In a desperate attempt to reach overly ambitious deficit targets, member states throughout Europe are implementing brutal and harsh austerity policies . They are slashing public services and public investments, cutting wages and social benefits.
The ETUC strongly opposes this ‘austerity’ approach. Austerity will take us down the road to ruin. Austerity will defeat itself and will result in weaker economies and higher, not lower, public debt:
- Austerity, especially when all member states simultaneously cut demand, will push the economy back into prolonged stagnation. This will cost Europe at least 4 million jobs, jobs that Europe desperately needs considering unemployment currently stands at 23 million.
- Austerity will also damage the growth potential of the European economy over the longer term. Persistent unemployment combined with precarious work, will downgrade human capital. Persistent depression will make business think twice before investing in a region that is unable to offer stable demand perspectives. In turn, reduced investment means productivity and innovation will suffer.
- Austerity will undermine the industrial basis of Europe. International business, facing a continent with an ailing economy, will relocate industrial investment to other regions in the world which provide dynamic demand perspectives.
- Austerity will prolong the sovereign debt crisis. Deficit cuts will be offset by the economic depression’s negative feedback effects on social spending and tax revenue. And while public deficits remain high, economic recession and deflation will push nominal GDP so that public debt as a share of GDP will continue to shoot up. Europe will try to get itself out of a hole by digging a deeper one.