First, the UK has slid back into recession.
THE UK slid back into recession yesterday after a drop in construction output and a stagnant services sector forced a 0.2% decline in GDP.
The decrease came after a fall of 0.3% the previous quarter and triggered the country’s first double-dip recession since the 1970s....
Wales’ First Minister Carwyn Jones had warned the Government’s spending cuts were “too deep, too fast” and believes a double-dip was almost the predictable outcome.
He added: “The UK Government's cuts - plus high inflation and weak growth in the eurozone - make these very difficult times for businesses and people in Wales.
“The Government now needs to change course and follow our lead by pursuing an economic policy which promotes sustainable economic growth, creates jobs and ensures people have the skills they need to fulfil their potential.”
[Prime Minister Mark] Rutte's hopes to clinch a deal to lower the deficit to within the EU's 3% target evaporated Saturday when his most important political ally, populist euroskeptic Geert Wilders, cut off talks, saying a slavish adherence to European rules was foolish and would harm the Dutch economy.
Meanwhile, in France, Socialist Francois Hollande won the first round of the presidential ballot. He now squares off with incumbent Nicolas Sarkozy; polls indicate that Hollande will be France's first Socialist president in 17 years. Hollande's economic program is far different from the prescriptions put forth by Sarkozy and German Chancellor Angela Merkel.
Mr. Hollande said on Wednesday that, if elected, he would seek to renegotiate a yet to be ratified European treaty that limits levels of borrowing and national debt, as Steven Erlanger and Nicholas Kulish report.
The French socialist candidate said he understood Germany’s reticence about bailing out the debt-burdened states of southern Europe. “But Germany must realize that it is growth that will allow us to solve a big part of our problems,” he said.
Making matters slightly worse is the realization that if conditions continue along these lines, there's very little that can be done -- Congress simply lacks the ability to pass effective economic legislation given the Republican agenda. (Emphasis mine.)
The contrast between President Obama's and the Fed chairman's policies on the one hand, and the austerity proposed by the GOP and conservatives in Europe on the other hand, couldn't be more stark. The austerity that's being pushed is one that falls inordinately on those least able to withstand it: the poor and the middle class. Ireland has imposed a series of taxes which do not take income into account; all households pay the same, rich or poor. The Paul Ryan budget slashes entitlements and aid to the poor and middle classes, while showering the rich and corporations with tax breaks. There is a class war, and it has always been waged by the rich.
But there are signs that a rebellion is forming against the dictates of austerity. In the US, the GOP budget can gain no traction in the face of ridicule by the Democrats and civil society groups. Even gentle reporting by the press and encomiums by pundits can't push GOP priorities forward. The fact that President Obama is leading Mitt Romney in the polls in spite of the sluggish economy is evidence of that. In Europe, the technocratic governments installed in Greece and Italy have to make way for elections, and there is no doubt that anti-austerity parties will do quite well, either seizing power or holding the balance thereof. Sarkozy in France has been undone largely due to his favoring austerity over growth. And if the Dutch government can't get a budget balancing package through the Parliament, then the whole project of austerity is in doubt.
Proponents of austerity had a good run after the 2008 collapse. They scared many electorates into thinking that debt was the source of national problems, and that austerity was the only solution. The results of the past four years have put the lie to that statement. Debt may or may not be a problem; but debt isn't solved by slashing spending, which then slashes growth, which leads to a further slashing of spending as the debt doesn't go down. The scare-mongering no longer works; people have seen the results of austerity, at least as it's being practiced, with sacrifices from the bulk of citizens but none from those with the most ability to pay. This rebellion should lead to quite an interesting 2012.