond yields subsided. They have benefited along with the other crisis countries from the ECB’s commitment last September to make unlimited purchases of bonds in secondary markets under strict conditions – its “Outright Monetary Transactions” (OMT) programme, which has proved so successful a deterrent that it has not yet been used. Helped by the debt-management agency’s forays into the markets, the Irish government is now fully funded into early 2015.
That’s handy because on the economic front things haven’t been going so smoothly. Irish cheerleaders can no longer brag about their country being a bright spot in the recessionary gloom on the euro-zone southern and western periphery. In fact, GDP has shrunk for three consecutive quarters (the second half of last year and the first quarter of 2013) as exports have been hit first by a slowdown in global trade and secondly by the lapsing of patents on blockbuster drugs that have hurt pharmaceutical exports. The budget deficit remains high at 7.5% of GDP and public debt will reach 124% this year, a figure that underestimates the effective burden because a big chunk of Irish GDP is profits made by foreign multinationals which are lightly taxed.
The Irish government thus has good reasons to be nervous about having to fend for itself. That’s why Michael Noonan, the finance minister, is angling for a backstop to be available after the bail-out ends. But it is not just a credit line that the Irish are seeking: they want to be eligible for the ECB’s OMT programme.
That will be possible, however, only if the Irish apply to the European Stability Mechanism (ESM), the eurozone’s bail-out fund, for an “enhanced conditions” credit line. The Irish argue that there would be no need to comply with extra conditions, but whether the other euro-zone finance ministers who are on the board of the ESM will concur remains to be seen. Ireland may find that the best it can secure is a deal where it is still subject to intrusive monitoring.
If all goes to plan the Irish exit from its ignominious bail-out at the end of this year will be hailed as a big success. But the reality will be fuzzier. The official funding may end but the price of support remaining available if necessary is that Ireland will not secure full independence.
via The Irish bail-out programme: The meaning of exit | The Economist.
Merkel highlights failings in Irish data protection ahead of EU action
“We have great data protection laws in Germany but if Facebook is based in Ireland, then Irish law applies”
Chancellor Angela Merkel said yesterday the ongoing Snowden controversy made clear that EU members should force US companies to explain what happens to user data when it leaves European computer servers
The Government faces pressure from Germany this week to improve oversight of how Irish-based companies like Google and Facebook process data they collect on European users.
Chancellor Angela Merkel said yesterday the ongoing Snowden controversy made clear that EU members should force US companies to explain what happens to user data when it leaves European computer servers. She has ordered her interior and justice ministers to adopt a “strict position” on data protection in Brussels talks on Thursday and Friday of this week and to end a stand-off over new common EU data protection rules.
“We have great data protection laws in Germany but if Facebook is based in Ireland, then Irish law applies,” said Dr Merkel on public television last night. “We wish that companies make clear to us in Europe to whom they give their data. This will have to be part of a [European] data protection directive.”
This turns the spotlight on the Portlaoise-based Data Protection Commissioner (DPC) which has front-line responsibility for policing whether companies based in Ireland adhere to EU data protection rules.
In recent years the DPC has been flooded with complaints from citizens around Europe that Facebook and other technology companies are collating information in violation of EU law.
