The euro debt crisis is far from over and it is getting worse by the day. Yet, when, in 2010, Greece asked, for the first time, for a bailout, we were told it wouldn’t happen again. Three years after the Greek tragedy the eurozone crisis has escalated. First Greece, then Ireland, Portugal, Cyprus and Brussels has not learned the lesson yet, and continue to pursue its failed policies.
The measures the EU and Eurozone countries have taken to prevent the spread of the Eurozone sovereign debt crisis have failed. Brussels has failed so far to find a way out of the crisis, it has failed politically and economically. All the mechanisms that provide financial assistance to Eurozone Member States in financial difficulties, the so-called bailout funds, do not work and they are transforming the EU into a transfer and liability union.In fact, if ever any more proof was needed that the bailouts do not work, they are just piling up debt, it is the Greek and Portuguese current situation.
The EU leaders have not been able to handle the present crisis.There have been countless European Councils, Ecofin and Eurogroup meetings but they have failed to come up with a successful response to the crisis. All the EU summit’s conclusions have given nothing else but illusion that they have provided solutions to it. The EU has created all this mess and has proved incapable of sort it out.
The Cyprus bailout, once again, has shown Brussels blind determination to save the euro at all costs, regardless of the misery caused upon citizens of the bailed out countries.The austerity measures imposed by Brussels, particularly on the bailout countries, are not working and social conditions and living standards are getting worse. The Eurozone, particularly Greece, Portugal, Ireland, Italy, Spain, and Cyprus just have more debt, more unemployment and more recession. These measures have been forced onto citizens, however they were not allowed to have a say on such important matter affecting them. As Iain Martin pointed out “The euro is doing this. Countries which should have their own currencies, and be able to devalue in order to begin the process of recovery, are straitjacketed by a one-size fits all policy.” These countries face a long period of stagnation, high unemployment, and painful structural reform. These countries are being sacrificed to save the euro and democracy is being undermined.
There are doubts whether the bailed out countries would be able to continue to implement the austerity measures with their population protesting on the streets. There have been demonstrations against the austerity measures all over Europe. The financial crisis and the austerity measures have lead to further democratic deficit and lack of legitimacy not only at Europe but also national level. Some countries, such as Greece and Portugal, endured a political crisis at the same time as a financial one. As analysts have been saying, the political crisis in Portugal shows the eurozone crisis is far from over.
The state of economic activity continues to deteriorate, particularly in the eurozone, as it continues, and will continue, to face low growth or no growth, mass unemployment and excessive debt. There are no signs of recovery. Recent figures published by the Eurostat, clearly show that the eurozone recession has not gone away. According to Eurostat, GDP fell in the euro area by 0.2% and by 0.1% in the EU27 during the first quarter of 2013, compared with the previous quarter. The European Commission’s spring economic forecasts have also confirmed that the eurozone will remain in recession in 2013. The EU's economy will continue shrinking this year. The GDP will shrink 0.3 percent in 2013 in the eurozone. The 2013’s annual GDP growth has been estimated at -0.1% in the EU and at -0.4% in the euro area.
Brussels is now focusing its attention on growth, however it has not a clue how to generate it. Its economic policies to generate growth in Europe and create jobs have failed in the past and it will continue to fail. In June 2012, the European Council agreed on a package of measures to boost growth and jobs, the so called “Compact for Growth and Jobs", which “constitutes the overall framework for action at national, euro and EU levels, mobilising all levers, instruments and policies”, and this would be done “in the context of the Europe 2020 Strategy.” However, Brussels plan to increase growth entails increasing grants and subsidies, increasing, therefore, EU spending. Yet, the solution does not lie in injecting more money into the public sector and to ventures and projects that, in fact, have failed, according to several reports of the European Court of Auditors. Hence, the growth strategy will be another failure, as the Lisbon Strategy, as it fails to recognise that the EU policies and regulations are the problem not the solution. In fact, the European Council noted in June 2013 “While good progress has been made in delivering on these measures, some of which are already bearing fruit, more efforts are required.”
The European Council also agreed on the launch of “a new "Investment Plan" to support SMEs and boost the financing of the economy.” The EU leaders called on the EIB “to implement its plan to increase its lending activity in the EU by at least 40% over
2013-2015.” However, the EU leaders should tackle first the causes of no growth in Europe, namely repealing the EU employment and social laws, which have been strangled the small and medium-sized business in Europe. Greece, Portugal, Spain, Ireland as well as Italy can only retrieve from their current situation with growth but that won’t happen unless there is a repeal of the EU employment and social laws.
The European Commission has already adopted several Communications, but any serious action on deregulation is yet to be seen.
The Commission initiated a consultation in order to ascertain “where EU regulation might be impeding jobs and growth and to identify areas or issues which would require further examination and action where necessary.” SMEs have identified the top 10 most burdensome EU laws, such as REACH, VAT, General Product Safety and market surveillance package, labour market-related legislation, Working time directive.
