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FINANCE/ How to save Europe from Germany’s “suicidal” plan

MARIO DEAGLIO comments on the situation on the European stock markets, the fears about the future of the Eurozone and the rebellions against the austerity measures. 

(Infophoto) (Infophoto)

In the recent days, stock markets bounced back a bit, but the uncertainties after the market’s Black Monday, however, are far from allayed. Fears about the future of the Eurozone, considering also the political situation in France and Holland, remain. According to Mario Deaglio, Professor of International Economics at the University of Turin, it is good that Europe begins to question the policies of austerity put forward so far. In this interview, he explains why.

Among the causes of the market’s Black Monday were the elections in France and the fall of the government in the Netherlands: events that seem like a rejection of Germany’s austerity policy. In your opinion, why have things come to this?
The German policy of rigor involves an appreciable effect on the family budget of the average European citizen, with a resultant decrease in spending power and, in some cases, in living standards. This was accepted by the population for a while, but now that the austerity measures seem to be biting harder, the number of people who oppose them is growing, with obvious political repercussions in different countries, even in Germany, where the "Pirate Party", one of the greatest expressions of the anti-Europe movement, is on the rise. It is a symptom of a social disease that is growing stronger and that is related to specific instances.

To what are you referring?
The average European citizen is beginning to ask himself some questions: How can we respond to what the markets are asking? Why must we reduce our deficits quickly and not over the course of several years? Why was a deficit of 3% of the GDP considered fine before and now it is no longer fine, while the Americans can have a deficit of 9% without anyone saying anything? This is what the citizens are beginning to ask and this is among the causes of the growing vote against austerity.

This situation puts the new European Treaty, the Fiscal Compact, in crisis even before its birth.
It is a stretch to call it a treaty. It is an agreement reached in a short time under the pressure of the market and under the leadership of Germany. Once this kind of extreme emergency is over, however, there is a section of public opinion and political powers that have made it clear that they do not identify with this arrangement.

We are in this situation when not even two months have passed since the second LTRO operation of the ECB, which was seen by many as the "anti-German" recipe. Does this mean that the liquidity provided was insufficient or that this type of policy is inadequate?