Austerity Today -Economic recovery ‘will take 20 years’
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Lenders Pressuring Greece Over Austerity Pledges Voice of America The lenders – Greece’s European neighbors, the European Central Bank and the International Monetary Fund – have been meeting with government officials in Athens. They are demanding that the government make progress on its austerity pledges ahead of … See all stories on this topic » |
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New Study Dispels Myths of European Austerity OpenMarket.org Cries throughout the media of “savage austerity” notwithstanding, only a handful of European countries have actually implemented austerity in the true sense of the term: reducing both public spending and taxation. On the other hand, most countries in … See all stories on this topic » |
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Portugal gov’t in peril as another minister quits TheNewsTribune.com Portugal’s government was in danger of collapse Tuesday after Foreign Minister Paulo Portas, the leader of the junior party in the center-right coalition government, resigned over the bailed-out country’s austerity policies. By BARRY HATTON; Associated … See all stories on this topic » |
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Rug buyers look for round rugs in austere times PRWire (press release) Rug buyers across Australia are looking to make their homes cosier as they hunker down for a period of relative economic austerity. That’s the view of the team at The Bespoke Rug Company (www.bespokerugs.com.au) Australia’s leading retailer of … See all stories on this topic » |
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Bailed-out Portugal’s finance minister resigns Fresno Bee Workers’ unions called a 24-hour general strike to protest the government’s austerity measures with public transport and government offices expected to be the worst-hit services. The banner reads in Portuguese: “The street is our. Nothing to lose”. See all stories on this topic » |
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The Tories must beware these feelings of irrational exuberance Telegraph.co.uk (blog) We have had enough of five years of austerity and doubt. All around there are signs that the economy is stirring, that the combination of low interest rates and high employment is beginning to encourage consumer activity. Even beyond the powerhouse of … See all stories on this topic » |
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There are few bright spots for them in last week’s spending review by George … Third Sector There are one or two other bright spots for the sector in the sixth year of austerity announced by George Osborne in last week’s spending review, which was in effect the opening salvo of the next general election campaign. The continuing expansion of … See all stories on this topic » |
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Portuguese Finance Minister’s Exit Elicits Few Gasps Wall Street Journal (blog) Yields on Portuguese government bonds ticked up a bit to 6.42% after the unexpected resignation of Mr. Gaspar–the architect of Portugal’s austerity plan–but volumes were low, and the news didn’t prompt predictions of outright default. Instead … See all stories on this topic » |
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Democratic Deficit Scolds Get Desperate and Weird New York Magazine Liberals may complain about austerity, but, they argue, “we haven’t had an austerity budget.” Cowan and Kessler’s evidence for this — that the federal government spent more, on average, during Obama’s first term than during George W. Bush’s second … See all stories on this topic » |
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Lapid: Deficit could cause collapse Globes Finance Minister: The austerity measures will stop Israel reaching the conditions in Europe with high unemployment. 2 July 13 12:42, Moshe Golan. Tweet. “The idea that we have people here whose lives are at risk because they are doing their jobs is … See all stories on this topic » |
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EU Rehn: New Portugal Finance Minister Must Maintain Tempo of Reform Wall Street Journal The former treasury secretary took the post after Vitor Gaspar, chief enforcer of austerity demands under Portugal’s EUR78 billion international bailout program, said Monday he was stepping down after two years in the job. Mr. Rehn praised Mr. Gaspar … See all stories on this topic » |
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The Strain in Spain Could Help Firefox OS Take Root TechNewsWorld Due to the extreme austerity measures in certain South American and European countries, “low-cost smartphones will be very appealing,” said Joshua Flood, a senior analyst at ABI Research. The ZTE Open — the first commercially available smartphone … See all stories on this topic » |
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Merkel opponent derides jobless summit as cynical ploy Reuters BERLIN (Reuters) – Angela Merkel’s summit on youth unemployment in Europe is an attempt to paper over the economic consequences of the austerity policies she championed in the region, a leading member of Germany’s opposition Social Democrats … See all stories on this topic » |
