Chancellor Merkel appears to losing supporters for austerity even within her own country and across Europe. Does Europe have to wait for the next German national election to get out of its crisis, or can somebody talk sense into German leadership already today?
Without neglecting the need for reforms in heavily undebted countries, this road of austerity does not seem to go the right direction any more. Higher tax percentages yield lower tax returns. more flexible employment conditions do not foster employment because companies are driven out of the market. Reforms of welfare funds do not perform well because employment contribution fall as unemployment rises.
True Greek elites are still into their blissful oblivion minding for party politics more than for the country and Europe, but what about the German leaders then? One might argue: thank God the next French election is coming and Sarkozy needs to show his country he can pull it out of recession AND solve the European crisis. And thank God that the Brits are too neo-liberal for such deflationary policies.
European citizens will be saved from poverty for the ‘wrong’ reasons it seems.
Speaking to journalists on Wednesday in Davos, former investor and philanthropist George Soros accused Germany of acting like a strict disciplinarian over the rest of Europe, relegating its neighbors to “the status of third world countries” that must pay back their debts in a foreign currency. “The problem is that the austerity that Germany wants will push Europe into a deflationary death spiral,” he said. “The economy will contract and tax revenues will fall. So the debt burden … will actually rise, requiring further budget cuts and setting in motion a vicious cycle.”
Soros is not alone in his criticism of Germany. In an article for the Financial Times on Monday, World Bank president Robert Zoellick also urged the country to take a greater leadership role in combating the crisis.
On Thursday afternoon, UK Prime Minister went as far as calling the Europe-wide financial transaction tax proposal supported by Merkel “madness,” saying it was a distraction and European leaders would do better to concentrate on dealing with the debt crisis.
“Tinkering here and there and hoping we’ll drift to a solution simply won’t cut it anymore,” Cameron said of the euro crisis. “This is a time for boldness, not caution.”