Time to say basta to the nonsense of austerity

Citizens across Europe are being asked to replace politics and economics with a sheer act of faith in austerity. But it's clear that they are starting to feel the need to stop this nonsense, and European leaders need to take this seriously.

Basta! After two years of reforms, Spaniards are all too familiar with the deadly ritual Europe’s strategy to fight the crisis has become. Every new reform package adopted is praised by European institutions and met with a pat on the back. Then, when recession looms, unemployment jumps again and risk premiums keep rising, Spaniards are asked to face yet more austerity. If and when you question whether the strategy amounts to a self-inflicted recession, you are told not to worry and encouraged to be patient and wait for the results. If faith is defined as the capacity to believe without seeing, Spaniards are being asked to replace politics and economics with a sheer act of faith in austerity.

Both citizens and elites in Europe seem to feel the need to stop this nonsense. The collapse of the Dutch government and the victory of François Hollande in the first round of the French presidential elections point in the same direction: a rebellion against austerity. But this could be just the beginning: upcoming elections in Greece, next month’s Irish referendum and the French legislative elections in June might well turn this into a major crisis. Looking at the damage that angry citizens have inflicted on the EU in the past decade, European leaders would do well to take their anxieties seriously.

Next week it will be two years since José Luis Rodríguez Zapatero’s socialist government adopted the first austerity measures and passed a series of structural reforms. These measures meant the electoral suicide of the Spanish Socialist party. Now the Conservatives find themselves in a similar situation: little more than 100 days after gaining power they have alienated citizens by pushing austerity well beyond their electoral mandate, only to find themselves as heavily penalised by the financial markets as Mr Zapatero was.

True, markets are making life difficult for the Spanish government, but that is no surprise. What is outrageous is that, while Spaniards face recession and soaring unemployment, Jens Weidmann, the Bundesbank president and European Central Bank council member, sits back and says that 6 per cent interest rates for Spanish sovereign debt “are not the end of the world”. At the same time, Nicolas Sarkozy campaigns for re-election by claiming his rival Mr Hollande would replicate Spain’s disaster should he make it to the Elysée. So much for solidarity among conservative governments.

Something must be wrong in the EU when a pro-Europe, pro-austerity conservative government is ignored by Berlin or, worse, humiliated by France. Something must be wrong too when the International Monetary Fund endorses your programme of reforms and asks whether you really need such tough fiscal consolidation at a time of recession – yet nobody in Brussels, Berlin or Frankfurt cares to listen. Equally worrying is that the European Commission happily endorses Spain’s severe cuts in education and research spending, deliberately ignoring the fact that these are incompatible with both the sustainable growth model it has been advocating for a decade and Spain’s urgent need to move away from an economic model based on real estate.

In private, conservative elites in Spain recognise that austerity targets have to be softened and that a new policy mix is needed. In public, they keep silent because they are too weak to confront Berlin, Brussels and Frankfurt; too scared of financial markets to lead the revolt; and too afraid of Spanish citizens finding out that they could be spared part of the sacrifices they are asked to make, if only Europe worked properly.

Who governs? In the EU as we teach it to our students, the commission speaks for the general interest and has the right of initiative, while member states and citizens have their say through the European Council and parliament. But in today’s Europe, EU institutions have been hollowed out as real power flows back and forth from Berlin to the corridors of the ECB, where the real battles about the crisis are fought in opacity.

The fiscal compact, the most unbalanced and asymmetric treaty member states have ever signed, is the best illustration of the new Europe: while austerity is strictly enforced, growth is barely promised. In the good old EU, member states were equal and treaties represented a compromise between competing visions of Europe. Now, Europe is about asymmetries in power and fear for the future. Europe now resembles Thomas Hobbes’ description of man’s life in its natural state: “poor, nasty, brutish and short.” Two years on, not a single growth measure has been adopted. Time to say: basta!

This article first appeared in the Financial Times