Portugal’s austerity government feels the pinch BBC News The resignation in quick succession of two of Portugal’s biggest political beasts has left many questioning whether the right-of-centre government which has enthusiastically embraced austeritymeasures can survive more than a few weeks, let alone months. See all stories on this topic » |
Twenty years of austerity ahead, says Sir Jeremy Heywood Telegraph.co.uk Sir Jeremy Heywood also suggested that the cuts made to public services to date were not sufficient and that austerity measures would have to continue for “at least” another four years. The comments from the Cabinet Secretary will have a sobering … See all stories on this topic » |
Austerity Blitz: Eurozone Notes From Beyond the Grave Truth-Out The criminal effects of the austerity blitz strategy that the European Union (EU) conceived of on Germany’s insistence as the answer to the global financial crisis when it hit Europe’s shores with the triggering of the Greek sovereign debt crisis have … See all stories on this topic » |
Portugal’s Budget Austerity May Do More Harm Than Good KTEP LAUREN FRAYER, BYLINE: Of all the bailed-out countries in Europe, Portugal has been the good student – taking the austerity medicine its lenders prescribe. Portuguese Finance Minister Vitor Gaspar took it even further – doubling budget cuts and tax hikes. See all stories on this topic » |
Public sector austerity drive ‘hitting women the hardest’ Gulf Times George Osborne’s revelation in his spending review that a further 144,000 jobs are to be slashed from the public sector means there is more pain to come for women, critics say. Data collated by the Guardian highlights the disproportionate blow to … See all stories on this topic » |
Lapid: Without Austerity Measures, Deficit Could ‘Bury’ Israel Algemeiner Most Popular. Recent Posts. The BioHug vest. Photo: BioHug.com. Israeli-Developed Vest Hugs People to Health · Yair Lapid, leader of the Yesh Atid party. Lapid: Without Austerity Measures, Deficit Could ‘Bury’ Israel · Amy Winehouse. Photo: wiki commons. See all stories on this topic » |
Portugal’s PM says he won’t quit despite resignations over austerity measures Fox News But the government’s future is hanging in the balance after the resignation earlier Tuesday of Foreign Minister Paulo Portas, the leader of the junior party in the governing center-right coalition, in protest against austerity measures. Passos Coelho … See all stories on this topic » |
Trade unions call for social investment Morning Star Online And he said the people of Northern Ireland were suffering the same fate at the hands of the austerity-mad Westminster government. “Austerity is now no more than a mantra without meaning. The intellectual underpinning for it has been discredited,” he … See all stories on this topic » |
Portugal’s finance minister resigns amid pressure for government to soften … Malaysia Sun Portugal’s finance minister resigns amid pressure for government to soften austerity | Malaysia Sun. Malaysia Sun. Issue 11/0183. Malaysia Sun · http://www.malaysiasun.com · Malaysia News · Southeast Asia News · Breaking International News · Asia … See all stories on this topic » |
Activists climb County Hall, Westminster in anti war, anti austerity protest Indymedia UK The newly formed Black Katz Kollektive has within the last hour occupied County Hall on the south side of Westminster Bridge facing the Houses of Parliament, with banners unfurled down the side of the building. Their message is simple: stop the war … See all stories on this topic » |
Portuguese government in peril as foreign minister, head of junior party in … The Republic Austerity is widely blamed for driving the jobless rate in Portugal to 17.6 percent and for what is forecast to be a third straight year of recession in 2013. Portugal needed a 78 billion euros ($102 billion) bailout two years ago after a decade of … See all stories on this topic » |
Portugal PM defiant despite another resignation Boston.com Gaspar, a non-political economist specially selected by Passos Coelho to push the austerity drive, said he lacked the political and public support for his ongoing program of cutting public sector pay and pensions and raising taxes. Portas, the leader … See all stories on this topic » |
Portuguese Finance Minister Gaspar resigns Channel News Asia Portuguese Finance Minister Vitor Gaspar, the architect of the country’s reforms under its EU-IMF bailout, resigned on Monday as the economy reels and social discontent mounts under the impact ofausterity measures. PHOTOS. File photo of Portuguese … See all stories on this topic » |
Miss. tax receipts approach $5 billion in FY2013 WJTV Top budget writers say they expect pressure from schools, universities and state agencies that saw budgets slashed during four years of austerity. Tax receipts have surged more strongly than jobs or Mississippi’s overall economy, leading to notes of … See all stories on this topic » |
Portuguese PM adamant he will not stand down Radio New Zealand Austerity measures are blamed for causing Portugal’s worst economic crisis since the 1970s. Portugal has been in recession for two years and the economy is expected to contract by 2.3% this year. Unemployment is over 17.5%. A general strike was held … See all stories on this topic » |
