Austerity — Difficult economic conditions created by government measures to reduce public expenditure; origin late Middle English, from French austérité — Oxford English Dictionary.
Saturday was the Day of Contemplation for the French — the traditional campaign-free day before the nation goes to the polls. With Socialist candidate Francois Hollande promising to shred the economic austerity measures of his rival, incumbent Nicolas Sarkozy, it has already been dubbed the election that could change the face of Europe.
Hollande leads the opinion polls, having pledged to replace a punishing Eurozone fiscal compact, agreed in March, with an investment-fuelled growth plan for its 17 member-states. But the austerity versus stimulus debate on this politically polarised continent resonates in every country.
Just a day before the French polls, the results of local government elections in Britain would have stirred Hollande and other European socialists. The ruling Conservative party was mauled, punished for Prime Minister David Cameron’s spending cuts. Opposition Labour, which wants spending cuts spread over a longer period, enjoyed its best local election results since 1997, polling 38% and gaining 800 seats.
Even the re-election of the Conservative Boris Johnson as London mayor hung over Cameron: “I suspect this result has settled the result of the next Tory leadership contest,” said Labour’s Ken Livingstone, the socialist who lost narrowly to Johnson.
None of this was unexpected. Every leader and political strategist on the left and right has long known that governments have no choice but to cut spending in order to deal with debt and that as the effects of bailouts and cheap loans wore off, governments would fall.
The main reason leaders have continued with their austerity programmes — in spite of the clear political risks — lies in Germany. Europe’s economic powerhouse is also its paymaster. And austerity is the price you pay for Germany providing the bulk of funds for bailing out the troubled economies. Hollande’s victory is certain to set France on a collision course with German Chancellor Angela Merkel.
With Germany cracking the whip on one side and angry voters showing the boot on the other, European democracies are edgy and nervous. On April 23, Dutch Prime Minister Mark Rutte and his Cabinet resigned after other parties refused to support his austerity programme. Having repeatedly lectured troubled southern economies such as Greece about the need to cut expenditure, the Rutte government became one of the shortest-lived in the country’s post-War history.
Even in Germany, opinion on how to achieve growth is divided. “The direction of European economic and financial policy must change, away from pure austerity toward growth,” said former German Chancellor Gerhard Schroeder on the eve of the French elections.
“Greece, Ireland, Portugal, Italy and Spain have made substantial progress in stabilising their finances. But the economic and political situation in these countries shows that austerity alone is not the way. On the contrary, there is a danger of half-strangling national economies with a strict policy of austerity.”
Two of those countries — Greece and Spain — were struggling to keep their heads above water this week. Along with France, Greece too goes to the polls on Sunday amid apocalyptic warnings. “On Sunday, our people’s fate is at stake,” Socialist leader Evangelos Venizelos told supporters. “Sunday will decide if we stay in Europe and in the euro ... or if we send the country down the road of bankruptcy.”
The Greek capital of Athens is where popular anger against austerity has most violently spilled on to the streets. Yet Venizelos’ PASOK party backs cuts in exchange for a 130billion-euro bailout programme bankrolled by a troika of the IMF, European Union and European Central Bank.
“The future government in Greece must abide by the country’s commitments,” said German finance minister Wolfgang Schaeuble. “If Greek voters were to vote for a majority that does not honour those agreements, then Greece will have to bear the consequences of that.”
The likely outcome of Sunday’s parliamentary elections is that PASOK will form a coalition with the centre-right New Democracy party of Antonis Samaras. In Spain, meanwhile, unemployment reached 24.1% at 5.6 million. More than half of Spaniards under 25 are jobless — raising the real spectre of a lost generation stalking southern Europe.
The French and Greek elections are expected to result in governments that will set themselves on paths of widely differing economic management. This may well turn out to be the way Europe works in the future: like it or not, the poorer countries will be forced to further tighten their belts. The rich North, on the other hand, will look to ease austerity.
Whether any of this will create economic growth anytime soon is a question no one wants to ask in Europe — let alone answer.