Tuesday, May 8, 2012

Europe isn't spending less, they are just spending less on their own people

European austerity is a relative term for the nations and people of the European Union.  On one hand, it represents a pullback from massive borrowing, spending, and public benefit programs, but it can also mean simply a pullback on where the money goes without cutting spending at all.

It appears now that austerity in Europe really is no more spending on the people, and instead giving money to banks, governments, and corporations, at the expense of the very populations who are barely surviving in desperation mode.


When you were a child and did something wrong, the worse possible words your mom could say were "wait til your father comes home!" and that dreaded anticipatory angst is what Europeans must be feeling now as the threat of austerity hangs like the sword of Damocles over their heads. The reason we say this is that in fact, as Veronique de Rugy of National Review Online notes, the 'savage' spending cuts in Europe have yet to show up anywhere. All the rhetoric of how Europe's austerity has failed, all the hand-wringing and election-winning, and yet all the major nations are spending more than pre-recession levels; France and the UK did not cut spending at all, and even in Greece and Spain cuts have been small (and any meaningful reforms failed to be implemented). In fact, the epicenter of the current meltdown - Spanish banking - has seen only de-minimus headcount reduction over the past few years - so who is tightening their belts? The trouble, of course, is that while the threat of austerity has struck fear in the hearts of every European voter, the action of raising taxes has hurt just as much and perhaps the "trumpeting the failure of austerity as a reason to go full-Keynesian again" chatter will recede as facts overtake fallacies. As Mark Grant recently noted, there's a big divide between austerity pledged and austerity implemented, as it appears its more about raising taxes than cutting spending. - Zerohedge



As you can see, nations like Spain, Greece, and Italy have not curtailed their spending at all, just moved where the money was going to.  In this case, it away from public benefit programs and more towards the banks, corporations, and crony capitalists who helped create the problem in the first place.

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