Europe's austerity acknowledged to be a failure; yet it remains the default option, just extended far into the future
The economist Yanis Varoufakis has an apt metaphor for Europe's latest approach to its economic crisis. Imagine, he says, that your neighbours demanded you do a 100m sprint in under 10 seconds. They whip you, and threaten dire sanctions for flunking. But as August looms and with your times getting worse not better, your taskmasters change the regime. The target remains in place, the threats are just as grave – but the deadline is extended to December. So, have your neighbours loosened their grip? Of course not, says Mr Varoufakis, they have simply extended into the future their "maddened misanthropy, making a virtue out of abject policy failure".
So it goes in the EU too. The European Commission has confirmed what was already widely suspected: that France, Spain, Portugal, the Netherlands, Poland and Slovenia will all be allowed extra time to complete their austerity plans. In some quarters this was greeted as "Europe in retreat". It is nothing of the sort. There has been no relinquishing of the actual budget targets, let alone a move towards replacing the cuts with other economic policies. Put at maximum strength, this decision allows Paris and the other capitals to bring in the automatic stabilisers: to spend more on unemployment and other benefit bills, which are rising fast amid this ferocious economic slump. That tweak alone will help take the edge off the pain of the crisis, but it will do nothing to resolve the underlying crisis. It is a palliative, and no more.
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