Portuguese Finance Minister Resigns New York Times MADRID — Portugal’s finance minister, Vítor Gaspar, unexpectedly resigned Monday amid a prolonged recession that citizens have attributed largely to austerity measures that he helped enforce in accordance with the demands of the country’s … See all stories on this topic » |
Concern over Portugal bailout Independent Online Lisbon – The resignation of the main architect of Portugal’s austerity policies has sparked concern over the country’s ability to complete its EU-IMF bailout programme. Analysts say the departure Monday of finance minister Vitor Gaspar has weakened a … See all stories on this topic » |
Portugal foreign minister steps down in second major ministerial resignation Deutsche Welle Former Treasury Secretary, Albuquerque was appointed on Monday following the shock resignation of Finance Minister Vitor Gaspar, the main architect of the austerity measures. ccp/kms (AFP, AP, dpa). Date 02.07.2013; Share Send Facebook Twitter … See all stories on this topic » |
Anglo Irish Banks -Most Recent Updates from home and Abroad
Banks treated Irish people with contempt, says O’Malley
Irish Times
“The contempt shown by Anglo Irish Bank for the Irish people and for their welfare and their public institutions was probably not very different from the attitude taken up by some of the other banks. We just do not have first-hand aural evidence of the …
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Merkel calls Anglo Irish Bank chatter damaging to democracy |
Deutsche Welle In Ireland, transcripts of telephone conversations between employees from 2008 at Anglo Irish Bankhave caused a massive outrage. In the tapes, the workers make fun of the government’s decision to guarantee bank liabilities at the height of the … See all stories on this topic » |
Anglo Irish tapes are only the tip of the iceberg when it comes to other banksIrishCentral |
Money trail
David Drumm carried out a number of personal financial moves that coincided with Anglo’s demise, writes investigative correspondent Conor Ryan read full article
The Anglo Tapes, The Guarantee And Ireland’s Economic Crisis
Probably the biggest economic story in Europe this week has been the release of recorded phone calls from 2008 between executives of the now-notorious Anglo Irish Bank. Anglo was a recklessly… read full article
Irish PM shocked by ‘vulgar’ Anglo Irish Bank tapes
New Straits Times
BRUSSELS : Irish Prime Minister Enda Kenny said Friday he was thunderstruck by leaked tapes at the centre of a scandal at the bailed-out Anglo Irish Bank which he said has tarnished Ireland’s reputation. But Kenny said after an EU summit in Brussels …
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Mocking Germans Adds Irish Insult to Banking Injury
Bloomberg
Irish politicians say jibes at Germans by some of the country’s former bankers undermine their case for securing help to cut the 64 billion-euro ($83 billion) bill for saving the financial system. John Bowe, a former executive at the now defunct Anglo …
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Anglo Irish Bank scandal ‘damages democracy’, Angela Merkel says
The Guardian
Angela Merkel has expressed “contempt” for the disgraced Anglo Irish Bank executives caught on tape mocking Germany’s involvement in the institution’s €30bn (£25.7bn) bailout. The German chancellor delivered a strong condemnation of the revelations, …
Businessweek
BRUSSELS (AP) — German Chancellor Angela Merkel on Friday blasted newly disclosed comments by former directors of Ireland’s most notorious bank, who mocked foreign depositors and conspired to conceal the true scale of their losses while winning a …
The Guardian
Speaking at the EU summit in Brussels, Enda Kenny, the Irish prime minister, gives his response to recordings of Anglo Irish Bank staff joking about a bailout deal and mocking Germany. His comments follow an accusation from the German chancellor …
Germany Has Created An Accidental Empire
Are we now living in a German Europe? In an interview with EUROPP editors Stuart A Brown and Chris Gilson, Ulrich Beck discusses German dominance of the European Union, the divisive effects of austerity policies, and the relevance of his concept of the ‘risk society’ to the current problems being experienced in the Eurozone.
How has Germany come to dominate the European Union?
Well it happened somehow by accident. Germany has actually created an ‘accidental empire’. There is no master plan; no intention to occupy Europe. It doesn’t have a military basis, so all the talk about a ‘Fourth Reich’ is misplaced. Rather it has an economic basis – it’s about economic power – and it’s interesting to see how in the anticipation of a European catastrophe, with fears that the Eurozone and maybe even the European Union might break down, the landscape of power in Europe has changed fundamentally.
First of all there’s a split between the Eurozone countries and the non-Eurozone countries. Suddenly for example the UK, which is only a member of the EU and not a member of the Eurozone, is losing its veto power. It’s a tragic comedy how the British Prime Minister is trying to tell us that he is still the one who is in charge of changing the European situation. The second split is that among the Eurozone countries there is an important division of power between the lender countries and the debtor countries. As a result Germany, the strongest economic country, has become the most powerful EU state.
