Austerity 'destroying social fabric' of Europe

The social fabric in many eurozone countries is being "destroyed" as a result of the economic crisis, senior member of the European Parliament Hannes Swoboda said yesterday, as he called on those imposing austerity to apologise for the impact it has had.

Swoboda, leader of the Socialists and Democrats political group in the parliament, was joined in his criticism of deep public spending cuts by the secretary general of the European Trade Union Confederation, Bernadette Ségol, who said the policy had created a "social emergency" in some nations.

This week the International Monetary Fund, in its World Economic Outlook report, said the fiscal multipliers used by authorities to calculate the impact of fiscal consolidation on gross domestic product had been "systematically too low", therefore underestimating the negative effects on growth.

"They should apologise, including the European Commission and the European Council, for what they are doing all the time," said Swoboda, who was speaking at the Friends of Europe think-tank's annual State of Europe conference in Brussels. "They are bringing people into enormous, unfortunate and impossible situations."

Hitting back at president of the council Herman Van Rompuy – who earlier in the same session commented that the European Union was "on the right track" and that there was an "increasing confidence" in the eurozone's future – Swoboda said: "Is this the right track? No, it is not the right track."

The MEP, who described himself throughout his contribution to the discussion as "angry" and "emotional", said the criticism was not about Van Rompuy but about the "whole strategy of the EU" in dealing with the crisis.

"How can we in Europe be competitive if we destroy the social fabric in many of our countries?" he said, adding: "Which are the countries that are competitive? The countries with the destroyed social fabric? No, it is Germany, Austria: countries that have a strong social fabric. These are the successful countries."

Swoboda said Europe was the only major economy where public investment was going down. "It is rising in China, it is rising in Japan, it is rising in India, in Brazil it is rising. But in Europe it is going down enormously. And the governments are not ready to say, look: austerity, yes, but let's at least leave some room for investment."

Earlier in the day union leader Ségol told the conference that there was a "social emergency" in some European countries that could bring "a lot more problems even than debt" because "austerity and cuts do not work". Fairness was "at the root of the crisis we have now", she said.

"Everywhere we hear about competitiveness. But if you want to compete on wages, on working conditions, you cannot possibly get the acceptance of the people. Is the future to tell people that you've got to have now the Chinese wages and so on? This is not the way Europe is going to be accepted."

Today Swoboda called for Greece, with unemployment above 25 per cent, to be given more time to meet the conditions of its bail-out. "There is no point in drawing up timetables that cannot be met," he said in statement. "Money is wasted through this short-sighted and inefficient approach – money that the eurozone direly needs."

If follows IMF managing director Christine Lagarde's comments at the fund's meeting in Tokyo this week that Greece should have "an additional two years" to complete its fiscal consolidation programme. Greek Prime Minister Antonis Samaras has been pushing for the extra time since coming to power in June.

That provoked German finance minister Wolfgang Schaüble to respond that the IMF had previously said debt reduction should be the priority. "When there is a certain medium-term goal, it doesn't build confidence if one starts going in a different direction," he said.

Nevertheless, Lagarde and Schaüble put on a united front today, appearing together in a televised debate in Tokyo, with the German minister saying there was "no difference" between the two and the French IMF boss adding that they worked "hand in hand". The troika of the commission, European Central Bank and IMF is currently preparing a long-awaited report on Greece's progress towards its fiscal targets.