The European Commission said, it “has put SMEs at the heart of its smart regulation agenda to help growth and job creation in Europe”. However, it is far from clear whether the Commission will address the concerns expressed by SMEs. Bill Cash noted, “despite all the protestations and initiatives, and 20 summits in 20 months, there is zero growth in the EU?”. Stressing “past hopeless performance”, Bill Cash believes that the burden of European regulation on small and medium-sized businesses, and other businesses wont be reduced. In fact, the Commission has been promising but no serious action has been taking yet to reduce the burden of EU regulation.
In the meantime, the unemployment rate also continues to rise, particularly in the Euroarea. The European Commission has acknowledged that growth is very slow to restore the unemployment situation across the EU. The austerity programmes are creating even more unemployment. In fact, as Dr. Stephen Davies, Institute of Economic Affairs's Education director pointed out “The really big cause for the very high rates of unemployment in general and amongst young people, in particular, is the catastrophic effect of the euro and of the attempts being made – the desperate attempts that are being made – to keep it going.”
According to Eurostat the euro area unemployment rate was 12.2% in May 2013 and 11.0% in the EU27, they have risen substantially compared with last May , when they were 11.3% and 10.4% respectively. Whereas the lowest unemployment rates were recorded in Austria (4.7%), Germany (5.3%) and Luxembourg (5.7%), the highest were recorded in Spain (26.9%) and Greece (26.8% in March 2013). The youth unemployment is getting even worse, it has risen to utterly unacceptable levels. The youth unemployment rate was 23.9% in the euro area and 23.1% in the EU27, compared with 23.0% and 22.8% respectively in May 2012. Whereas the lowest rates were recorded in Germany (7.6%), Austria (8.7%) and the Netherlands (10.6%), the highest were recorded in Greece (59.2% ), Spain (56.5%) and Portugal (42.1%).
The EU leaders met on 27 June to assess the EU’s youth employment growth and competitiveness. The European Council noted, “youth unemployment has reached unprecedented levels in several Member States” and stressed that the high number of young people in Europe who are unemployed is unacceptable. The EU leaders agreed “on a comprehensive approach to combat youth unemployment”. Despite stressing that
“Urgent action must be taken”, the measures agreed by the EU leaders to tackle youth employment are unlikely to have an impact on the problem, as they are not only too costly but also ineffective. According to the European Council conclusions “all the necessary preparations will be made for the Youth Employment Initiative (YEI) to be fully operational by January 2014”. Under this scheme EUR 6 billion will be disburse during the first two years of the next Multiannual Financial Framework to beneficiaries in EU regions having youth unemployment rates above 25%. Moreover, the Structural Funds will be particularly focus on youth employment and “The Commission and the Member States will exploit all possibilities offered by the European Social Fund (ESF), which is one of the main financial tools at EU level for this purpose, including through supporting the creation of new jobs for young workers.”
The policies that are being pursued wont bring unemployment down. Indeed, as Wolfgang Münchau pointed out in the Financial Times, the programmes to deal with youth unemployment “are a waste of time and money if not supported by macroeconomic policy”. However, Brussels plan to fight against unemployment just involves programmes with limited impact, which require more money. As Martin Callanan said, “A good place for us to start would be to scrap some of the EU's job-killing legislation like the Working Time Directive that actually prevents people from working, or the Agency Workers Directive which makes it harder for young people to get a foot on the employment ladder.”
It is important to recall that the euro was intended to create stability, complete the Single Market, eliminating exchange rate risks and foreign transaction costs, stimulate economic integration, and ultimately to generate growth and employment. The EU has failed to deliver what it promised. The euro is creating uncertainty, hostility and a division between north and south of Europe. The above mention figures clearly show the differences between the Northern and Southern EU Member States. Bill Cash, during the Maastricht treaty debates, predicted that 'there will not be an equal union; there will be an imbalance.' He noted, 'Any modified form of the discredited system would simply not work because a series of divergent economies cannot be made to converge. Countries such as Germany on the one hand and Greece and Italy on the other inevitably will not achieve currency parity.'
In fact, this has all been predicted. Bill Cash predicted massively high unemployment, riots in the streets, the rise of the far right and the implosion of the European economic system. He said, in 1993, that 'the Maastricht provisions relating to economic and monetary union and to convergence are likely to impose immense pressure for more unemployment' and 'will create civil disorder in parts of Europe.' According to the ILO since 2008, the beginning of the economic and financial crisis, there has been an increase of strikes and demonstrations in most EU member states. The organisation also noted that the risk of social unrest "is highest among the EU-27 countries – it increased from 34% in 2006-07 to 46% in 2011-2012."
The euro, and Brussels failing policies, is creating social unrest throughout Europe. Taking into account the current state of affairs, a popular revolt might be on the Eurozone cards. Brussels’ assumption that the only possible way to overcome the euro crisis is through further integration, is wrong and, if they continue to follow this path there would be irreversible consequences.
