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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

Photo: Christopher Furlong/Getty Images
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Meet Momentum: the next step in the transformation of our politics

The leadership election was just the start - this is the next step. 

Something big happened in British politics this summer. After years of being told there was no alternative to austerity and the stale politics of despair, something amazing happened.

Given just half a chance, hundreds of thousands of people seized an opportunity for a new kind of politics. A form of politics that was kinder, more honest and straight talking. One that refused the political counsel of despair and offered a simple yet powerful alternative: Hope.

As we now know it was Jeremy Corbyn that so clearly and forcefully articulated this simple yet powerful message. One that explained a now obvious, self-evident truth -  that austerity is a political choice, not a necessity.

A quarter of a million people, 60 per cent of the total leadership vote, overwhelmingly made Jeremy Corbyn their new leader. Shortly afterwards Labour’s conference gave Jeremy and his shadow cabinet a clear mandate to turn the Party into an anti-austerity party of hope and bold alternatives.

Whether people agree with Jeremy Corbyn's politics or not it's becoming increasingly clear his victory has blown politics wide open. As US actor Shia LaBeouf recently exclaimed, “British politics just got very exciting”.   

But more important is that these changes are good for our democracy. The British public deserve real choices not forced, technocratic arguments about variations of the same dead end arguments. Once again we've been reminded we should never fear articulating bold, radical and credible alternatives to the problems facing our economy, country and planet.

After years of cuts, privatisation and the handing over of ever more power to unaccountable vested interests, our country is crying out for such new ideas and leadership.  On everything from climate change to the housing crisis, we need solutions that are credible, bold and radical. It's why our party recently established an economic advisory group headed by a range of highly respected economists like the Nobel Prize-winning economist Joseph Stiglitz and Thomas Piketty. Yes, we'll be radical but never at the expense of credibility.

So we've broken the mainstream political mould of the past 35 years, offering something new and positive - a kinder way of doing politics. And yet to read some newspapers or listen to some political commentators you could be forgiven for thinking we've ushered in nothing short of political armageddon. A theme many have picked up on is something the Tories are clearly pushing, namely that the “Labour Party is now a threat to our national security, our economic security and your family's security”.

In the unwritten rule of parliamentary politics and etiquette this is, even by Tory standards, a desperate low-blow. If there were any doubt that both they and the powerful vested interests they represent felt threatened, this should put paid to it.

Be under no illusion - the powerful, the exploiters, the excessively wealthy will not pull their punches. By standing up to them, both Jeremy and the Labour Party will face an unparalleled assault that will make what happened to Ed Miliband pale into insignificance.

That's why the need for a social movement to work for a more democratic, equal and decent society inside and outside the Labour Party couldn't be greater. One that can help make the political space necessary for the new ideas we so badly need.The array of vested interests confronting us cannot be taken on by one man or even a single political party in Westminster. Instead, we need a bigger, broader, deeper alliance that can confront such powerful, vested interests.

That's why today, four weeks after ballots closed in the Labour leadership election; I'm so very pleased to announce the launch of Momentum.

Momentum is a grassroots network arising out of, and following on from the Jeremy Corbyn for Labour leader campaign.

It plans are as bold as the challenges that confront it. It will organise in every town, city and village to create a mass movement for real, progressive change.

It will work with Labour members to transform our Party into a democratic institution worthy of its founders' original aspirations. A Party with not just the right policies for a General Election but ultimately the collective will to enact them in government.

But we also understand politics has changed and is changing. The top-down, command and control, monolithic political structures of yesteryear are fast fading. The political eco-system of today is both vast and diverse. Whilst out Party can play a key leadership role in future political change it must also understand it does not have a monopoly on opposing vested interest.

That's why Momentum will strive to bring together progressives campaigning for social, economic and environmental justice across the country. Be they individuals or groups we'll reach out into our communities and workplaces to campaign and organise together on the issues that matter to all of us.

Throughout the campaign, Jeremy spoke about building a social movement to work for a more democratic, equal and decent society. Now is the time to make this a reality and to build on this  - Momentum.

Clive Lewis is the MP for Norwich South and an Opposition frontbencher.