Wolfgang Münchau: Austerity, Not the Populists, Destroyed Europe’s Centre Ground https://www.ft.com/content/be3ca48a-2344-11ea-b8a1-584213ee7b2b: 'From Brexit to fiscal policy, the EU’s largest member states have seen the mainstream wrongfooted: There were tell-tale signs early on. In 2009, Peer Steinbrück, a former German finance minister and later the Social Democrats’ candidate for chancellor, introduced the constitutional balanced budget rule. This later gave rise to Germany’s permanent fiscal surpluses and under-investment in critical infrastructure. In a joint study, Germany’s employers and trade unions recently put the investment shortfall at a staggering €450bn. So it is unsurprising that the SPD has lost political support during the years of its grand coalition with Angela Merkel’s Christian Democrats. In 2012, Italy’s government of technocrats, led by Mario Monti, imposed procyclical austerity in the middle of a recession. The goal was to prove that Italy was a good follower of the eurozone’s fiscal rules. The country has still not fully recovered from that shock. In 2014, François Hollande, the former French president, outed himself as a rightwing supply-sider when he cited Say’s law—that supply creates its own demand. Since then his Socialist party has in effect disappeared as a political force, along with its old rivals on the centre right. In late 2015 in the UK, I overheard a group of pro-Remain politicians, academics and commentators persuading themselves that the easiest way to win the forthcoming Brexit referendum would be to scare the hell out of the electorate. We all know how that went. What these disparate stories have in common is that they paint a picture of the decline of the political centre in Europe. I consider this, not the rise in populism, to be the main development in the EU’s largest member states. If there was one common policy that accelerated that trend, it was austerity. We have come to judge austerity mainly in terms of its economic impact. But it is the political fallout from public spending cuts that is most likely to persist. Austerity as a policy is the consequence of a poor understanding of economics coupled with a self-righteous mind and a tendency to spend too much time with your chums at places like Davos...


#noted #2019-12-27

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