The medicine is killing the patient.
Extreme retrenchment and cost-cutting has not just caused social unrest in
Yesterday saw a dramatic conclusion by the International Monetary Fund (IMF)
that the effect of the austerity doctrine has run contrary to its purpose.
The debt burden has not decreased and growth has not been boosted –
precisely because EU governments have applied the public consumption brakes
The Washington D.C.-based IMF, which is normally unsentimental and far from
leftist, has calculated that the effects of cutbacks in Europe have been
more destructive and growth inhibiting than politicians have dared tell
In the short term, the so-called necessary reforms have actually done more
harm than good. The EU countries have simply impoverished themselves by
applying the brakes to overall consumption.
The combined social and economic collapse is nowhere clearer than in Greece,
where Germany’s Chancellor Angela Merkel paid a state visit yesterday to the
sound of booing and violent street protests.
The uproar is fuelled out of real frustration that the austerity requirements
placed on Greece have reached the pain threshold. The man in the street in
Greece is actually feeling what the IMF has now calculated: the economy
cannot be kick-started simply by lowering wages.
The demonization of Angela Merkel and the disgraceful Nazi comparisons we have
seen are preposterous. There is no doubt that the other European countries
have a right to demand a concrete plan for Greek debt relief as a
prerequisite for continued loans and credits for Greece.
After years of over-consumption and lack of tax revenues, Greece cannot avoid
But the situation is now desperate. Bottom line: Greece is in meltdown – a
situation that other EU countries – including Germany - have previously
experienced and have received massive aid towards economic reconstruction.
The European project is about cross-border solidarity and the will to bring
about stability and growth through common solutions.
No-one, including the rich countries of the north, is served if Germany and
other like-minded countries insist that all of the reforms have to be
introduced immediately, and quicker than even the IMF sees as sensible.
The medicine so far is in the process of killing Greece. The dose must be
reduced. The demands must be toned down in order that Europe itself is not
dragged into a critical condition.
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