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AK EUROPA: Austerity policy has been a huge mistake!

This week AK EUROPA, the Brussels Office of the Austrian Federal Chamber of Labour, the ÖGB Europabüro, the Brussels Office of the Austrian Federation of Trade Unions and the European Social Observatory (OSE) hosted an event under the heading “Economic Crisis and Austerity in Southern Europe: Threat or Opportunity for building a Sustainable Welfare State?” In particular the welfare state in the Southern European countries was most badly affected by both economic crisis and austerity policy. Against this background, the discussants analysed the measures adopted in these countries before and after the crisis and examined the erosion of social rights, which is often associated with these.

GUILLÉN: austerity policy resulted in falling wages, unemployment and a sharp rise in the poverty rate

Ana M. Guillén, Professor of Sociology at the University of Oviedo, Spain, began by giving an overview of the development of social systems in Southern Europe. Admittedly, there had been different starting positions in Portugal, Spain, Italy and Greece; however, the austerity policy did have a similar impact on their welfare state structures. Hence, primarily, all countries made massive spending cuts in respect of social security and public services to contribute to a consolidation of budgets, whilst introducing tax increases at the same time. The results were falling wages, unemployment and a sharp rise in the poverty rate. Ana Guillén also pointed out that the cuts in social services by the technocratic government in Italy under Mario Monti were far less severe than in countries headed by political parties. Quite obviously, Monti was in a better position to resist the Troika's policies and not to make cuts exclusively in the social sector.

PETMESIDOU: cuts in the health sector will turn out to be a boomerang for budgets

Maria Petmesidou, Professor of Social Policy at Democritus University of Thrace (Greece), spoke about the impact of austerity policy on healthcare in Southern Europe. After the outbreak of the crisis, Italy, Greece, Spain and Portugal had reduced public health funding. In many cases, costs were passed on to patients. At the same time, access to treatments and medication was made more difficult whilst the number of hospital staff was reduced. In turn, the cuts had a massive impact on patients. Due to a lack of treatment, the HIV infection rate of drug addicts in Greece rose by almost a factor of fourteen. However, Petmesidou also warned against the negative effects on the economic output of the states affected. As a consequence of worsened public health, austerity measures would turn out to be a boomerang and become an ever greater burden on budgets in the long term.

MARTERBAUER: austerity policy has been a huge mistake

Referring to the title of the event Markus Marterbauer, Head of the Department of Economics and Statistics of the Chamber of Labour Vienna, pointed out that many threats and cuts in the welfare state were still to be feared. In particular in Southern Europe, cuts by way of structural reforms had been carried out, which, for example led to the destruction of collective agreement systems, which ultimately resulted in actually undesired higher economic volatility. In this context, he also quoted the Liberal Belgian economist Paul de Grauwe, who only just demanded an end to structural reforms and clearly came out in favour of public investments. According to Marterbauer, the International Monetary Fund (IMF) had also recently concluded that the austerity policy had been a huge mistake, as it had did not solved the debt problems in the Eurozone, but made them worse. Finally, he also mentioned the USA, which emerged much better from the crisis because of investments.

PINELLI: Austerity policy did not come out of thin air

Dino Pinelli, Senior Economist, European Commission, DG ECFIN, immediately addressed the scrutinized austerity policy and pointed out that by no means it had come out of thin air. It was rather meant as a reaction to reassure the financial markets, so that Member States were again able to fund themselves. However, the states themselves were also to blame for the poor situation in Southern Europe as they had failed to carry out the necessary reforms, be it in the pension sector or in respect of financing the social systems in general. In spite of this he admitted that there might have been a less painful way out of the crisis for the states of Southern Europe; however, it would not have been very easy to find alternatives.

Further information:

PowerPoint Presentation von Ana M. GUILLÉN (available in English only)

PowerPoint Presentation von Maria PETMESIDOU (available in English only)

PowerPoint Presentation von Dino PINELLI (available in English only)

Special Issue: Economic Crisis and Austerity in Southern Europe: Threat or Opportunity for a Sustainable Welfare State? Edited by Maria Petmesidou & Ana M. Guillén (available in English only)

Photos of the event

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Quelle: AK Europa