Soros: Europe Must Prioritize Solidarity Over Austerity

Wednesday, 31 Oct 2012 12:59 PM

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Europe must craft policies that aim to extinguish the debt crisis and promote solidarity among all member nations, as too much focus on austerity can pit creditor against debtor and threaten the stability of the continent, said billionaire investor George Soros.

Europe has already arranged several bailouts, ranging from packages aimed to prop up the Spanish banking sector to sovereign rescue funds for Greece.

Such lifelines, sovereign ones especially, come attached with austerity measures, such as requirements to cut spending or raise taxes, as creditor nations like Germany want to see more streamlined governments that can better repay their debts.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

Debtor nations have complained that austerity measures in the past have been too harsh and have obliterated growth rates and punished ordinary citizens, thus making painful recessions even more stinging and fueling anger.

“Member countries are now divided into two classes — creditors and debtors — with the creditors in charge. As the largest and most creditworthy country, Germany occupies a dominant position,” Soros wrote in a Project Syndicate column.

“Debtor countries pay substantial risk premiums to finance their debt, which is reflected in their high economy-wide borrowing costs. This has pushed them into a deflationary tailspin and put them at a substantial — and potentially permanent — competitive disadvantage vis-à-vis creditor countries.”

Protests in the streets of Athens and Madrid have turned violent, as the pain of austerity becomes increasingly unbearable for many.

Recent elections in Greece saw a strong showing by the Golden Dawn political party, which adheres to a neo-Nazi doctrine. This does not bode well for a continent that has worked so hard to rise from the ashes of World War II and become an economic powerhouse.

Germany, in the meantime, finds itself as Europe’s leader, a role the country never sought nor wants.

“Germany remains willing to do the minimum – and nothing more – to hold the euro together, and the EU’s recent steps have merely reinforced German resistance to further concessions. This will perpetuate the division between creditor and debtor countries,” Soros wrote.

”A widening gap in economic performance and political dominance is such a dismal prospect for the EU that it must not be allowed to become permanent. There must be a way to prevent it — after all, history is not predetermined. The EU, originally conceived as an instrument of solidarity, is today held together by grim necessity,” Soros added.

“That is not conducive to a harmonious partnership. The only way to reverse the trend is to recapture the spirit of solidarity that animated the European project from the start.”

Former Greek Prime Minister George Papandreou agrees, pointing out in a column appearing in The Christian Science Monitor that the politics of fear must be overcome.

“Like ghosts from the past, we see political violence, xenophobia, migrants being scapegoated and extreme nationalism creeping into our public debates — even into our parliaments. This is a Europe diverging from its founding principles. Principles that rendered nationalistic hatreds an anathema,” Papandreou wrote.

“Instead of real, necessary reform and fiscal responsibility, we are implementing an overdose of austerity — dealing more with symptoms and less with the root causes of the economic woes of Europe. Instead of rewarding superhuman efforts, we are condemned for our shortcomings.”

The crisis is a political one as much as it is an economic one, one that calls for a strengthening of European institutions and economic strategies that call for investment in human capital that come side-by-side with debt-reduction measures.

Policymakers must avoid slapping harsh austerity measures that punish the ordinary citizen.

“We do have a choice. Either we empower Europe and its citizens and become a catalyst for humanizing our global economy, or globalization will dehumanize our societies and undermine the European project,” Papandreou wrote.

“As a citizen of Europe, I vote for the first choice.”

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

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