BRUSSELS - For more than a year European Union officials seeking to solve Europe’s debt crisis have been baying for austerity, austerity, and more austerity. Now the people of Europe are taking their backlash from the streets to the ballot box - possibly forcing a change of direction.
Governments have fallen, more are at risk, and in some places a stark streak of nationalism appears to be on the rise that could swing Europe ever deeper into a fortress mentality.
At stake is the future of Europe, where countries rich and poor are struggling with mountains of debt and moribund economies - a toxic combination that often seems to require contradictory remedies of belt-tightening and economic stimulus.
Increasingly, the long focus on austerity is convincing Europeans that the German-led mantra of fiscal responsibility is creating a vicious cycle of more misery leading to lower growth - leading to even greater debt distress.
“I think what is happening in Europe is the austerity drive is actually slowing down the necessary rebalancing of European economies,’’ said Simon Tilford, chief economist at the Center for European Reform.
Residents of Europe apparently have had enough of this particular medicine.
In France, President Nicolas Sarkozy, among the architects of the EU’s response to the financial crisis, is in danger of being voted out of office in May by François Hollande - a Socialist who promises not to cut, but to increase public spending by $26.3 billion by 2017. Hollande also promises to renegotiate a much-vaunted budgetary pact among 25 EU countries meant to enforce national fiscal discipline.
Greece votes in elections next month in which fringe parties hostile to international bailouts requiring steep austerity are expected to make huge gains - possibly endangering efforts by the current technocratic government to rein in the nation’s debt.
And the Netherlands’ 18-month old conservative coalition resigned this week after failing to agree on cutting its own budget deficit to meet EU limits it had demanded of other countries.
Beyond that, in the Czech Republic, almost 100,000 people rallied in Prague’s downtown Wenceslas Square last weekend to protest government reforms and cuts, calling on the government to resign. And earlier this year, tens of thousands of Romanians bitter about public sector wage cuts took to the streets, and the government collapsed.
“I don’t think there are any examples of countries accepting endless austerity and downward standards of living,’’ Tilford said. “There has to be light at the of the tunnel.’’
Voters may be wise to reject unrelenting cuts. But in their desire to avoid pain, they may be prompting politicians to put off decisions that Europe must take to remain competitive globally.
Many experts say labor markets must be reformed in order to spur investment and halt ballooning unemployment. Growing fears about globalization have caused many governments to promise to cool their commitment to free markets.
But at least some economists are now calling for a return to priming the pump - even at the cost of higher deficits.