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Protesters take part in an anti-austerity rally in Athens on May 22. (YORGOS KARAHALIS/YORGOS KARAHALIS/REUTERS)
Protesters take part in an anti-austerity rally in Athens on May 22. (YORGOS KARAHALIS/YORGOS KARAHALIS/REUTERS)

Neil Reynolds

What austerity? Europe's borrow-and-spend train rolls on Add to ...

In a 2011 review of government spending in the countries known as Euro27, the European statistical agency tracked public expenditures from 2006, before the Crash, through 2010. Among other conclusions, Eurostat determined that austerity – whatever it was – had yet to reduce government spending. Only by the merest of margins, the agency said, could it document any real, absolute reduction in spending. Indeed, Euro27 governments spent €6.2-trillion ($8-trillion) in 2010: 50.8 per cent of Europe’s GDP. Four years earlier, they had spent only 45.6 per cent. By this measure, European austerity has increased public spending by 12 per cent in four years.

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Not that all Euro27 countries preached austerity and practised profligacy. Only most. Traditionally a big public sector spender, Sweden cut its expenditures from 55.2 per cent of GDP to 51.3 per cent, the largest single act of austerity on the continent. Paradoxically, Swedes aren’t marching in the streets. A more conservative public sector spender, Switzerland reduced its expenditures from 36.4 per cent of GDP to 34.2 per cent. For that matter, the Swiss aren’t marching in the streets, either.

Greece, the most egregious spender, increased its public sector expenditures from 45.2 per cent of GDP to 50.1 per cent. This huge increase in government spending notwithstanding, the Greeks are marching in the streets. Go figure.

Interestingly, only the euro zone countries that borrowed more to spend more are now deemed bankruptcy risks.

Portugal increased public spending from 44.5 per cent of GDP to 50.7 per cent.

Ireland increased public spending from 34.3 per cent to 48.7 per cent.

Italy increased public spending from 42.6 per cent to 47.3 per cent.

France increased public spending from 53.0 per cent to 55.9 per cent.

On the other hand, Germany, champion of austerity and Europe’s strongest economy, increased public spending only modestly, from 45.3 per cent of GDP to 46.6 per cent – without significant public rage.

It may be argued that these countries are going further into debt only to make interest payments on their debts. This is partly true. But these debts are not some repugnant thing imposed by greedy capitalist lenders of last resort. They are merely prior public expenditures – last year’s old-age pensions, last year’s health care funds, last year’s corporate subsidies. You can’t isolate government spending into goods purchased with tax revenue and services purchased with borrowed money; they are inseparable.

A difficult fact remains. European governments now weary of austerity have yet to cut spending, have yet to halt the inexorable rise in national spending. All euphemism aside, they would rather go bankrupt than reduce spending. This is no exaggeration. Using the 2005-08 average as a base, Eurostat found that most Euro27 governments increased spending in every single category of government expenditures in 2009 and 2010.

In these two years, Euro27 countries increased spending on public order from 1.8 per cent of GDP to 1.9 per cent. On economic affairs (translation: corporate subsidies) from 3.9 per cent to 4.4 per cent. On education from 5.2 per cent to 5.6 per cent. On health care from 6.7 per cent to 7.4 per cent. On social transfers (pensions, unemployment benefits) from 18.1 per cent to 20.1 per cent. And so on.

How were these increases in government spending funded? By debt. Euro27 countries borrowed an amount equal to 1.5 per cent of GDP in 2006, 6.5 per cent in 2010 and 4.5 per cent in 2011. Greece borrowed 6 per cent of GDP in 2006, 9 per cent in 2011. Spain borrowed 2.4 per cent of its GDP in 2006, 5.2 per cent in 2011. France borrowed 2.4 of its GDP in 2006, 3.8 per cent in 2011. In contrast, Sweden – a country that shrank its government – borrowed 2.7 per cent of its GDP in 2006; it became a net lender (0.1 per cent of GDP) in 2011.

For its part, Canada’s austerity record isn’t much better than the Euro27 record. Combined federally and provincially, Canadian governments now spend 42.4 per cent of the country’s GDP – compared with 37.1 per cent five years ago. Some resolve. Some restraint. (Eurostat numbers include central, state and local spending.) U.S. President Barack Obama and French President François Hollande emerged from the G8 summit at Camp David on the weekend championing the use – or misuse – of the word “growth.” This is another dangerous deceit. It means only that these governments think they should print more money, borrow more money and spend more money. In the name of austerity, this is precisely what most of these gluttonously self-indulgent countries have been doing for the past five years already.

 
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