Are austerity policies dividing Europe?
Indeed they are, in many ways. First of all we have a new line of division between northern European and southern European countries. Of course this is very evident, but the background from a sociological point of view is that we are experiencing the redistribution of risk from the banks, through the states, to the poor, the unemployed and the elderly. This is an amazing new inequality, but we are still thinking in national terms and trying to locate this redistribution of risk in terms of national categories.
At the same time there are two leading ideologies in relation to austerity policies. The first is pretty much based on what I call the ‘Merkiavelli’ model – by this I mean a combination of Niccolò Machiavelli and Angela Merkel. On a personal level, Merkel takes a long time to make decisions: she’s always waiting until some kind of consensus appears. But this kind of waiting makes the countries depending on Germany’s decision realise that actually Germany holds the power. This deliberate hesitation is quite an interesting strategy in terms of the way that Germany has taken over economically.
The second element is that Germany’s austerity policies are not based simply on pragmatism, but also underlying values. The German objection to countries spending more money than they have is a moral issue which, from a sociological point of view, ties in with the ‘Protestant Ethic’. It’s a perspective which has Martin Luther and Max Weber in the background. But this is not seen as a moral issue in Germany, instead it’s viewed as economic rationality. They don’t see it as a German way of resolving the crisis; they see it as if they are the teachers instructing southern European countries on how to manage their economies.
This creates another ideological split because the strategy doesn’t seem to be working so far and we see many forms of protest, of which Cyprus is the latest example. But on the other hand there is still a very important and powerful neo-liberal faction in Europe which continues to believe that austerity policies are the answer to the crisis.
Is the Eurozone crisis proof that we live in a risk society?
Yes, this is the way I see it. My idea of the risk society could easily be misunderstood because the term ‘risk’ actually signifies that we are in a situation to cope with uncertainty, but to me the risk society is a situation in which we are not able to cope with the uncertainty and consequences that we produce in society.
I make a distinction between ‘first modernity’ and our current situation. First modernity, which lasted from around the 18th century until perhaps the 1960s or 1970s, was a period where there was a great deal of space for experimentation and we had a lot of answers for the uncertainties that we produced: probability models, insurance mechanisms, and so on. But then because of the success of modernity we are now producing consequences for which we don’t have any answers, such as climate change and the financial crisis. The financial crisis is an example of the victory of a specific interpretation of modernity: neo-liberal modernity after the breakdown of the Communist system, which dictates that the market is the solution and that the more we increase the role of the market, the better. But now we see that this model is failing and we don’t have any answers.
We have to make a distinction between a risk society and a catastrophe society. A catastrophe society would be one in which the motto is ‘too late’: where we give in to the panic of desperation. A risk society in contrast is about the anticipation of future catastrophes in order to prevent them from happening. But because these potential catastrophes are not supposed to happen – the financial system could collapse, or nuclear technology could be a threat to the whole world – we don’t have the basis for experimentation. The rationality of calculating risk doesn’t work anymore. We are trying to anticipate something that is not supposed to happen, which is an entirely new situation.
Take Germany as an example. If we look at Angela Merkel, a few years ago she didn’t believe that Greece posed a major problem, or that she needed to engage with it as an issue. Yet now we are in a completely different situation because she has learned that if you look into the eyes of a potential catastrophe, suddenly new things become possible. Suddenly you think about new institutions, or about the fiscal compact, or about a banking union, because you anticipate a catastrophe which is not supposed to happen. This is a huge mobilising force, but it’s highly ambivalent because it can be used in different ways. It could be used to develop a new vision for Europe, or it could be used to justify leaving the European Union.
How should Europe solve its problems?
I would say that the first thing we have to think about is what the purpose of the European Union actually is. Is there any purpose? Why Europe and not the whole world? Why not do it alone in Germany, or the UK, or France?
I think there are four answers in this respect. First, the European Union is about enemies becoming neighbours. In the context of European history this actually constitutes something of a miracle. The second purpose of the European Union is that it can prevent countries from being lost in world politics. A post-European Britain, or a post-European Germany, is a lost Britain, and a lost Germany. Europe is part of what makes these countries important from a global perspective.
