Europe Copes With Backlash Against Austerity Measures

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Robert Siegel talks with Anton La Guardia, the Brussels-based European Union correspondent for The Economist, about the backlash he's seeing against austerity measures throughout Europe.

ROBERT SIEGEL, HOST:

Like the first round of the French presidential election yesterday, the government crisis in the Netherlands marks a move against austerity. That's been the eurozone's policy for escaping the economic doldrums, the policy championed and demanded by Germany. In short, cut government spending.

How strong is anti-austerity sentiment? We're going to ask Anton La Guardia who covers the European Union. He writes the "Charlemagne" column for The Economist. And he joins us from Brussels. Welcome to the program.

ANTON LA GUARDIA: Thank you.

SIEGEL: Let's talk about the Dutch government falling first. It's one thing for one of Europe's deeply-indebted countries on the periphery, say, Greece or Ireland, resisting deep budget cuts. But isn't Holland supposed to be one of the strong economies that's supposed to be getting stronger through budget-cutting?

GUARDIA: Well, the Netherlands is one of the last few AAA rated governments, so there is a supreme irony in the way first they're back in recession. And secondly, how the political system has been unable to take even the threat of a little bit of austerity of the sort that the government has demanded be imposed on others. So, there's a large degree of Schadenfreude around Europe.

SIEGEL: Now, we heard that in the Netherlands it was the right wing populists, anti-immigrant party of Geert Wilders that pulled the plug on the government. Is this both a far right position now in Europe, in addition to being, say, a left-wing socialist position that you should change the austerity program?

GUARDIA: Well, on this issue the extremes touch each other in that both the populist the far right and the left, the hard left, dislike austerity partly because their electorate tends to be poorer. It feels near the burden of cuts of public spending more readily. And the fear now is that this has gone so far that it will reduce growth.

SIEGEL: Well, let's take the most extreme reading of the events today and on Sunday. Let's assume that a government comes to power in the Netherlands that is against austerity. And that a French president is elected who is against austerity. Does that signal actually a breakdown in the whole European strategy for dealing with its economic crisis?

GUARDIA: Well, it could. The strategy has been to try and get each country that's part of the euro to adopt balanced budget legislation or preferably constitutional amendments. On top of that, the countries that have been in sort of under attack or under pressure from the markets have been rescued, have been given the cheap loans, and are being told to tighten their belt rather quickly.

Now, the countries that have been recipients of aid have, on the whole, you know, sort of yes, protested but buckled down because they've had no choice. I think what's interesting about the Netherlands and France, to some extent, although they're not quite the same, is that neither of them are, you know, under immediate pressure, and yet they seem to be turning against this idea.

Now, it has to be said that the parties that are demanding this, that are against austerity, are on the whole opposition parties. They're not parties that are currently in government. So, mixed with all this is also a degree of anti-incumbency.

SIEGEL: Does it become a renewed crisis of the euro if, indeed, it ceases to be a division between wealthy Northern European countries and poorer peripheral countries, and it becomes Germany against the rest of the eurozone?

GUARDIA: Well, that certainly makes it more uncomfortable for Germany. You know, Angela Merkel, the chancellor, has had as her main ally Nicolas Sarkozy of France. Now, if he loses power, she's going to have a partner who doesn't quite believe that; and who has said he wants to renegotiate the treaty that the Germans dragooned most other countries into accepting.

If, moreover, the hard-liners of fiscal discipline - the Dutch government - are seen to be in trouble that leaves the Germans rather alone and isolated, which is a position they don't like. They're very uncomfortable with this idea of German power and leadership. And it becomes very easy to blame them for problems that are much more deep-seated than just austerity.

We shouldn't forget there is genuinely a debt problem in Europe and that even Germany's stock of debt is about 80 percent of GDP which is, you know, on the high side.

SIEGEL: Well, Anton La Guardia, thank you very much for talking with us.

GUARDIA: Thank you.

SIEGEL: That's correspondent Anton La Guardia. He writes the "Charlemagne" column for The Economist. He spoke to us from Brussels.

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