EU austerity faces rising public anger

The European Union’s ‘Troika’ institutions and austerity: friend or foe?

Protesters on tractors gather at the European Commission in Brussels to protest austerity [Simon Marks/Al Jazeera]

Brussels, Belgium – Outside the European Commission in Brussels late last month dozens of horn-blowing tractors from Belgium rolled ominously down roads usually reserved for the limousines belonging to this continent’s powerful politicians.

Accompanied by throngs of demonstrators and surrounded by smoking hay stacks and burning effigies of leaders such as Germany’s Angela Merkel, the roughly 4,000 participants had travelled from across the region to protest against a bureaucratic elite that a growing number of Europeans feel have for too long ignored the interests of everyday people.

After half a decade of public spending cuts, job losses, and poor wage growth, Europe is barely emerging from the worst financial crisis since the Great Depression.

There are almost 25 million unemployed people still living in the 28-member bloc, inequality is rising in many member states, and the region on Wednesday officially entered a period of deflation.

All this has meant voices of dissent and anger are mounting against the European Commission, the region’s executive branch, the European Central Bank (ECB), and International Monetary Fund – the three institutions known together as the Troika that are responsible for devising Europe’s exit strategy from the years of economic crisis.

Hard-line left-wing political parties in Greece and Spain now stand realistic chances of winning national elections in 2015 as they fight against austerity measures and forced privatisation programmes, the very policies insisted on by the Troika in return for debt relief and bank bailouts.

“The European Central Bank wants to open its new headquarters in Frankfurt. A dizzying 1.3bn euros [$1.54bn] was spent on the 185-metre-high fortress-like twin tower building, surrounded by a fence and castle moat,” Jon Malamatinas, an activist with the group Blockupy, bellowed through a loudspeaker last month in Brussels as a council meeting among Europe’s heads of state took place.

The new European Central Bank building in Frankfurt stands in stark contrast to surrounding buildings [Getty Images]

“This intimidating architecture of power is a perfect symbol of the distance between the political and financial elites and the people,” he continued, adding thousands of activists from all over Europe will block the roads leading to the ECB when it inaugurates its headquarters on March 18 in Frankfurt.

“We will take over their party and turn it into an articulation of transnational resistance against Europe’s crisis policies.”

Observers say protests being held are growing increasingly critical of a European executive seen as placing the interests of investors, the banking sector, and large multinational corporations before those of its citizens.

Such views culminated in November after the International Consortium of Investigative Journalists exposed how the tiny landlocked country of Luxembourg had organised hundreds of secret tax deals for companies such as Disney and Skype while Jean-Claude Juncker, the commission’s president, was still in charge of the country.

“It is clear that in Spain, as well as Greece, there is a tendency to reject the economic policies adopted by Europe,” said Eric Toussaint, a political scientist at the University of Liege and president of the Belgian arm of the Committee for the Abolition of Third World Debt.

“There is a push on the left side of the political spectrum for radical solutions, which will lead towards a certain rupture with the capitalist system.”

Trade unions, left-wing political parties, and civil society organisations across Europe are also beginning to support drastic ideas such as the cancellation of the dizzily high public debt levels accrued during the crisis as a way of bailing out investors and banks.

Opponents of stringent austerity measures have proposed large scale debt cancellation to alleviate living conditions [Simon Marks]

Toussaint said debt cancellation for countries such as Greece is legitimate because the decisions taken to rescue the country in the first place were made undemocratically and behind closed doors.

“It is obvious that for a country such as Greece, whose debt represents 175 percent of GDP, it is impossible to improve living conditions for the population while continuing to pay back such high levels of debt,” Toussaint said.

“This debt has strongly risen due to decisions that were taken against the interests of the population, and we can identify precisely who was responsible for this, notably the European institutions.”

The European parliament last year concluded it was no longer possible to have such large decisions affecting a country’s economic future made behind closed doors with no one taking responsibility for the repercussions.