The third point is that we should not only think about a new Europe, we also have to think about how the European nations have to change. They are part of the process and I would say that Europe is about redefining the national interest in a European way. Europe is not an obstacle to national sovereignty; it is the necessary means to improve national sovereignty. Nationalism is now the enemy of the nation because only through the European Union can these countries have genuine sovereignty.
The fourth point is that European modernity, which has been distributed all over the world, is a suicidal project. It’s producing all kinds of basic problems, such as climate change and the financial crisis. It’s a bit like if a car company created a car without any brakes and it started to cause accidents: the company would take these cars back to redesign them and that’s exactly what Europe should do with modernity. Reinventing modernity could be a specific purpose for Europe.
Taken together these four points form what you could say is a grand narrative of Europe, but one basic issue is missing in the whole design. So far we’ve thought about things like institutions, law, and economics, but we haven’t asked what the European Union means for individuals. What do individuals gain from the European project? First of all I would say that, particularly in terms of the younger generation, more Europe is producing more freedom. It’s not only about the free movement of people across Europe; it’s also about opening up your own perspective and living in a space which is essentially grounded on law.
Second, European workers, but also students as well, are now confronted with the kind of existential uncertainty which needs an answer. Half of the best educated generation in Spanish and Greek history lack any future prospects. So what we need is a vision for a social Europe in the sense that the individual can see that there is not necessarily social security, but that there is less uncertainty. Finally we need to redefine democracy from the bottom up. We need to ask how an individual can become engaged with the European project. In that respect I have made a manifesto, along with Daniel Cohn-Bendit, called “We Are Europe”, arguing that we need a free year for everyone to do a project in another country with other Europeans in order to start a European civil society.
A more detailed discussion of the topics covered in this article is available in Ulrich Beck’s latest book, German Europe (Polity 2013). This interview was first published on EUROPP@LSE
Why Europe can’t just “fix” youth unemployment
Our problems are not due to a lack of innovative ideas; they are due to an excess of financial power concentrated in the hands of an elite of bankers.
For years already, the youth of Europe’s heavily indebted periphery has been facing mass unemployment. In Greece and Spain, a respective 59 and 56 percent of young people are now out of work, while youth unemployment in the EU as a whole currently stands at a troubling 24 percent, up from 22.5 percent last year. The “lucky” ones are those waiting tables with PhD degrees in their back pockets. Those who were forced to leave their families and friends behind to join the generational exodus to Germany or Angola don’t even show up in the statistics.
In recent weeks, European leaders somewhat belatedly seem to have become mightily interested in the issue. Italy’s new Prime Minister Enrico Letta called youth unemployment the most serious problem facing his country and called for an EU plan to “combat” it. German Chancellor Angela Merkel, flag-bearer of the European austerity movement, similarly considers youth unemployment to be “Europe’s biggest challenge.” Meanwhile, a new campaign by Big Think somewhat naively asks “what’s causing youth unemployment and what can fix it?”
Apart from the obvious hypocrisy of these concerns — coming from the lips of the same officials whose unrelenting insistence on austerity, neoliberal reforms and full debt repayment largely caused the unemployment crisis to begin with — this newfound sympathy for our generation’s plight hinges on a dangerous assumption that serves to ideologically re-construct youth unemployment as a “problem” that can somehow be “solved” with a magic fix or a continental master plan — without addressing the underlying causes of austerity, depression, and a fundamentally unsustainable debt load, let alone the internal contradictions of the eurozone and globalized financial capitalism more generally.
It should be clear to any intelligent person by now that youth unemployment is not a problem in the ordinary sense of the word; it is a symptom of a much more deep-seated disease that’s breaking down our society from within. Other symptoms include the rise of neo-Nazism and xenophobic violence in Greece; the wave of suicides across Southern Europe; the 400.000 families that have been evicted from their homes in Spain; the thousands of starving horses that have been abandoned by their owners in Ireland; the UK students who had their tuition fees tripled and now face the prospect of either dropping out, studying abroad, or accruing massive student debts; the eurozone record levels of mortgage debt held by Dutch households, etc., etc. — not to mention the thorough discrediting of democratic institutions and the massive riots that have rocked major European capitals like London, Athens, Madrid, Lisbon and Rome.
