Time for Growth: Austerity Has 'Reached its Limits,' Barroso Says

Health workers march against austerity in Madrid on April 21. Zoom
REUTERS

Health workers march against austerity in Madrid on April 21.

European Commission President José Manuel Barroso has said that Europe has reached the political limits of its austerity measures, suggesting that crisis countries should get more time to consolidate their budgets. But Germany warned against changing course on Tuesday.

Striking statements were made by one of Europe's most powerful men on Monday night, when European Commission President José Manuel Barroso said the strict austerity measures thus far imposed on the EU's beleaguered economies may have reached their political limits.

Although this policy is "fundamentally right," it has nevertheless "reached its limits," he told a conference in Brussels. "A policy, to be successful, not only has to be properly designed, it has to have the minimum of political and social support," he added.

Barroso's comments came just ahead of the release of the EU's latest budget deficit numbers by the body's statistics agency Eurostat on Monday. They showed that for 2012, though Europe's combined deficit level dropped, the overall debt for the 17 members of the EU currency union jumped from €8.2 trillion ($10.7 trillion) to €8.6 trillion. The drastic belt-tightening policies imposed on a number of ailing member states have apparently had little effect. On the contrary, many theorize that the spending cuts intensify budgetary problems because they stifle growth, which has prompted fierce protest in the Southern European countries in recession.

Barroso suggested that these countries in crisis be given more time to bring their deficits down to the required 3 percent of gross domestic product (GDP). Spain and Greece, for example, are far from reaching that goal, with both of their budgetary deficits at 10 and 10.6 percent respectively, according to Eurostat. France, too, is running a deficit above its target of 4.5 percent, reaching 4.8 percent of GDP for 2012. While these countries are still expected to bring their deficits down, Barroso said that there should be a discussion about how quickly that needs to happen.

"We need to combine the indispensable correction in public finances, huge deficits, huge public debt ... with proper measures for growth," he said.

Barroso has always supported growth-friendly budget consolidation, but some have interpreted his latest comments as a possible shift in Europe's approach to austerity, which would be welcomed by EU leaders hungry to see more growth. The European Commission is set to decide on May 29 whether to recommend that EU finance ministers give France and Spain an extra year to bring their deficits down to 3 percent of GDP, moving the deadline to 2015. And while it remains unclear what they will do, a move to ease austerity would be met with intense resistance from Germany -- which Eurostat showed was the only EU country to have a budget surplus last year. Chancellor Angela Merkel has pushed tirelessly for the EU to maintain strict austerity despite pleas from Paris and Madrid, where lawmakers want permission to amass more debt in the short term to jumpstart their economies.

On Tuesday, German Foreign Minister Guido Westerwelle maintained Germany's position, warning against a move away from austerity. "We are convinced that if we give up on the policies of budgetary consolidation, if we fall back into the old policies of racking up debts, then we will cement mass unemployment for many years in Europe," he said in Brussels. Growth cannot be purchased with new debts, he added, saying that "growth and consolidation policies are two sides of the same coin."

kla -- with wire reports

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1. German democracy will deside!
SHBasse 04/23/2013
It is as all sound economic reasoning has been thrown overboard in the vain hope that things will mend themselves! All of the old industrialized countries are uncompetitive and are continuously losing jobs and production. How will prolonging the adjustment to the present reality help anybody but the politicians! The correlation between the production crisis and the economic crisis has not yet been recognized. http://unifiedscience2.blogspot.com/2011/02/deeper-causes-of-downturn.html The similarities between the 13 years long and still ongoing economic downturn in Japan, and the present crisis in all the old industrialized countries are so similar, that even without a deeper understanding of the above described origin of the crisis, it should be obvious to all reasoning people, that we are in for a very long downturn. Last time everybody turned a blind eye to dramatic economic imbalances the world ended up in “The second world war”. Do Barroso really think that turning a blind eye to reality now will not result in grave consequences later!
2. A Definition of Insanity
muley63 04/23/2013
Germany needs to read their Einstein. Insanity: doing the same thing over and over again and expecting different results. Albert Einstein Read more at http://www.brainyquote.com/quotes/quotes/a/alberteins133991.html#tLJDZJv56ZWZ3M3V.99 People need to ignore Guido because he is always wrong. Wrong on austerity. Wrong on Libya. Wrong on Syria. He is wrong all the time.
3. A house built on sand
Inglenda2 04/26/2013
European Commission President José Manuel Barroso has the right to an own opinion, nevertheless not the German austerity measures are to blame for the Euro crisis, but rather the introduction of a common currency without a common tax and social security basis. Europe has certainly reached the its political limits, but to suggest that countries, with a financial crisis, should get more time to consolidate their budgets is putting the cart before the horse. Problems cannot be solved by increasing the length of time in which near criminal activities are allowed to be continued. Not only an extreme national waste of taxpayers money is obvious, but also that of the EU itself. Were the behaviour of business managers to resemble that of most European politicians, there would be a flood of embezzlement court cases brought by shareholders. Germany is and was right, to warn against changing a course which demands a responsible attitude towards the resources of European citizens. This form of responsibility is seldom shown either by José Manuel Barroso or the European Commission. Without a harmony of common basic conditions, there is little logical sense which would support a reason for the Euro currency, especially then, when only ineffectual, or no control by the electorate is possible. Luckily Europe is not just the Euro, so it can therefore be hoped, that this poorly planned and forced introduction of a common currency, may be replaced by an efficient mutual form of financial regulation. The Alternative Party in Germany is a step towards this goal and would almost certainly be welcomed by the general community in most other member states.
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