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Al Jazeera top 10 2011
Europe's year of austerity
The bond market has achieved what elected politicians never could - a complete victory for neoliberalism in our No. 5.
Last Modified: 28 Dec 2011 09:04
Protests have raged across Europe, as living standards for average people will decline due to austerity [Reuters]

It has been a good year for unelected technocrats and a bad one for democracy in Europe. The vision of a generous welfare state mixed with competitive capitalism all but fell apart under its weight in 2011; as debt-laden states sacrificed sovereignty at the international bond market's financial altar.

Scenes of burning tyres, tear gas and striking workers became common place across the continent as Europeans - ineffectively - opposed the market's dictates.

Italy's finance minister was reduced to tears in December when announcing harsh cuts. The technocratic government, led by prime minister Mario Monti passed a $39bn austerity package, including tax hikes and a higher retirement age. Spain's recently elected Conservative prime minister, Mariano Rajoy, has promised spending cuts of $21.6bn to trim a dangerous deficit. And Ireland unveiled a new series of budget cuts, worth more than $3bn in December.

"We are going through a painful process of adjustment. Public anger is acute because the public was not responsible for putting us in the position we are in," Brendan Howlin, Ireland's public expenditure minister said at the time, echoing the view of many across the continent.

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Economically, cuts to social spending will mean less growth, as workers facing pay cuts will not be spending money. Normal Keynesian solutions of government saving in good times and spending to stimulate growth in bad times, however, have run their course. States simply cannot borrow anymore, making Keynesian solutions impossible, even if austerity is unpractical, if the desired result is growth.

Last year, we featured the rise of the right in Europe as one of our top 10 stories. The mix of xenophobia and economic malaise can have deadly consequences, as history has shown.

One thing is certain: The bond market and its technocratic enablers have achieved what elected politicians like Margaret Thatcher never could; the end of the modern welfare state and a complete victory for neoliberalism.

The choices for Europe will be difficult in 2012, as the entire project could easily collapse. Alternatively, leaders could opt to continue the "muddle on" strategy, where central banks try to buy time by purchasing debt and attempting to defend the project of integration. The "peripheral" countries in southern Europe - particularly debt-laden Greece - could leave the eurozone, allowing a core led by Germany and France to go-it-alone. Harder still, perhaps, is that the philosopher Slavoj Zizek seems to have gotten it right when noting that Europe's crisis shows the "marriage between capitalism and democracy is over". In 2012, be careful what you wish for; as bad as things are now, it could always get worse.

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Al Jazeera
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