Yet, even at this hour, leaders on both sides of the Atlantic seem determined to handcuff fiscal policies — the main tools that can increase jobs, consumer demand and economic growth — with an unquestioning devotion to rigid austerity.
Europe’s post-2008 economic problems have differed from America’s in many important ways. Washington has mercifully never had to cope with the problem of a dollar torn apart by the separate taxing and spending policies of 17 sovereign governments.
But as the crisis moves toward its fourth year, there are disturbing common threads.
One is the chilling specter of sovereign default, something that never should have come up in the United States but did for a while because of the reckless brinkmanship of House Republicans. A more real threat of default now haunts European bond markets, as chronically underfinanced bailout plans with punitive terms have made it impossible for the debtor countries to grow fast enough to pay down their debts.
Another grim parallel is the refusal by leaders to take politically tough but economically necessary stands.
On Tuesday, Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France again ruled out the two steps most needed to stem the panic in the financial markets: issuing common European bonds and committing more money for Europe’s depleted bailout fund. Instead, they proposed more meetings and called on all European nations to enshrine an ill-advised “golden rule” of balanced budgets in their constitutions. Markets are rightly unimpressed.
Excessive indebtedness is a real, long-term problem. But Europe’s broad downward trajectory can only be turned around if governments — both those of lenders and debtors — spend more in the near term to put people back to work and get consumers back to spending.
Instead, panicked by market volatility and urged on by Chancellor Merkel, Europe’s leaders have made a bad situation worse by prescribing austerity everywhere they look. The results are painfully clear. Growth is grinding to a halt across Europe.
That is true even in Germany, as its export markets falter and domestic demand fails to take up the slack. It is now growing at an anemic 0.1 percent and the euro zone at only 0.2 percent.
Meanwhile, debt market panic has spread from smaller economies like Greece, Ireland and Portugal to the larger economies of Spain, Italy and even France. Only emergency lending by the European Central Bank now staves off renewed fears of default, and no one knows how much longer the bank can continue without help from European bonds and a better financed bailout fund.
As the crisis quickens, more enlightened voices struggle to be heard. Christine Lagarde, the new managing director of the International Monetary Fund, is calling for balancing long-term debt reduction with “short-term support for growth and jobs.” The financier George Soros this week renewed his pleas for more growth-friendly policies, as has Gordon Brown, the former British prime minister.
Elections are approaching in Spain, France, Germany and other European countries over the coming months. The campaign will soon gear up here. Voters on both sides of the Atlantic need to demand more from their leaders than continued austerity on autopilot.
Europe’s post-2008 economic problems have differed from America’s in many important ways. Washington has mercifully never had to cope with the problem of a dollar torn apart by the separate taxing and spending policies of 17 sovereign governments.
But as the crisis moves toward its fourth year, there are disturbing common threads.
One is the chilling specter of sovereign default, something that never should have come up in the United States but did for a while because of the reckless brinkmanship of House Republicans. A more real threat of default now haunts European bond markets, as chronically underfinanced bailout plans with punitive terms have made it impossible for the debtor countries to grow fast enough to pay down their debts.
Another grim parallel is the refusal by leaders to take politically tough but economically necessary stands.
On Tuesday, Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France again ruled out the two steps most needed to stem the panic in the financial markets: issuing common European bonds and committing more money for Europe’s depleted bailout fund. Instead, they proposed more meetings and called on all European nations to enshrine an ill-advised “golden rule” of balanced budgets in their constitutions. Markets are rightly unimpressed.
Excessive indebtedness is a real, long-term problem. But Europe’s broad downward trajectory can only be turned around if governments — both those of lenders and debtors — spend more in the near term to put people back to work and get consumers back to spending.
Instead, panicked by market volatility and urged on by Chancellor Merkel, Europe’s leaders have made a bad situation worse by prescribing austerity everywhere they look. The results are painfully clear. Growth is grinding to a halt across Europe.
That is true even in Germany, as its export markets falter and domestic demand fails to take up the slack. It is now growing at an anemic 0.1 percent and the euro zone at only 0.2 percent.
Meanwhile, debt market panic has spread from smaller economies like Greece, Ireland and Portugal to the larger economies of Spain, Italy and even France. Only emergency lending by the European Central Bank now staves off renewed fears of default, and no one knows how much longer the bank can continue without help from European bonds and a better financed bailout fund.
As the crisis quickens, more enlightened voices struggle to be heard. Christine Lagarde, the new managing director of the International Monetary Fund, is calling for balancing long-term debt reduction with “short-term support for growth and jobs.” The financier George Soros this week renewed his pleas for more growth-friendly policies, as has Gordon Brown, the former British prime minister.
Elections are approaching in Spain, France, Germany and other European countries over the coming months. The campaign will soon gear up here. Voters on both sides of the Atlantic need to demand more from their leaders than continued austerity on autopilot.
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