In two highly publicised resolutions, the parliament concluded that the Troika’s decision-making structure compromised transparency and accountability, and brought about widespread negative impacts on employment.

But alleviating the pressures from sky high public debt will be a huge challenge and could mean countries such as Greece may be forced to leave the eurozone altogether.

Germany, in particular, is sternly against writing off any of Greece’s debt as it could set a dangerous precedent for other countries in the region.

Significant negative impacts of austerity measures have been felt throughout Europe [Simon Marks/Al Jazeera] 

Still, those in favour of such action note such acts have been done before. Germany was able to cancel its debt after World War II, and countries such as Ecuador have defied their international lenders and defaulted on debt.

Others say without a debt burden, countries in the eurozone will not have an incentive to make the reforms needed to become more competitive. And not everyone is convinced about the idea of illegitimate debt in Europe.

“Banks are necessary for the economy to function, and the situation would have been much worse if the banks had not been bailed out,” said Gregory Claeys, a researcher at Bruegel, an influential think-tank based in Brussels.

“At the time, it was necessary to avoid a worse situation. I don’t think this is illegitimate.”

Still, Claeys said the speed at which countries in the euro area were made to make spending cuts and carry out reforms that led to large job losses and wage cuts was done too quickly.

“Assumptions that were made about the multiplier effects of austerity on economic growth were basically wrong,” he said. “The impact of the policies implemented during the crisis was far from perfect.”

Jan von Gerich, an economist working at Nordea Bank in Finland, said while decisions taken by the European authorities had detrimental effects on society, the alternatives at the time were limited. He also explained the reason for the depth of the fallout was because Europe had introduced a currency union in 2000, without ever making sure the region’s national budgets were in line and sustainable.

“You seem to have a perception in many countries that you can make all the decisions on spending and disregard how it will affect the currency union,” he said.

In Greece, the left-wing party known as Syriza lead by Alexis Tsipras is leading the polls for parliamentary elections scheduled for January 25. It is here where those in favour of sending a strong message to Europe’s Brussels-based institutions want to see change.

Political parties in Greece and Spain want to change how much influence Brussels-based institutions have [Simon Marks/Al Jazeera]

“To give you an idea, about 20 percent of households do not have electricity. We’re going to give them some kind of free electricity,” said Georgios Katrougalos, a member of the European Parliament representing Syriza in Brussels.

“Even if we are coming under pressure from financial markets, if we give a breather to the population then we can sustain things until the economy gets better.”

Still, some analysts are sceptical that Syriza’s charm campaign will materialise. For one, Syriza has softened its rhetoric on some key economic issues, and may yet temper its approach further if it wins power.

“I think these ideas are election-winning rhetoric, certainly in the case of Greece, to win votes. We had tentative discussions and meetings with the Ministry of Finance, Central Bank, Parliament and prime minister’s office. If Syriza comes into power, they cannot change the terms,” said Hannah Scobie, chairwoman of the European Economics and Financial Centre at the University of London.

“They may try and give more money to the poor and unemployed, but in terms of restructuring the debt to say we won’t pay, that is not on the cards.”

Whatever happens the elections in Greece on January 25 will be a deciding moment for Europe.

“I think that a possible win of the left in Greece can trigger a kind of domino effect, at the beginning in the south and later on maybe in the core,” Katrougalos, the Greek member of parliament, said.

And if that happens, hopes that Europe is out of crisis mode could come crashing down.

“A new Greek default is looming, with overt or covert haircuts [to its debt], which will be followed by further cycles of loans and haircuts for as long as Greece does not regain its lost competitiveness by exiting the eurozone and devaluing its new currency,” said Hans-Werner Sinn, president of the Ifo Institute for Economic Research, a Munich-based institution.

“Alexis Tsipras is one of the few Greek politicians who has understood the real nature of the problem.”

Source: Al Jazeera