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Angela Merkel’s mania for austerity is destroying Europe, says Mehdi Hasan

The German Chancellor is terminating growth and pushing us towards a new Depression.

Which world leader poses the biggest threat to global order and prosperity? The Iranian president, Mahmoud Ahmadinejad? Wrong. Israel’s prime minister, Binyamin Netanyahu? Nope. North Korea’s Kim Jong-un? Wrong again.

The answer is a mild-mannered opera fan and former chemist who has been in office for seven years. Yes, step forward, Chancellor Angela Merkel of Germany, whose solution to Europe’s financial crisis – or lack thereof – has brought the continent, and perhaps the world, to the edge of a second Great Depression. “World Bank warns that euro collapse could spark global crisis”, read the headline on the front of the Observer on 17 June.

With apologies to Mike Godwin and his eponymous law, Merkel is the most dangerous German leader since Hitler. Her eight predecessors – from Konrad Adenauer to Gerhard Schröder – presided over a manufacturing miracle at home and the rehabilitation of Germany’s reputation abroad. Under Merkel, however, the country finds itself isolated once again, loathed and feared in equal measure.

Cartoons in the newspapers of Germany’s neighbours have depicted the chancellor with a Hitler moustache or wearing a spiked, Bismarck-era military helmet. Commenting on the phenomenon, the columnist Jakob Augstein observed: “Her abrasive pro-austerity policies threaten everything that previous German governments had accomplished since World War II.” Merkel, Augstein rightly noted, is “a radical politician, not a conservative one”.

Neighbourhood bully

Merkel did not cause the financial crisis; that (dis)honour still belongs to the world’s “top” bankers. But her deficit fetishism and obsession with spending cuts are exacerbating the continent-wide debt-and-growth crises that threaten to upset more than six decades of pan-European unity and stability.

Then there is her bullying tendency. The majority of Greeks voted on 17 June either to delay or to cancel the EU-imposed austerity plan; up popped Merkel the next day to warn: “No departures can be made from the reform measures . . . We have to count on Greece sticking to its commitments” – and to slap down her foreign minister, who had suggested that the EU might give Greece more time to do cuts.

Merkel prefers to fiddle as Athens burns – and Madrid and Rome, too. Youth unemployment in Spain and Greece is hovering around 50 per cent; in Italy, a third of 15-to-24-year-olds are out of work. Riots beckon as Europe’s far right attracts new supporters. It is ironic that the leader of a nation paranoid about and offended by any mention of its Nazi period seems so relaxed about the rise of anti-austerity, neo-Nazi parties across the EU, from Marine Le Pen’s National Front in France to Greece’s black-shirted Golden Dawn to the fascists of Jobbik, now the third-largest party in Hungary’s parliament.

Merkel’s supporters argue that this is unfair. She is, they say, standing up for hard-working Germans who are weary of bailing out their feckless southern European neighbours. This is nonsense. First, figures released by the OECD show that the “lazy” Greek worker labours for 2,017 hours per year, which is more than the average in any other EU nation – and more than 40 per cent longer than the average German works. So a little less Schadenfreude, please.

Second, it isn’t just southern Europeans who are revolting against fiscal sadism. In May, Mer­kel’s Christian Democrats suffered a humiliating defeat in an election in Germany’s most populous state, North Rhine-Westphalia. It was the party’s worst result in the state since the Second World War. Ordinary Germans are starting to acknowledge that austerity isn’t working.

But Merkel won’t budge. She is a purveyor of the conventional wisdom which says that the economy is like a household that can’t borrow or spend more than it earns. But economies are not households – or credit cards! – and common sense tells us that the solution to a downturn caused by a prolonged drought in demand is not to reduce demand further (by slashing spending). History teaches us that the Great Depression wasn’t helped by Herbert Hoover’s cuts in the US and, in pre-war Germany, it was mass unemployment, not hyperinflation, that propelled Hitler to power in 1933.

Fiscal self-flagellation

In a study published in 2010, analysts at the International Monetary Fund found just two cases, out of 170 examples across 15 advanced economies between 1980 and 2009, in which cuts in government spending turned out to be expansionary for the economy overall. They concluded: “Fiscal consolidation typically has a contractionary effect on output.”

