The EU’s self-defeating austerity

The British people’s vote for the United Kingdom to withdraw from the European Union caught many by surprise. This result encouraged populist political parties in many other EU countries to demand a similar vote. Immediately after the referendum result was known a number of studies were commissioned to analyse and interpret this verdict. Why had the ‘exit’ vote won over the ‘remain’ camp?

Many commentators have focused on immigration, racism and xenophobia as being the main factors. But these sentiments are not new to the UK. What was new is that these forces were powerful enough to force one of the EU larger countries to break from the Union of which it had been a member for over 40 years, in the process igniting a flame in other member states to hold similar referenda. 

The issue in the UK and within a large segment of EU member states is that there are real grievances which demagogues have been able to cunningly exploit. First and foremost is the austerity that has curbed growth. Millions of Europeans feel that the application by EU leaders of neo-liberal policies has not worked for them and is the cause of their predicament, mainly the unemployed.

Most EU government spending has been sharply cut since the financial crises of 2008, ostensibly out of concern that deficits and debts were harming the economy. As a result wages, in real terms, in most countries are lower today than they were before the crises.

Austerity also meant cuts in public spending such as on education and healthcare. The Brexit supporters took advantage of this to turn it into resentment against immigrants – their main argument was that immigrants were overwhelming the national health system. In addition, if the UK did not make its contributions to the EU, the UK government could instead use the money to better fund healthcare and education. They succeeded. The same will hold if other EU countries should decide to go ex Prime Minister Cameron’s way and chance a similar vote.

Last year a European Parliament report concluded that austerity policies in the EU have eroded the poorest citizens’ access to education and healthcare. The report stated that measures adopted by several EU governments to cut public spending have had dire consequences. The countries in the study were Belgium, Cyprus, Greece, Ireland, Italy, Portugal and Spain.

All seven had spending on education and healthcare systematically slashed. For example the number of teachers in their schools reduced while the number of pupils rose. Pension provisions have also suffered as a result of the prolonged austerity measures. All seven countries studied raised the pensionable age, with some even reducing pensions. Also last February Caritas International charted rising inequality across the EU and confirmed that social imbalances are increasing with the poor being hit hardest. 

This bleak economic performance and its social and human consequences on EU citizens is a result of conscious decisions taken by EU leaders concerned to balance their budgets rather than invest to steer economies toward full employment and address needs in infrastructure, clean energy, healthcare, the most vulnerable, and education. 

The International Monetary Fund (IMF) has recently published an in depth study titled ‘Neoliberalism: Oversold?’ in which it conceded that neoliberalism has not delivered economic growth, but has only made a few people better off.  The EU’s present scenario is worrying a number of governments. If this imbalance lasts for longer or increases even more the European integration project will be threatened.

Malta has been spared these extreme austerity measures. The government is committed to continue to invest in healthcare, pension reforms, education and support to our most vulnerable. This growth strategy has resulted in almost full employment. Malta has the second lowest unemployment rate in the European Union, as recent Eurostat statistics show. Good economic decisions and sensible investment strategies should continue to guide us to maintain and even exceed these results.  The future is now. What we wisely invest in today will secure the future of pensions, good healthcare and education systems for the next generation.

It does not make sense to have the EU launch one social policy after another: (Skills Agenda, the Pillar of Social Rights) and to talk of a European social model that puts people at the centre of policies and then follow a neoliberal financial and economic policy inhibiting member states from investing wisely to improve people’s lives.

As for the European Union it would be more productive if the EU leaders start asking why people would want to leave the Union. The economy is a good place to start. They should embrace reality and adopt an economic policy that will push the EU towards stronger growth and full utilisation of its human resources. If it goes this path, it would have learned a lesson from the Brexit experience and will not be so anxious that other member countries will follow the United Kingdom’s lead.

Evarist Bartolo is Minister of Education and Employment