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Tue Mar 5, 2013, 07:39 AM

EU Opens Way for Easier Budgets After Austerity Backlash [View all]

European finance ministers opened the way for looser budget policies after a backlash against austerity thrust Italy into political limbo and shattered months of relative stability in European markets.

Italy’s deadlocked election, France’s refusal to make deeper budget cuts and protests against the shrinking of the welfare state across southern Europe escalated the rebellion against the German-led prescription for fighting the debt crisis.

Economic strains “may also justify in a certain number of cases reviewing deadlines for the correction of excessive deficits,” European Union Economic and Monetary Commissioner Olli Rehn told reporters late yesterday after a meeting of euro- area finance ministers in Brussels...

... “The cure is not working, and there is no hope that it will -- that is, without being worse than the disease,” Joseph E. Stiglitz, the Nobel Prize-winning Columbia University economist, said in a posting on Project Syndicate (see below). “Germany has consistently rejected every policy that would provide a long- term solution. The Germans, it seems, will do everything except what is needed.” ...

/... http://www.bloomberg.com/news/2013-03-04/eu-opens-way-for-easier-budgets-after-italian-austerity-backlash.html

Europe's protest parties on the march

The suddenness with which Grillo has emerged and taken one in four of Italian votes may have shocked the traditional governing elite across the EU, but it shows little sign of knowing how to respond or adjusting to the message being sent by voters who have sent incumbents tumbling one after the other from Greece to Finland over the past three years...

... The message to the Italians from the German government this week was "you may have kicked out our politicians, but you must not kick out their policies". That was echoed by the European commission in Brussels, while the German opposition social democrat leader, Peer Steinbrück, ventured to suggest that the Italians had voted for "clowns" .

On Thursday the outgoing Italian prime minister, Mario Monti, comprehensively trounced in the election, attended a European commission conference in Brussels where he enjoyed a standing ovation almost as if he had been the victor. The mismatch between the popular and elite verdicts was striking.

Monti said that in his 15 months in office he deliberately never told Italians that his programme of austerity, structural reforms, and tax rises was being implemented because of EU orders. Then he added: "Although of course it was true that the European Union was asking for them."

Given his failure, there may now be a slight shift to soften the edges of German-prescribed austerity while EU leaders also harp on, but do nothing, about repairing the vast gap opening up between the more integrationist policies they are pursuing and democratic accountability and legitimacy to underpin them...

/... http://www.guardian.co.uk/world/2013/mar/01/europe-protest-parties-march

(Stiglitz): The outcome of the Italian elections should send a clear message to Europe’s leaders: the austerity policies that they have pursued are being rejected by voters.

The European project, as idealistic as it was, was always a top-down endeavor. But it is another matter altogether to encourage technocrats to run countries, seemingly circumventing democratic processes, and foist upon them policies that lead to widespread public misery.

While Europe’s leaders shy away from the word, the reality is that much of the European Union is in depression. The loss of output in Italy since the beginning of the crisis is as great as it was in the 1930’s. Greece’s youth unemployment rate now exceeds 60%, and Spain’s is above 50%. With the destruction of human capital, Europe’s social fabric is tearing, and its future is being thrown into jeopardy.

The economy’s doctors say that the patient must stay the course. Political leaders who suggest otherwise are labeled as populists. The reality, though, is that the cure is not working, and there is no hope that it will – that is, without being worse than the disease. Indeed, it will take a decade or more to recover the losses incurred in this austerity process.

In short, it is neither populism nor shortsightedness that has led citizens to reject the policies that have been imposed on them. It is an understanding that these policies are deeply misguided...

/... Read more at http://www.project-syndicate.org/commentary/listening-to-european-voters--rejection-of-austerity-by-joseph-e--stiglitz#YS8dU9MT2jDKYxDM.99

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