Long-time austerity is wise, but Europe should ease up
Three elections in Europe mark a turning point in the struggle to get the continent back on its feet financially. Voters in France and Greece rejected politicians who have pushed through painful austerity measures, with little economic success to show for it. France elected its first Socialist president in 17 years, Francois Hollande. Parties opposing austerity won 60 percent of the vote in Greece’s legislative elections, with radical leftists making the largest gains. Even in Germany, the loudest champion of belt-tightening measures, voters in a regional election struck down allies of German Chancellor Angela Merkel.
The elections come in the wake of economic results that have been notably less successful in Europe than in the United States. After the 2008 economic meltdown, both President Bush and President Obama chose to stimulate the US economy, Bush with tax cuts and Obama with more than $780 billion in combined tax cuts and government spending. They argued that it was worth increasing the national debt in the short term to get the economy going again, although a Tea Party backlash tempered such thinking after 2010. The European Union, bound by different rules and more restrictions on its central bank, passed a far smaller stimulus package — worth some $260 billion — and then turned quickly to belt-tightening measures that laid off government workers and dramatically scaled back spending.
“What you got in the United States was some stimulus, some cuts, but mostly a focus on growth,” said Boston University international relations Professor Vivien Schmidt, in a phone call from Italy. “What you have seen in Europe was all about austerity and making everyone agree to very rapid deficit reduction. Yes, structural reform is important. Yes, you need to worry about deficits. But austerity hasn’t worked economically and we are seeing the effects politically.”
Today, the US economy has achieved a fragile recovery, growing at a 2.2 percent annual rate, while unemployment has dropped to 8.1 percent. Meanwhile, the European Commission predicts that GDP in the Eurozone will stagnate in 2012. Economic growth is forecast to be as low as .6 percent, while unemployment is expected to remain above 10 percent. Only time will tell which response proves the most effective over the long-run. Eventually, both the United States and Europe must get their spending under control. But so far, America’s solution to the crisis has brought about better results. US politicians and Tea Party activists who insist on more austerity now, before a full US recovery, should take heed.