The dangers of managing decline

The anti-austerity demonstration by some 100,000 people in Brussels on Thursday was further proof of a truth we discovered at the start of the Greek crisis: It is very difficult to manage a society’s decline. Throughout Europe, a wave of rage and despair is rising against austerity and deprivation; it paralyzes governments, provoking tension between countries, between groups of citizens, between institutions.

There are no easy solutions that will reduce debt while spurring growth. When the crisis broke out in the United States in 2008, America and Britain chose a different route from Europe’s. Ignoring the cries of those who demanded the immediate reduction of debt, they both poured money into the market to support growth and jobs, to get past the acute part of the crisis. The United States and Britain achieved greater growth and lower unemployment than the countries of the eurozone. In Europe, the European Central Bank has tried to support the economy while hiding the fact, because of the German dogma of strict austerity and reform. Germany says this formula works; the past few years have shown, however, that harsh austerity weakens the economy and citizens, undermining the necessary reform effort.

Greece had neither the autonomy nor the credibility to allow it to keep borrowing and printing money. In order to gain the support of its partners and creditors, it was forced to apply austerity at the same time that it attempted major changes to the economy and public administration – changes that had an immediate effect on citizens’ lives and expectations. The depression and long-term lack of liquidity in the market, high unemployment and minimal investment shook citizens’ faith and caused the political system’s fragmentation. So as not to lose more votes, governments were wary about making the changes that creditors demanded, while opposition parties had to do no more than criticize the governments and their “foreign” reform package and wait for votes to come their way. And so neither those who voted for the changes nor citizens who may have initially believed in the need for reform had confidence that the sacrifice was worth it. The delayed recovery forced most people to rely on their own resources and solidarity, whereas each group that had the power took care of its own interests. The program’s credibility was shaken.

Wherever countries are forced to cut spending and reduce benefits, they will have to deal with citizens fighting to hold on to what they are losing, who have no faith in rescue packages. Greece’s experience – with the mistakes in the program, with disenchanted citizens, with a political system stuck in past practices – is the model of this. But it is no way out. The solution depends on the European Union deciding to protect all that it has gained, to create a Europe-wide development plan, and, chiefly, to inspire faith in the future.

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