But European leaders seem blind to the metastasis of misery that has crept into the social fabric of our continent. Wouldn’t it be great, they now seem to tell us, if we could have crippling austerity, an increasing debt load, a devastating social crisis, starving pensioners, the return of fascism, a wave of suicides and mass deprivation — but without the youth unemployment? I’m not buying this story, and I don’t think any of us should. The attempt to cast the current crisis in generational terms serves to drive a wedge between us and our unemployed, indebted and/or retired (grand)parents. It serves to co-opt the youth in the ongoing wave of neoliberal reforms, making us believe it is in our best interest to crack down on the labor rights, jobs and pensions of our parents so we ourselves can better compete for the increasingly precarious jobs of the future.
The real reason European leaders are suddenly so concerned about youth unemployment — while they remain unmoved by the plight of Greek AIDS patients, for instance, who now can’t get their anti-retroviral drugs — is simply that they are terrified by the prospect of social unrest. As the New York Times reported today, “it is clear that policy makers are seriously worried that millions of frustrated young job seekers pose as much of a threat to the euro zone as excessive government debt or weak banks.” German Finance Minister Wolfgang Schäuble literally admitted that “We will have to speed up in fighting youth unemployment, because otherwise we will lose the support, in a democratic way, in some populations of the European Union.” What they fear, in other words, is a continent-wide youth uprising. At its worst, their plans to “fix” youth unemployment serve to distract us from the obvious class dimension at play, promoting the illusion that the social crisis we face is just a series of economic problems that can be fixed without radical changes to the political status quo.
The inconvenient truth is that unemployment is an integral element of the neoliberal policy response to the crisis pursued by the European Union and the IMF. This, in itself, is nothing new. IMF austerity programs in the developing world have long involved dramatic reductions in wages and rises in unemployment. Careful quantitative analysis of the Latin American debt crisis of the 1980s has shown that “the most consistent and statistically significant impact of Fund programs in Latin America … was the reduction in labor share of income.” Even official IMF studies recognize that its austerity programs “boost unemployment and lower paychecks.” Most importantly, the authors of a 2011 IMF report, Painful Medicine, conclude that austerity causes not just short-term but “particularly long-term unemployment.”
In other words, asking for austerity measures without youth unemployment is like insisting on the medieval practice of blood-letting without the blood-loss. It is not only brutal, but also practically impossible. Austerity and unemployment are like Siamese twins, conjoined at the hip, designed to strengthen and reinforce one another. As long as the EU and IMF keep imposing these highly destructive adjustment measures, unemployment will keep on rising. The only genuine “solution” to unemployment, therefore, would be to break free from the shackles of austerity and to default on the foreign debt. This is the reformist vision pursued by SYRIZA in Greece, and despite the lack of revolutionary imagination of this quasi-Keynesian approach, there is certainly something to be said for it from a humanitarian point of view.
At the same time, I have now written some 50,000 words on this question — why not default? – for my PhD thesis, showing precisely why the option of default is often so elusive. In a word, default would greatly harm the interests of foreign private creditors, who just happen to control virtually all the critical resources in the global economy, giving them a disproportionate ability to block the type of solutions that would favor the unemployed. So to get to the phase where we can even realistically start considering genuine “solutions” to the “problem” of youth unemployment, we first have to confront the financial power structures that obstruct the pursuit of such solutions to begin with. This requires much more than a continental master plan to combat youth unemployment. It requires a radical break with the status quo.
Our problems, in short, are not due to a lack of innovative ideas; they are due to an excess of financial power concentrated within the hands of a tiny elite of bankers. This means we have to dramatically reformulate our question. Rather than asking what innovative ideas can solve the problem of youth employment, we should be asking what type of strategies could upend the structural power of international creditors. This leads us away from economics and back into the realm of revolutionary theory and praxis. How could Europe’s downtrodden youth ever possibly conceive of shaking the global financial order? It is to this impossible question that I will turn in my next post.
via Why Europe can’t just “fix” youth unemployment | ROAR Magazine.