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04/23/2013

Even Euro boss has had it with austerity

There was a big meeting of European minds on Monday at the Brussels Think Tank Dialogue.

While no doubt, lots was said on lots of things, some comments by European Commission president Jose Barroso are causing waves in euro newsrooms and in the Twitterverse.

At the austerity and growth debate, Barroso said "we are reaching the limits fo the current policies," according to transcripts.

This is Barroso, former prime minister of Portugal whose tough economic policies helped lay the foundations of an austerity charge in his own nation when he was in power from 2002 to 2004. Portugal continues to struggle under high unemployment and sluggish economic growth and it is one of the most indebted countries in Europe.

While the current policies are "of course appropriate" Barroso said when it comes to addressing the "challenges of unsustainable debt" and the need to put Europe back on sound footing, he mused now may be a good time to turn the page. Try something else.

"So while this policy is fundamentally right, I think it has reached its limits in many aspects, because a policy to be successful not only has to be properly designed.  It has to have the minimum of political and social support."

On that last point, let's look at Exhibit A. For the past few years there have been violent clashes and protests on the streets of Athens, not to mention the rise of far-right extremism. French unions are angry. Immigrants are fleeing Spain to find work elsewhere. The United Kingdom is now getting subtle warnings from the International Monetary Fund to tone down its austerity push. The Italian political system is twisted up in knots.  And if you are under 25 and looking for a job in Greece, Spain or Portugal, well ... one in two of you may find one.

"We need to have a policy that is right," Barroso continued. "At the same time we need to have the ways, the means of its implementation and its acceptance, the acceptability, political and social. This is where I think we have not done everything right ..."

Right.

Politically and socially, one policy that is only seen as austerity, is "not sustainable," he added.

"We need sound fiscal policy. We need deeper reform for competitiveness and we need investment, namely with a social dimension."

Right again. Next?

Tanya Talaga is the Star's global economics reporter.  Follow her on Twitter @tanyatalaga.

 

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