End of austerity in Europe can bring losses to Germany
02/01/2014Germany risks, once again, pay the bill of the European Union (EU) with the decision taken at the G-20 meeting, held in Moscow, on Friday and Saturday, on the prioritization of growth of countries at the expense of the austerity policy.
According to experts interviewed by DCI, political tension in European countries, generated by the dissatisfaction of the population with the economic policy adopted so far, spurred governments to adopt the change in posture, taking a serious risk to the European economy.
“There is a great risk of increasing indebtedness of countries to reduce the discontent of the population, and it can also end up harming the German state”, said the head of the International Relations Department of the School and Advertising and Marketing (ESPM), Rodrigo Cintra. “For those already with economic problems, the creation of macroeconomic mechanisms, as decreased interest, for example, does not work. In the short term have a positive response, but in the long run increases the hole, because the economy is not strong enough”, completed.
The ministers of the G-20 agreed to put growth before austerity after two days of meeting, What represents, beyond fear political instability of European states, a victory of American visions amid concern about the weak global recovery. After the discussions in Moscow, the ministers declared that “the short-term priority is to boost growth and job creation”.
The result marks the difference from the previous meetings of the G-20, which they emphasized the need to fix the national budgets.
The Minister of Finance and Secretary of the British Treasury, George Osborne, also declared support of the G-20 to the Organization's plan for Economic Cooperation and Development (OECD) for an international tax reform. The OECD has developed the plan, of 15 points, to eliminate loopholes that allow multinational companies pay few taxes.
Although Germany has pressed the G20 to adopt strict targets to reduce the debts of countries, Minister of Finance of the country, German politican, stressed German support employment stimulus plans and economic growth.
As defined Schäuble “one of the biggest and most important challenges of our time” the attempt to reduce unemployment, but it warned that countries do not forget the fiscal discipline, stressing that there can be no economic growth without prioritizing the healthy balance of finance as a medium-term goal.
This effort met strong opposition in the US and the German authorities received little support from other countries this time. “With its strong statement this weekend, the G-20 recognized the need to pursue policies that foster growth and jobs”, said the secretary of the US Treasury, Jacob Lew, ao The Wall Street Journal. He said “it is clear that an intelligent macroeconomic policy, focused on jobs, It is the best way to motivate economic growth”.
However, Germany has promised to return to this subject again when G20 leaders meet in St. Petersburg in August. “Unfortunately could not update reliably goals previously established in Toronto”, said the president of the German central bank, a Bundesbank, Jens Weidmann, after the release of the G-20 statement.
The meeting of finance ministers and central bankers of the G-20 was intended to pave the way for the group's summit in St. Petersburg, In September. The most concrete decision of the meeting was to support an Organization Plan for Economic Cooperation and Development to combat tax evasion by multinational companies.
Several developing countries have also expressed fears that their economies suffer when the Federal Reserve (the US central bank) start reducing its asset purchase program. The Fed's purchases, designed to maintain low interest rates, They injected money in countries such as Brazil and South Korea in as investors sought higher returns outside the US. Now, this liquidity is at risk as the Fed tries to exit from its accommodative monetary policies.
the Russians, holding the chair G-20, They said the group's members agreed to set a “information exchange” to improve communication on monetary policy between the authorities. However, one US official denied that the United States has been committed to this and the final communiqué of the G-20 said only that future changes in monetary policy “will continue to be carefully calibrated and clearly communicated”.
original publication: DCI, 22/07/2013