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The European Conundrum: Stagnation, Massive Unemployment and Rising Debt - Despite Austerity

Tuesday, 04 November 2014 09:58 By C.J. PolychroniouTruthout | News Analysis 
2014.11.4.Euro.MainFive years after the 2008 financial crash reached Europe, its crisis is actually spreading. (Image via Shutterstock)New data reveals, as we will show below, that Europe is the sick man of the global economy once again. But more to the point, it is high time to acknowledge that the European Monetary Union (EMU) is, for all practical intents and purposes, no longer viable.
Ever since the latest global financial crisis begun in 2008, Europe's monetary union is mired in a severe economic crisis from which it is simply unable to recover. For starters, the euro crisis has had a devastating impact on the peripheral eurozone countries (Greece, Portugal, Ireland, Spain, Italy and Cyprus), and it consolidated even further the division between north and south, thus putting permanently to rest illusive notions like convergence and cohesion inside the EMU.
The crisis management approach adopted on their behalf by the core euro-zone countries - Germany in particular - made things much worse. The so-called "rescue plans" enforced by the troika of the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF) for the crisis-ridden euro member states (Italy excluded) ravaged the southern economies as the harsh austerity policies administered caused massive declines in domestic demand and sharp rises in long-term unemployment, brought about brutal cuts in social programs and public investments, and resulted in rapidly declining standards of living and large-scale migration.

Five years after the financial crisis of 2008 reached Europe's shores, the euro crisis is not only not slowing down, but it is actually spreading, affecting more and more member states and giving rise in turn to growing popular discontent about the European integration process with far-reaching and unforeseen consequences.

GDP in Spain, Portugal, Ireland, and Italy is on the average 7 percent below the pre-crisis levels; Greece's GDP is nearly 25 percent below its pre-crisis peak. The latest Eurostat data show that the unemployment rates in the peripheral countries are stratospherically high, indicating that there is no recovery. In Greece the official unemployment rate is over 26 percent while in Spain it is nearly 25 percent. In Portugal it is 14 percent, in Italy 12.3 percent, and in Ireland (the country with the highest net migration level in Europe) at over 11 percent.
In addition, all of the bailed-out countries have seen their public debt ratios explode, leaving them in a state of debt bondage and permanent austerity from which they are unlikely to escape any time in the foreseeable future. In Greece, government gross debt exploded from 126.8 percent at the end of 2009 to 175 percent at the end of 2013 (and is expected to grow to exceed that mark by the end of 2014); Spain's public debt ratio grew from 52.7 percent in 2009 to over 92 percent at the end of 2013 (and is expected to reach the historic mark of 100 percent by the end of 2014); Ireland's grew from 62.2 percent in 2009 to over 123 percent at the end of 2013; and Portugal's, from 83.6 percent in 2009 to 128 percent at the end of 2013. (1)
Five years after the financial crisis of 2008 reached Europe's shores, the euro crisis is not only not slowing down, but it is actually spreading, affecting more and more member states and giving rise in turn to growing popular discontent about the European integration process with far-reaching and unforeseen consequences. (2)
All across the Eurolands, socially intolerable levels of unemployment, stagnating and/or declining wages and lack of growth prospects work in tandem with the undemocratic status of eurozone governance - the illegitimate policies dictated mainly by Germany - and the lack of a vision for the future either at the domestic or the European level to produce a European public sentiment that is increasingly Euroskeptic and in fact outright hostile to further integration. (3)
It has been widely noted that European policy has been quite short-sighted in dealing with the euro crisis because the policies pursued aimed at buying time and nothing more. This is true, but in a partial and rather superficial manner only as this line of criticism ignores the fact that the European integration project is built on extreme neoliberal premises and assumptions about economic growth and development that leave little room for the kind of policy thinking, let alone policymaking and implementation, that the so-called "master-economist" envisioned and articulated in an attempt to address the crisis of capitalism of the 1920s and the Great Depression of the 1930s. (4)
Moreover, the evolution of European economic integration since the Maastricht Treaty has rested on rather undemocratic political foundations, thereby de facto excluding claims based on empowered participation, for the explicit aim has been principally to serve the goals and interests of European capital and European corporations rather than the common good of Europe's citizens.(5)
The European integration process has always been about strong states imposing their will on weaker ones and international capital finding wider and more open space in which to operate and thus to run roughshod over domestic labor. The bailout schemes serve as unquestionable testimony to the eurozone's antidemocratic governance and imperial bent.

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