Andor opposes ‘unsustainable’ austerity measures

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The EU's commissioner for employment and social affairs has set himself apart from colleagues by decrying "unsustainable" austerity measures "which are clearly not working," and calling for the burden of debt across the EU to be shared more equitably.

Briefing journalists in Brussels on Thursday (14 July), László Andor outlined his policy objectives for the Polish EU Presidency, but also delivered a sharp rebuke to the policy of implementing austerity measures in light of the worsening debt crisis.

He said that the crisis was presenting policymakers with a dilemma, forcing them to choose between debt financing and financial regulations on the one hand, and social and employment policies on the other.

Austerity is 'not working'

The former socialist government adviser and economist said it was clear that debtor countries cannot shoulder the cost of restructuring alone, adding: "This approach is unsustainable and implies that the individual member states can get out of this crisis simply by imposing austerity. This is clearly not working."

Andor said that the strategy might have worked if Europe had returned to growth, bringing investor confidence rapidly in its wake. But his clear message was that the austerity programmes – which Economic Affairs Commissioner Olli Rehn advocated forcefully – are not delivering. He said: "Ultimately expecting austerity to work on its own is not possible."

The EU and IMF warned Greece to enact its five-year austerity plan – with €28.6 billion in savings, and key implementing laws for structural reforms and state asset sales – in order to secure a €12 billion slice of aid this month.

Comments precede expected crisis meeting

There is a need to examine "both sides of the coin," according to Andor, who was referring to need for debt to be shared more equitably in exchange for demands for member states to carry out austerity reforms. He said: "At this point we are not balanced and we are far from a full solution."

The intervention is in line with Andor's socialist background and his brief as the commissioner for social affairs and inclusion, but it comes at a sensitive time as eurozone leaders prepare for a summit dedicated to the Greek debt crisis on Thursday (21 July).

Eurozone leaders are expected to decide how to involve banks and private investors in a "haircut" on bond yields in order to stem the lack of market confidence in Greek gilt-edged stock.

Jeremy Fleming

"The crisis has brought us back to the dilemmas of developing common debt financing capacities, financial sector regulation and stronger social and employment policies on the EU level,” according to Employment, Social Affairs and Inclusion Commissioner László Andor.

"These elements have come up with a degree of inconsistency but the crisis is accelerating this process. So it has become clear by now that where there is a direct intervention we cannot just put the costs of restructuring on the shoulders of debtor countries - this approach is unsustainable and implies that the individual member states can get out of this crisis simply by imposing austerity. This is clearly not working," Andor added.

"It could have worked if the whole of the EU had returned to growth and thereby strengthened investor confidence much faster. That's why the process has to go gradually further. Also, it is disturbing that national or even regional elections can take the whole process hostage and nationalist parties can slow things down, but ultimately expecting austerity to work on its own is not possible," he explained. 

"We need to find a way to common debt financing that is meaningful for the markets. We need to look at both sides of the coin - the need to develop common debt financing solutions and, in exchange for that, stronger coordination of internal reforms. But at this point we are not balanced and we are far from a full solution," the commissioner concluded.

Since the euro zone's debt crisis erupted last year, the region's rich governments have aimed to limit it to Greece, Ireland and Portugal, which have so far signed up to bailouts totalling €273 billion – a sum that is small compared to the financial resources of the zone as a whole.

But in return, the IMF and the EU have demanded that austerity measures be implemented. Greece has been asked to implement a number of privatisations of state-owned services, to rein in public sector pensions and jobs, and to increase the age of retirement.

Similar programmes are being rolled out, or are in the pipeline, across EU member states, especially those most affected by the sovereign debt crisis.

  • 21 July: Extraordinary meeting of eurozone heads of state in Brussels.

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