The year 2011 will be remembered for the European debt crisis and its impact on the global economy, but also for its hard consequences on everyday life. The crisis began in 2007 and is without precedent in post-war economic history. Europe is living its darkest economic days since the 1930s.
Due to the growing importance of the topic and due to the diffusion of social media platforms, in recent months there has been a proliferation of “economic blogging” (and tweeting). Opinion, thoughts and reactions abound online trying to make sense of what future awaits the Eurozone.
Considering VAT increases, along with salary, pension and benefit cuts, some basic goods are becoming less affordable. Indian blogger Deepankar Basu wrote on the indian economic website Sanhati:
These [austerity] measures reduce expenditure and increase taxes in order to reduce government deficits. Cutbacks in government spending and increases in taxes, at this particular moment, however, amount to the worst possible policy stance, reducing aggregate demand even further, and pushing the economies deeper into recession.
Sovereign debts, junk ratings: protests take to the street
The crisis is perceived to have started within three countries – Ireland, Greece and Portugal – but quickly spread to Spain and Italy.
Since the international rating agencies gave their assessments (ratings) for each national solvency (the ability to pay public debt) it seemed they “held the wand” over the Eurozone’s future. This power over the fate of each state provoked strong debates all over Europe, with many questioning the legitimacy of their analysis.
In Portugal, for example, there was a strong commotion and reaction when the independent American financial analysis firm Moody's called Portuguese debt “junk debt”.
But the core of the protests occurred in May. It all started in Spain with the 15M movement, mainly coordinated by the youth organization Democracia Real Ya [es], which was extremely active online and organized massive demonstrations against corruption, unemployment, and a political structure allegedly favouring a two-party system.
The acampadas born in Plaza del Sol in Madrid quickly “infected” other Spanish cities, such as Barcelona, Sevilla and Malaga. In a few weeks other movements became active in other European Countries and globally, later the Occupy Wall Street movement.
Some, including mainstream media [es], soon made connections between the the so-called Spanish Revolution and the Arab Spring.
Como si se tratara de la plaza Tahrir, en Egipto, escenario de las protestas populares[es]. El caldo de cultivo del derrocamiento de Hosni Mubarak. Esto es distinto pero puede ser el embrión de algo. Quién sabe.
Solidarity to the Spanish movement came soon from Greece, which has been the first European Union country to taste the sting of IMF/ECB austerity since 2010. Particularly in Greece the anti-austerity protests have been strongest. In June there were peaceful protests and gatherings at Syntagma (Constitution) Square, and when protesters planned to surround the House of the Parliament the day for which the vote for the Mid-Term Austerity Programme had been scheduled, there were violent clashes with the police.
Protests and demonstrations continued over the summer especially in Spain and Greece. But only the big reforms and the austerity plans widely adopted in “PIIGS” countries (Portugal, Ireland, Italy, Greece and Spain) late in the autumn marked a turning point of the European debt crisis.
“Blood and Tears”: the austerity recipe
The pressure of the financial markets and recommendations coming from European Commission urged some governments to adopt so-called austerity measures aimed at eliminating unsustainable budget deficits. Recipes seem to have some common traits across countries: cuts on social spending and social services, additional taxes, VAT increases and salary cuts with citizens paying for the crisis.
In Spain the intense social debate over the economic recovery plan led to new protest in September when the #reformazo (#bigreform) was announced. Spain, and later Italy, decided to introduce constitutional changes to limit public spending (budgetary stability). In turn, there were protests throughout the country organized by the assemblies of Puerta del Sol and by the entire 15M movement against what Real Democracy Now! has called the Financial Coup D'État.
In Greece in October there was an unprecedented protest during the ‘Ochi Day‘ (No Day) Parade since Greeks were angry for the relentless and ineffective austerity measures, culminating in the “haircut” deal negotiated by banks and European politicians, which many fear signifies the beginning of a new foreign “occupation” of the country.
The impact of the austerity recipes have been particularly severe in Greece where suicides and criminality are mounting, and where social and health assistance is becoming more and more expensive. The reportedly high cost (that can reach 1000 euros) for childbirth in public hospitals is only one example of adverse social impacts of the current crisis.
But there are also chronicles of the victims of the explosive cocktail of the housing bubble, the financial crisis, and high unemployment rates. Thousands of families are now without homes. A large campaign started in Spain against housing speculation, to stop evictions and relocate families to unused buildings.
Mobilizing on the streets and the Internet
Apart from economic issues and their implications for the people of European countries, democratic participation and citizenship rights occupy the public debate. The massive participation in protests and demonstrations against austerity measures – both online and in the streets – was something new on the European political scene.
Many, such as in Portugal, have pointed out there was an alternative to the top-down measures imposed by EC, IMF and ECB so that the Iceland’s practice of direct democracy became a model. Since Iceland refused an international bailout, many argued that there could be a different solution for the current crisis than ten years of severe budget restrictions to bail out bondholders.
But there was also another issue that emerged in recent months, since there have been crucial changes of government in three European countries. While in Spain the change was due to early elections, the new prime ministers in Greece and in Italy were chosen by the head of state, without any popular approval.
The resignation of Silvio Berlusconi in Italy was particularly important not only for the country, but for the whole European Union, since the country needed to calm financial markets in order to keep interest rates on sovereign debt under control. After the “Party for Berlusconi's resignation” soon Italians and Europeans involved in the crisis had to face the ugly reality they have to live with.
As Europe’s financial woes intensify, austerity reigns, the crisis deepens and economists are forecasting an (unprecedented?) recession, maybe 2011 will be remembered as a “lost year” of the European economic history.