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Euro Zone Crisis: What More Austerity Means

Euro Zone Crisis: What More Austerity Means

Spanish Prime Minister Mariano Rajoy announced €65 billion of “exceptional measures to exceptional circumstances,” of spending cuts and tax hikes to be carried out over the next two years:

  • €3.5 billion in cut to public spending
  • the number of public companies will see a “drastic reduction”
  • cuts to civil servants benefits
  • no more “Christmas bonus” for senior workers
  • the selling of state assets including airports and railways
  • 20 percent decrease in funding for unions and political parties
  • 21 percent increase from 18 percent for the value added tax (VAT)

The reaction among economists was not upbeat. The Spanish government must impose some sort of structural reforms to receive the billions of euros in bailout funds — possibly €100 billion — from the European Central Bank’s bailout fund.

Unemployment in Spain is nearly 25 percent and the deficit is the central government is 3.4 percent of gross domestic product.

Clashes were already underway in Madrid. More than 8,000 miners have been on strike since the end of May and many had walked for three weeks to Madrid to a rally whose turnout would be, unions hoped, at least 25,000. At some point the protests saw police fire rubber bullets, demonstrators throwing fire crackers and rocks. At least 22 were injured and sevem arrested. The Guardian described the protests as possibly “the most serious protests we’ve seen in the eurozone for a few months.”

Ship builders in Greece were also on strike and thousands of doctors and nurses in Portugal.

Rumors have emerged, and are bring downplayed, of dissension within the leaders of Greece’s unity coalition. New finance minister Yannis Stournaras is being criticized for “failing to broach the issue of Greece’s demand to extend Greece’s deadline for fiscal adjustment.” Addressing the Greek Vouli (Parliament), Alexis Tsipris, leader of the radical left party Syriza, condemned Stournaras for in effect “surrendering” to Greece’s lenders about the terms of the bailout for Greece.

Besides strikes, Greece has seen an upsurge in attacks on immigrants, with most attributed to members of far right party Chrysi Avgi (Χρυσή Αυγη), the Golden Dawn.

In Ireland, even members of the middle class are turning to smuggling in items such cigarettes. The official price of a pack of cigarettes is about €9.20 due to the VAT; black market prices are about €3.20.VAT is 23 percent in Ireland.

Small wonder analysts, hearing of Rajoy’s plan to raise Spain’s to 21 percent, dubbed it poor medicine.

Related Care2 Coverage

Euro Zone Crisis: Why Finance Ministers Stay Up All Night

Euro Zone Crisis: For Twenty More Years?

Euro Zone Crisis: Banks Lower Rates But Confidence Stays Low

 

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Photo taken June 11, 2012, in Madrid by Popicinio_01

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49 comments

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9:15AM PDT on Oct 23, 2012

I lived in Spain for about a year during Franco's reign. There was a Guardia Civil with a machine gun posted on many corners. There was an air of sadness in the country. Then they had more freedom and wealth in the country. Then that was hit hard. You can't blame them for being angry at people who took that away from them.

7:36AM PDT on Sep 2, 2012

It would be refreshing to see the government leaders discussing these issues with the citizens in a civilized manner rather than bringing in police thugs and escalating violence.

6:53AM PDT on Jul 18, 2012

So, they cut money out of the local economies so people have less to live on and spend, then they buy up the public services like the railways and airports, call it 'austarity measures' and claim it is nescessary to prevent inflation? And they have to do this so they can get 'bail out money?
This is just plain robbery, and untill people have enough wits to recognize it for what it is and understand that this is how poverty is created so those living it can be further exploited, the world money printers will get away with it.More and more, we are getting glimpses into how the global monetary system works and even though they tell us that this is 'just how it is', I'm not buying that this is how it has to be.

12:46PM PDT on Jul 13, 2012

è un momento orribile, non ci dormo la notte

1:55AM PDT on Jul 13, 2012

Europe seems to be going down the toilet.

8:20PM PDT on Jul 12, 2012

the current economic paradigms are failing in so many ways it is hard to believe anyone could feasibly defend them. All the scholars, however, seem clueless to devise a better approach while those who really sucking on the productive seem to be making out like the bandits they really are. This doesn't bode well for the future.

7:35PM PDT on Jul 12, 2012

@Nadine D..."Democracy will cease to exist when you take away from those who are willing to work and give to those who would not work." Thomas Jefferson.

If Jefferson said this, and I'm not certain as to why he would, he would not have been speaking of people who would like to work but cannot due to lack of available employment; rather I would think he was speaking of robber barons and bankers. Those who really do not labor, but use people and their assets for a living; often badly (and who are killing democracy)

7:33PM PDT on Jul 12, 2012

@Nadine D..."Democracy will cease to exist when you take away from those who are willing to work and give to those who would not work."

If Jefferson said this, and I'm not certain as to why he would, he would not have been speaking of people who would like to work but cannot due to lack of available employment; rather I would think he was speaking of robber barons and bankers. Those who really do not labor, but use people and their assets for a living; often badly (and who are killing democracy).


4:25PM PDT on Jul 12, 2012

Oh for goodness sakes, the countries in financial trouble are the same ones who have always been in financial trouble, even before there was a Euro and even before there was an EU. I have no clue why anybody outside of Europe is even paying attention to this. That Spain, Portugal, Greece, and Italy have economic problems is hardly a novelty. That those freeloaders expect Germany, France, Scandinavia, et al to fix their problems is nothing new either. This is simply the 50s and 60s all over again.

4:08PM PDT on Jul 12, 2012

Those in charge in Europe are apparently only interested in fattening the wallets of the uber rich. This is the forced implementation of the Chicago School of economics solution all over again. When the financial geniuses behind this get done, Europe will look a great deal like South America in the 1970s-1980s; people will need a wheel barrel full of money to buy a loaf of bread. As these austerity measures are put in place there will be dramatic increases in unemployment, hyper-inflation, and the selling off of any and all public assets that might in the long run have helped the economy.

This is the U.S. CIA in South America; it is United Fruit updated. It is the violent insertion of austerity where what is needed is to stimulate in order to resuscitate.

In September 1973, supported by the CIA, Augusto Pinochet overthrew the government of Salvador Allende. This was done ostensibly to prevent the spread of Marxism in South America (sound familiar). The rationale was that Allende must be a Marxist because he was promoting economic growth from the bottom up, and he was ensuring that most of Chile's assets and resources were nationalized. These measures had been taken because prior to that, large American corporations (United Fruit, ITT, etc. were taking economic control of the country.

When Pinochet's "revolution," ended, influenced by Milton Friedman, he brought in a cadre of Chicago school economists and immediately set the country on an austerity path. Unemployment

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Kristina Chew Kristina Chew teaches and writes about ancient Greek and Latin and is Online Advocacy and Marketing... more
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