What do you think the use of technocratic governments in Europe says about European democracy?
There are two problems with it. First of all it shouldn’t happen, at least if anybody believes in democracy. Secondly, the policies that they’re following are just driving Europe into deeper and deeper problems. The idea of imposing austerity during a recession makes no sense whatsoever. There are problems, especially in the southern European countries, but in Greece the problems are not alleviated by compelling the country to reduce its growth because the debt relative to GDP simply increases, and that’s what the policies have been doing. In the case of Spain, which is a different case, the country was actually doing quite well up until the crash: it had a budget surplus. There were problems, but they were problems caused by banks, not by the government, including German banks, who were lending in the style of their US counterparts (subprime mortgages). So the financial system crashed and then austerity was imposed on Spain, which is the worst policy. It increases unemployment, it reduces growth; it does bail out banks and investors, but that shouldn’t be the prime concern.
Europe needs stimulus – even the IMF is coming around to that position – and there’s plenty of capacity for stimulus. Europe’s a rich place, there are plenty of reserves available to the European Central Bank. The Bundesbank doesn’t like it, investors don’t like it, banks don’t like it, but those are the policies which should be pursued. Even writers in the US business press agree with that. If Europe doesn’t change policy, they’re just going to go into a deeper recession. The European Commission just released its report on expectations for next year, which are for very low growth and increasing unemployment, which is the main problem. It’s a very serious problem: unemployment is destroying a generation, which is not a trivial matter. It’s also economically outlandish. If people are forced into unemployment then that’s not only extremely harmful from a human point of view – to individuals – but even from an economic point of view. It means there are unused resources, which could be used to grow and develop.
Europe’s policies make sense only on one assumption: that the goal is to try and undermine and unravel the welfare state. And that’s almost been said. Mario Draghi, the President of the European Central Bank, had an interview with the Wall Street Journal where he said that the social contract in Europe is dead. He wasn’t advocating it, he was describing it, but that’s essentially what the policies lead to. [++]