Merkel’s insistence on fiscal self-flagellation, her unwillingness to countenance any fiscal stimulus by Germany or an easy-money policy by the European Central Bank, have pushed depressed countries such as Greece further into depression. The recent announcement at the G20 summit in Mexico that Merkel may now be willing to allow eurozone institutions to buy up the debt of crisis-hit member countries is too little, too late.

This isn’t just about geopolitics or macro­economics. Europe’s austerians have blood on their hands. Suicide rates are up by 40 per cent in Greece; the birthplace of western democracy is being remorselessly reduced to the status of a developing country. Meanwhile, Merkel, as the US economist Robert Kuttner wrote earlier this month, “continues to pursue Germany’s narrow self-interest . . . [because] Germany benefits from the rest of Europe’s suf­fering in two ways – expanded exports and dirt-cheap money”.

In denial and bent on austerity über alles, Merkel is destroying the European project, pauperising Germany’s neighbours and risking a new global depression.

She must be stopped. 

Mehdi Hasan is the author of the ebook “The Debt Delusion” (Vintage Digital, £3.74). For the New Statesman's position on the Eurozone crisis, read our leader here.

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

This article first appeared in the 25 June 2012 issue of the New Statesman, Europe’s most dangerous leader

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What's to be done about racial inequality?

David Cameron's words on equal opportunities are to be welcomed - now for some action, says Sunder Katwala.

David Cameron made the strongest, clearest and most high profile statement about ethnic inequalities and the need to tackle discrimination ever yet offered by a British Prime Minister in his leader’s speech to the Conservative Party conference in Manchester.
“Picture this. You’ve graduated with a good degree. You send out your CV far and wide. But you get rejection after rejection. What’s wrong? It’s not the qualifications or the previous experience. It’s just two words at the top: first name, surname. Do you know that in our country today: even if they have exactly the same qualifications, people with white-sounding names are nearly twice as likely to get call backs for jobs than people with ethnic-sounding names? … That, in 21st century Britain, is disgraceful. We can talk all we want about opportunity, but it’s meaningless unless people are really judged equally”, said Cameron.
While the proof of the pudding will be in the eating, this was a powerfully argued Prime Ministerial intervention – and a particularly well-timed one, for three reasons.

Firstly, the Prime Minister was able to root his case in an all-but-universally accepted appeal for equal opportunities. It will always prove more difficult in practice to put political energy and resources behind efforts to remedy discrimination against a minority of the population unless a convincing fairness case is made that values cherished across our whole society are at stake. Cameron’s argument, that any party which tells itself that it is the party of the ‘fair chance’ and ‘the equal shot’ must have a response when there is such clear evidence of discrimination, should prove persuasive to a Conservative Party that has not seen race inequalities as its natural territory. Cameron argued that the same principles should animate responses to discrimination when it comes to race, gender and social class. Put like that, wanting job interviews to be fair – by eradicating conscious and unconscious patterns of bias wherever possible – would strike most Britons as offering as clear a case of the values of fair play as wanting the best baker to win the Great British Bake-Off on television.
Secondly, Cameron’s intervention comes at a potential "tipping point" moment for fair opportunities across ethnic groups. Traditionally, ethnic discrimination has been discussed primarily through the lens of its impact on the most marginalised. Certainly, persistent gaps in the criminal justice system, mental health provision and unemployment rates remain stark for some minority groups. What has been less noticed is the emergence of a much more complex pattern of opportunity and disadvantage – not least as a consequence of significant ethnic minority progress.

Most strikingly of all, in educational outcomes, historic attainment gaps between ethnic minorities and their white British peers have disappeared over the last decade. In the aggregate, ethnic minorities get better GCSE results on average. Ethnic minority Britons are more likely, not less likely, to be university graduates than their fellow citizens. 

