Opnion of Abdelazim Gomaa
Is bankrupt policies of austerity in the euro area and the United States?
Saturday, May 26, 2012
Despite the escalation of the consequences of financial and economic crisis of the European Union and the United States under the policies of government austerity harsh, especially followed by the euro-zone countries, will continue many of the experts and academics, such as Michael Huettner, director of the Institute of German Economy in Kiel, and Hans-Werner Sinn, president of the Institute « Evo »in Munich, in the defense of these policies, which they see as a guarantee for the stability of financial markets and the flow of investment and boost growth. Based on those in their defense to the experience of conservative fiscal policies that have been successful in Germany and Austria, the Netherlands and other countries.
Huettner demonstrates the validity of his negative reactions of the markets on the success of Francois Hollande in French presidential elections in the form of evidence that these markets will not accept policies that stimulate growth on the basis of further public debt. Huettner says that the problem for the euro zone countries are not in the lack of funds and liquidity, but in the under-investment due to declining competitiveness and creative forces on the one hand and the power of the bureaucracy on the other. The age finds in turn that the policy of exemptions and to provide more loans through the fund rescue and pumping the central banks more liquidity in the market, similar to what happened in Greece, will help to achieve economic recovery out of the countries concerned from the cycle of crisis, and it calls the exit of Greece from the Because the euro and lending support policies of the European Conditional more austerity will bring her more than the overall unemployment and undermining political stability.
Despite the fact that experts and academics like Paul Krugman, winner of Nobel Prize in Economics in 2008, agree with the likes of age on the need to exit Greece from the euro zone to be able to devalue its currency and thereby increase their exports, they see at the same time in the austerity policies pursued by Western governments, Governments, especially the euro area, a real dilemma leads to a dead end. Is based on Krugman in his criticism to the austerity at the height of the crisis, leading to shrinkage and depriving millions of people their jobs. Which reflects the economic downturn and contraction.
Among the things that will lead him, according to Krugman, tax revenues fell by a primary source of government budgets. It would mean that the failure to achieve the goal of stability and reduce the impact of government loans and service benefits that accumulate in nearly three decades, regardless of the political elites of the ruling that have been in the form of increasing the pressure groups working in the service of financial institutions and banks that Anfeltt from the control of governments and caused the most severe economic crisis since the thirties of the twentieth century.
Regardless of their positions and evaluate their validity, it is sufficient that one looks to the facts in countries such as France and Greece in order to understand Krugman in his criticism of the policies of austerity. The French chose, for example, president opposed the line of former President Nicolas Sarkozy and its ally, German Chancellor Angela Merkel, who launched their policy on the common name «Mrkozy».
The election came the Greek political map of new political forces drove out the traditional circle of the ability to form a government. In light of this surprised Krugman, insist on the policy of austerity in the form similar to religious extremism, as stated in his book «Stop Depression», which called for an end to the influence of conservatives or neo-classical in determining the point of economic policies and the existing three decades ago, blaming these policies responsible for the crisis because of the expanding influence the financial sector at the expense of the job of governments to ensure equal opportunities between the sectors. In light of this writer proposes the adoption of Keynesian theory and recipes to meet the growing crisis.
It does this mean and foremost for the United States to correct the situation of the financial sector and the redistribution of incomes at the expense of the rich in order to enhance the purchasing power of low income and middle class in the form of reducing her debt burden and stimulating the recovery of domestic demand.
As for the euro zone countries, the main problem lies in the compromise its sovereignty over cash for the benefit of the European Central Bank, which lose the ability to lower the values of their currencies to address imbalances in their economies by stimulating the export or domestic demand, investment, etc. and turned it into what looks like the game in the hands of decision makers, banks and financial markets.
Faced with this deadlock situation, Krugman believes that out of the crisis can not be achieved without restructuring the financial and economic policies dating back to the countries of the euro area is currently vulnerable to competition. It does this mean for the powerful countries such as Germany, raising the level of wages in order to reduce their competitiveness in terms of export within the region and increase domestic demand for German goods such as Spain and its southern Italy, Portugal and Greece.
