Brussels, 29/01/2013 (Agence Europe) - As he did ahead of the fortieth anniversary of the European Trade Union Confederation (ETUC, see related article), Euro Commissioner Olli Rehn refused in a speech to a joint meeting of MEPs and national parliamentarians on Tuesday 29 January 2013 (see EUROPE 10772) to question the EU's strategy of using spending cuts and austerity to fight the crisis.
Although budget consolidation has a negative impact on growth, that does not mean that the opposite would lead to greater growth, he said, because the lack of budget restraint in recent years led to a hike in borrowing costs for the countries in question, thus increasing the debt burden and forcing public money to be used to service the debt rather than for investment. He said that the “excellent” study by the two International Monetary Fund economists admitting that the IMF had underestimated the negative impact of austerity measures did not say that budget consolidation should end because the implications of the austerity measures vary in both duration and the economic context.
Along with underestimating the growth-destroying impact of the austerity measures, MEP Liêm Hoang-Ngoc (S&D, France) criticised Rehn for recommending a three times bigger reduction in public deficits than recommended in the “six-pack” of new rules adjusting the Stability and Growth Pact. A German-speaking parliamentarian wondered how long it would take Rehn to realise he had made a mistake and called for a reassessment of the measures to tackle the crisis that are only making it worse. (MB/transl.fl)