As a result of that progress, Cameron’s intervention comes at a moment of significant potential – but significant risk too. Britain’s ethnic minorities are the youngest and fastest-growing sections of British society. If that educational progress translates into economic success, it will make a significant contribution to the "Great British Take-Off" that the Prime Minister envisions. But if that does not happen, with educational convergence combined with current ‘ethnic penalties’ in employment and income persisting, then that potential could well curdle into frustration that the British promise of equal opportunities is not being kept.  Cameron also mirrored his own language in committing himself to both a ‘fight against extremism’ and a ‘fight against discrimination’: while those are distinct challenges and causes, actively pursuing both tracks simultaneously has the potential, at least, depolarise some debates about responses to extremism  - and so to help deepen the broad social coalitions we need for a more cohesive society too.

Thirdly, Cameron’s challenge could mark an important deepening in the political competition between the major parties on race issues. Many have been struck by the increase in political attention on the centre-right to race issues over the last five to ten years. The focus has been on the politics of representation. By increasing the number of non-white Conservative MPs from two to seventeen since 2005, Cameron has sent a powerful signal that Labour’s traditional claim to be ‘the party of ethnic minorities’ would now be contested. Cameron was again able to celebrate in Manchester several ways in which his Cabinet and Parliamentary benches demonstrate many successful journeys of migrant and minority integration in British society. That might perhaps help to ease the fears, about integration being impossible in an era of higher immigration, which the Home Secretary had articulated the previous day.

So symbolism can matter. But facial diversity is not enough. The politics of ethnic minority opportunity needs to be about more than visits to gurdwaras, diversity nights at the party conference fringes and unveiling statues of Mahatma Gandhi in Parliament Square. Jeremy Corbyn’s first speech as Labour leader did include one brief celebratory reference to Britain’s ethnic diversity – “as I travelled the country during the leadership campaign it was wonderful to see the diversity of all the people in our country” – and to Labour bringing in more black, Asian and ethnic minority members - but it did not include any substantial content on discrimination. Tim Farron acknowledged during his leadership campaign that the Liberal Democrats have struggled to get to the starting-line on race and diversity at all. The opposition parties too will no doubt now be challenged to match not just the Prime Minister’s rhetorical commitment to challenging inequalities but also to propose how it could be done in practice.

Non-white Britons expect substance, not just symbolism from all of the parties on race inequalites.  Survation’s large survey of ethnic minority voters for British Future showed the Conservatives winning more ethnic minority support than ever before – but just 29 per cent of non-white respondents were confident that the Conservatives are committed to treating people of every ethnic background equally, while 54 per cent said this of Labour. Respondents were twice as likely to say that the Conservatives needto do more to reach out – and the Prime Minister would seem to be committed to showing that he has got that message.  Moreover, there is evidence that ethnic inclusion could be important in broadening a party’s appeal to other younger, urban and more liberal white voters too – which is why it made sense for this issue to form part of a broader attempt by David Cameron to colonise the broad centre of British politics in his Manchester speech.

But the case for caution is that there has been limited policy attention to ethnic inequalities under the last two governments. Restaurateur Iqbal Wahhab decided to give up his role chairing an ethnic minority taskforce for successive governments, unconvinced there was a political commitment to do much more than convene a talking shop. Lib Dem equalities minister Lynne Featherstone did push the CV discrimination issue – but many Conservatives were sceptical. Cameron’s new commitment may face similar challenges from those whose instinct is to worry that more attention to discrimination or bias in the jobs market will mean more red tape for business.

Labour had a separate race inequalities manifesto in 2015, outside of its main election manifesto, while the Conservative manifesto did not contain significant commitments to racial inequality. The mid-campaign launch in Croydon of a series of race equality pledges showed an increasing awareness of the growing importance of ethnic minority votes - though the fact that they all involved aiming for increases of 20 per cent by 2020 gave them a slightly back-of-the-envelope feel. 

Prime Ministerial commitments have an important agenda-setting function. A generation ago the Stephen Lawrence case opened the eyes of middle England to racist violence and police failures, particularly through the Daily Mail’s persistent challenging of those injustices. A Conservative Prime Minister’s words could similarly make a big difference in the mainstreaming of the issue of inequalities of opportunity. What action should follow words? Between now and next year’s party conference season, that must will now be the test for this Conservative government – and for their political opponents too. 

Sunder Katwala is director of British Future and former general secretary of the Fabian Society.