No matter how bad the economy looks in austerity-hit Europe, Merkel does not and probably never will understand economics. She’s played to the pro-austerity crowd – fanning the flames with expertise – and there’s almost no way she can work herself out of that position.
In Merkel’s eyes, austerity worked well for Germany and now it’s working well in places such as Spain. Except it’s not. Yesterday the NY Times ran a depressing article about Spaniards now searching for food in trash bins. (And remember, Spain’s budget had a surplus before the crisis.) In Greece, the plan to pay back the impossible loans is far off track but again, we all knew it would be that way at the start.
Even in the non-eurozone UK, austerity is now costing the country billions due to families quitting work to help sick family members. This means no more tax revenue and more stress on the system. It’s not working and it won’t work. There are countless examples of austerity failing miserably in a shrinking economy. Austerity has only worked during a growing economy and that does not exist in Spain, Greece, Portugal or the UK.
With this attitude, things will only get worse in Europe. Let’s not forget who keeps insisting on driving the EU economy into the ground. The bankers caused the crisis, but it’s Merkel who is making a bad situation worse.
The Chancellor made her remarks in a speech to the Federation of German Industries on another day of turmoil in the currency bloc. The Spanish government faced mass anti-austerity protests in Madrid, while Greece was reported to be billions of euro off-track in meeting the terms of its bailout. Meanwhile, the ratings agency Standard and Poor’s once again highlighted the grim state of the EU economy, forecasting that the eurozone would not return to growth until at least 2014.
Against such a gloomy backdrop, Ms Merkel insisted: “We need to take a deep breath to overcome this crisis. We must make the efforts that will allow Europe to emerge from the crisis stronger than it went in.”
The German leader conceded that hard-won reforms in southern Europe had helped, but said there was still work to do. The markets, she added, had doubts about their ability pay back their debts. Her comments were overshadowed by the continuing crises in Spain and Greece. The government in Athens conceded yesterday that it would need between €13bn to €15bn more in funding if it were given the two-year extension to the bailout plan it has been requesting.