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Published 20 June 2012 21:58, Updated 21 June 2012 17:25
Every economy is made up of millions of individual units – people buying and selling, marrying and giving birth, just living their everyday lives. Sometimes in news reports about the economy this can be forgotten. So behind all the concern about Europe and whether countries such as Greece and Spain will go bankrupt, there are heart-rending stories about how the Greeks in particular are dealing with an economy that is falling over.
Anecdotal reports are that the suicide rate in Greece has doubled and The Sydney Morning Herald (published by Fairfax which also publishes BRW) last week had a story with details from recent Greek suicide notes. These were from people that had worked all their lives only to find themselves with nothing. One was from a man who could not live with the shame of scrounging from bins after the pride of running his own business.
Austerity has been promoted as the answer in Europe but it does not appear to be working. Politicians like austerity because it is a neat moral solution to an economic problem. For people that have overspent, under-saved and want to retire early, it seems only right that they should be required to tighten their belts and put right their past wrongs through hard work and sacrifice to build up their balance sheets. However, this moral viewpoint requires that public sector austerity is in some way accompanied by private sector growth. From a view on the ground, austerity has bred only austerity, it has not bred growth.
What it does breed is anger from those under austerity’s yoke. In Europe, this is demonstrated by the rise of niche and extreme parties that feed off voter angst. So in Greece, there has been the swift rise of Syriza – an extreme left-wing party that used to be a ragtag bunch of interests that has coalesced around voter anger into a workable party. At the same time in Greece, Golden Dawn – an extreme right-wing party that campaigns under a swastika-like banner – is also experiencing a renaissance in the polls. And it’s the same across other countries in Europe where recent state and local elections in France and Italy saw strong showings from far-right and far-left parties. In Holland, anti-austerity sentiment has given the balance of political power to a right wing anti-Islamic faction that wants to see an end to multiculturalism. It seems the very tool that European powers thought would bring political stability to the region – currency union – is the same tool that is feeding extremist parties of all shapes and sizes.
BRW does not wish to be alarmist. European leaders know as well as anyone the dangers that threaten stability and will be working all hours at the G20 summit in Mexico this week to come up with a solution that placates bond holders and German voters with regards to Greece but also gives countries facing austerity packages enough oxygen to feed the green shoots of their economies.
What does this all mean for Australia? While Greece is far away, it will affect us in terms of its impact on the global economy and that ephemeral but essential ingredient for success – confidence. It’s also another reminder of how good we have it, with our strong economy, our proximity to the powerhouse economies in the Asia-Pacific and our system of government. While neither of the main parties seem inspiring, at least they are stable.