Sunday, June 13, 2010
Going in for the kill or a break from the global playbook?
Now that they have spent trillions bailing out banks, investment houses and the like, the governments of Europe are now calling for the harshest austerity cuts in their history. Where will those cuts come from? Obviously from the social programs side of the budget. This will bring on the economic destruction of the middle class in these countries and cause violent protests and demonstrations. It is nothing but larceny on a scale never before seen. The rich have gotten dramatically richer off these decisions and now the middle classes will have to cough up more money in higher taxes and experience the pain caused by fewer social programs and the looting of their retirement funds. It sure is funny how all these politicians who just months ago were pushing for massive stimulus packages, which were only give-a-ways to the elite, are now calling for these austerity measures. Remember how they claimed that if the massive stimulus was not carried out, the world's economy would collapse? Now the mantra is, drastic cut backs and the end to massive borrowing or the world's economy will collapse. They can't have it both ways. You notice, both methods will result in nothing for the mass of people in the middle or the poor. They are the ones paying for it. It is only a matter of time before this happens here. My guess, it is part of the plan.
Europe embraces the cult of austerity – but at what cost?
Eurozone finance ministers were still committed to spending their way to recovery only a few months ago. Then came the Greek debt crisis, which threatened to engulf the continent. Despite warnings from the US, Britain and its EU neighbours are braced for unprecedented public sector cuts
By extolling the virtues of old-fashioned thrift, Merkel hoped last week to go some way towards explaining to ordinary Germans why they must suddenly swallow the most painful austerity pill administered by their government in generations. Last Monday, with some trepidation, she announced massive cuts of ¤11.2bn in 2011 and plans for a total of ¤80bn by 2014. Yesterday, in Stuttgart and elsewhere, the inevitable protests began on the streets.
Even for a country painfully aware, because of its history, of the danger of debt, the extent of corrective action came as a shock. "Germany has never agreed to an austerity package to this extent, but these cuts have to be made in order for the country to establish a stable economic future," Merkel said.
Across Europe other governments, scared by the Greek debt crisis, the repercussions of which imperil the very existence of the euro, have been doing the same, raising the spectre of mass layoffs in public services in the name of European unity.
On Monday, David Cameron said the state of the public finances was far worse than he had expected as he prepared Britain for the worst. "The decisions we make will affect every single person in our country. And the effects of those decisions will stay with us for years, perhaps decades, to come."
Elsewhere, Italy has approved austerity measures worth ¤24bn over the next three years. There will be public sector pay freezes and salary cuts of up to 10% for the highest earners.
Spain has ordered cuts of ¤15bn this year and next to reduce its deficit by more than 4%. Crowds gathered outside Madrid's economics ministry calling for the prime minister's head. "Zapatero resign!" they shouted. Spain's biggest unions have threatened a general strike. The axe is falling, too, in Hungary, Portugal, Ireland and in Greece, where the government has been bailed out by Brussels and the IMF.
In total, EU governments have announced public spending cuts of around ¤200bn, as well as patching together a mammoth ¤500bn safety blanket for the euro.