Citizens of Europe in despair
18 April 2011
Austerity measures have dented public confidence – especially, when coupled with low economic growth, says Bobby Duffy
When the economy goes wrong, it overshadows all other concerns in citizens' minds. Even terrorist attacks or foreign wars generally do not achieve the same levels of sustained concern that we see with economic issues – and this has been the case over decades and across just about all countries.
One new feature of the current crisis in Europe, though, is the much increased focus among the public on the need to deal with government debt. For citizens in many countries, public debt has just not been on the agenda – because it is both too big and too abstract for people to see any consequences. For example, our annual review of the social and political situation in France describes how this debt has existed as an "invisible cloud" of €1,591.5 billion – it has had no hold over people.
But this lack of concern has changed markedly in a short space of time. When asked in the most recent Eurobarometer study about the most important issues facing countries, dealing with the debt came behind only the other big economic concerns and on a par with healthcare and crime; we would not have seen that pattern even a year ago.
In fact, earlier last year there were a number of countries that we could call "debt deniers", which have high levels of public debt - but were relatively unlikely to think that action on this was needed, such as France, Portugal and Italy. But by the end of 2010, each had come into line and high public debt countries now widely say they accept the need for action - for example, 75 per cent in France and 84 per cent in Italy.
So is this a sign that we're ready to take our medicine, that we realise we've been living beyond our collective means and need drastic measures? That would be an understandable shift in opinion, as the consequences in Greece, Ireland and now Portugal have caught the public's attention across Europe.
While we may see a fundamental shift in opinion in those countries actually requiring bailouts, it would be wrong to conclude that this will result in long-term sea-change in attitudes across Europe. For a concern about debt to stick, people will need to see that reducing it works. Some countries have been here before and provide useful lessons on the impact that success has. In particular, Sweden and Canada in the mid-1990s are often referred to – and it is easy to see why. The Swedish Prime Minister at the time Göran Persson talks about how he resolved to make sure the books balanced after he had to go cap-in-hand to 24 year-old financiers on Wall Street, which he saw as a humiliating experience for a head of government.
In Canada, the crunch-point came from an article in the Wall Street Journal referring to its dollar as the "northern peso" and the country as an "honorary member of the third world". The cuts that followed took Canada from a level of public debt comparable with the UK and Ireland to half that level in the following ten years.
The crucial point was that this coincided with economic growth that took up the slack from public sector cuts and meant that the retreat of the state became associated in the people's minds with improvements in the financial situation. Whether this growth was a result of the cuts or a coincidence is still a matter for debate, as is whether the same will happen in the most affected countries in Europe.
But growth also requires optimism among the public and there is little sign of that in our own and other surveys across many countries in Europe. In fact, what is striking about the trends from recent Eurobarometer studies is the stagnation in confidence among those at the bottom of the European pile: while Germany saw a 30+ per cent increase in confidence between May and November last year - for Ireland, Greece, Spain, Portugal, Italy, the UK and many more countries, vanishingly low levels of confidence barely shifted or declined even further. This is important, as confidence is vital to spending behaviour and therefore the economy as a whole. This spring is too early to expect green shoots, but for this economic approach to work - many in Europe will be praying for some signs of new life soon.
Bobby Duffy is director of the Ipsos Social Research Institute, in the UK
When the economy goes wrong, it overshadows all other concerns in citizens' minds. Even terrorist attacks or foreign wars generally do not achieve the same levels of sustained concern that we see with economic issues – and this has been the case over decades and across just about all countries.
One new feature of the current crisis in Europe, though, is the much increased focus among the public on the need to deal with government debt. For citizens in many countries, public debt has just not been on the agenda – because it is both too big and too abstract for people to see any consequences. For example, our annual review of the social and political situation in France describes how this debt has existed as an "invisible cloud" of €1,591.5 billion – it has had no hold over people.
But this lack of concern has changed markedly in a short space of time. When asked in the most recent Eurobarometer study about the most important issues facing countries, dealing with the debt came behind only the other big economic concerns and on a par with healthcare and crime; we would not have seen that pattern even a year ago.
In fact, earlier last year there were a number of countries that we could call "debt deniers", which have high levels of public debt - but were relatively unlikely to think that action on this was needed, such as France, Portugal and Italy. But by the end of 2010, each had come into line and high public debt countries now widely say they accept the need for action - for example, 75 per cent in France and 84 per cent in Italy.
So is this a sign that we're ready to take our medicine, that we realise we've been living beyond our collective means and need drastic measures? That would be an understandable shift in opinion, as the consequences in Greece, Ireland and now Portugal have caught the public's attention across Europe.
While we may see a fundamental shift in opinion in those countries actually requiring bailouts, it would be wrong to conclude that this will result in long-term sea-change in attitudes across Europe. For a concern about debt to stick, people will need to see that reducing it works. Some countries have been here before and provide useful lessons on the impact that success has. In particular, Sweden and Canada in the mid-1990s are often referred to – and it is easy to see why. The Swedish Prime Minister at the time Göran Persson talks about how he resolved to make sure the books balanced after he had to go cap-in-hand to 24 year-old financiers on Wall Street, which he saw as a humiliating experience for a head of government.
In Canada, the crunch-point came from an article in the Wall Street Journal referring to its dollar as the "northern peso" and the country as an "honorary member of the third world". The cuts that followed took Canada from a level of public debt comparable with the UK and Ireland to half that level in the following ten years.
The crucial point was that this coincided with economic growth that took up the slack from public sector cuts and meant that the retreat of the state became associated in the people's minds with improvements in the financial situation. Whether this growth was a result of the cuts or a coincidence is still a matter for debate, as is whether the same will happen in the most affected countries in Europe.
But growth also requires optimism among the public and there is little sign of that in our own and other surveys across many countries in Europe. In fact, what is striking about the trends from recent Eurobarometer studies is the stagnation in confidence among those at the bottom of the European pile: while Germany saw a 30+ per cent increase in confidence between May and November last year - for Ireland, Greece, Spain, Portugal, Italy, the UK and many more countries, vanishingly low levels of confidence barely shifted or declined even further. This is important, as confidence is vital to spending behaviour and therefore the economy as a whole. This spring is too early to expect green shoots, but for this economic approach to work - many in Europe will be praying for some signs of new life soon.
Bobby Duffy is director of the Ipsos Social Research Institute, in the UK
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