‘Sick’ economy the problem, not austerity

A Greek scenario which saw furious masses unseating their government through ballots, accusing it of conceding too much to harsh austerity measures that had left them struggling to make ends meet, is being played out in more European countries: Spain, Portugal and Ireland…The list could grow further.
The angry voters in these countries are venting their wrath on established political parties for imposing harsh rules that have impacted their living conditions.
The dust raised by the austerity measures is choking the ruling political parties that embrace such unpopular economic policies. In fact, the anti-austerity camps are getting increasing support. In Ireland, voters punished the outgoing coalition government of the centre-right Fine Gael and Labour parties, which had slashed public spending and raised taxes in a gruelling austerity
programme required by an international bailout deal.
While in Spain, the vote on December 20 produced a parliament with 200 new members out of 350, but no party is able to form a government as support for two new parties — the left-wing Podemos and centre-left Ciudadanos — eroded the standing of traditional forces.
In neighbouring Portugal, the Left Bloc made a historic breakthrough in parliamentary elections in October to take 10.2 per cent of votes in an election that resulted in an unstable minority Socialist government supported by the Left Bloc and other parties.
From the economic point of view, the reforms dictated by the austerity measures aren’t necessarily wrong. All the three countries, which have suffered the brunt of economic crisis, needed loans to shore up their economies. So there was no way for them to decline the austerity measures imposed by international institutions in exchange for loans from the International Monetary Fund and European institutions.
However, the return of Ireland to strong economic growth that saw it becoming the fastest-growing economy in the Eurozone, was not enough to convince voters to back the government which had imposed austerity. But they didn’t immediately feel the benefits of the growing economy, as they suffer the effects of job insecurity, lower wages, higher taxes and the aftermath of swinging cuts to public spending.
The ordinary masses don’t care much for ‘good indicators’ that don’t touch their living conditions. That is why it did not move Irish people when their government, led by the Fine Gael political party, became the first government to pay back its debt of 83 billion euros ($93.8 billion).
Unlike Greece — which remained deeply indebted at the time of its elections –Ireland has not only completed its recovery programme but is thriving, by many indicators. It had 7 percent growth in the first nine months of 2015, the highest in the European Union, and unemployment has continued to steadily drop.
Ireland accepted billions of euros in a cash bailout from European lenders in exchange for unpopular austerity measures such as budget cuts, social welfare reductions and higher taxes, but recovered to become Europe’s success story.
After years of austerity, the parties that had spearheaded those unpopular economic reforms in countries across Europe were increasingly ousted by left-wing mavericks.
In Spain and Portugal, it was deficit of trust in the ruling governments. The masses felt that austerity measures were too harsh. Governments should have put the plans in place after taking the people into confidence. But they didn’t do so and paid the price.
It is imperative now that whoever comes to power in these countries should take action to ensure public confidence in the banking and financial systems, while also laying the groundwork for structural investment reforms in the future. They should look for new and sustainable ways to invest, create confidence in the market as well as foster growth in advanced technologies and industries.
Indeed, the problem is not austerity as many believe, but it is the underperformance of certain economy that requires loans and reforms to restore the growth. Dublin is a glaring example of how shackles of austerity can be broken and economy can be revived.