The answer, even though they see over and over again that austerity leads to collapse of the economy, the answer over and over [from politicians] is more austerity.
— Joseph Stiglitz, Asian Financial Forum, January 17, 2012
It has been a busy weekend. France finds itself with a new president, its first socialist leader since François Mitterand left office in 1995. Greek voters flocked to the parties of the anti-bailout movement with indignant enthusiasm. The liberals seem to be holding on, narrowly, in Serbia.
The true effigy in burning after the elections is austerity itself, a doctrine that has assumed the form of biblical doctrine in the hands of German Chancellor Angela Merkel. Sarkozy was its co-progenitor, though his failings were far more profound than his dalliance with the German leader.
And that doctrine has shown itself to be flawed. Le Monde (May 4), prior to the election on Sunday, suggested that embracing austerity was dangerous and poisonous, the sure guarantee of electoral suicide. The mood in Europe was changing towards those “drastic cuts in state expenditures, raising taxes, reforming the labour market and so on. More growth will bring higher tax revenues that are necessary to service the public debt.”
Whether François Hollande actually makes the difference is questionable. Sarkozy, for one, can hardly be said to have suffered a comprehensive defeat. The National Front candidate Marine Le Pen refused to endorse either two of the frontrunners. Hollande was in the end fortunate that the centrist François Bayrou endorsed him on Friday. Promises have been made to raise taxes with an acknowledgment that economic growth is essential.
The austerity doctrine took its predictable hammering in the Greek elections, with both New Democracy and the main socialist party Pasok getting respective pastings. Austerity has been made a condition of EU-IMF assistance, not to mention the country remaining in the eurozone. The voters felt otherwise. Yiorgos Vrassidis, a voter who directed his ballot to Syriza, the grouping of the Radical Left, made his intentions clear: “The politicians who got us in to this mess continue to mock us. Neither of them will do anything, all they are interested in is pulling the wool over our eyes so they can get into power again”. (Guardian, May 6). The bailout has been termed everything from being “barbaric” to a constituted “economic Fourth Reich”.
Alex Tsipras, Syriza’s leader, has vowed to do something that will shake Brussels to the core – suspend the servicing of Greece’s debt altogether and add a ‘pro-growth’ clause to the repayment arrangements. But the options presented to voters, according to the Greek left-liberal newspaper To Vima (May 4) have merely suggested that the country’s politicians have run out of ideas. Lies are in ample supply, even if the money is not. “The only thing they don’t talk about is reality”. Greece has two options: abide by the wishes of the creditors (the austerity credo), which will reduce it to a rump state economically on par with Romania or Bulgaria; or abandon the program altogether, which would lead to “an even greater shock”. The German magazine Der Spiegel (May 6) is steadfast in its glumness. “It’s clear that there is no alternative to austerity.”
There is little need to speculate too much about where things will go with such notions as the fiscal pact Merkel has endorsed, or the technocratic gospel that holds sway over budgets. The tight pocket is not necessarily the most feasible one and constrained spending has shown itself to be disastrous. The institutional arrangements for the euro, for one, were not sound to begin with, and fracturing is inevitable. Cutting something that is shrinking has the tag of suicide written all over it, but it is a suicide that European governments have been propelled towards for some time now.
The electoral reality has shown that austerity has been willed a slow death, but so have the victors who have profited from voter dissatisfaction. They are only bound to disappoint. As the Nobel Prize-winner Joseph Stiglitz notes, “Politics is at the root of the problem”.