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The European Union is contemplating more lenient economic stimulus proposals that move away from the crushing top-down austerity regulations that battered Greece and several other countries during the debt crisis a decade ago and helped push millions into poverty, homelessness and unemployment.
The European Commission, the EU’s executive arm, said on Wednesday that the new plans would give member states facing severe debt disruptions much more leeway in finding a viable path to economic sustainability, combining a long-term debt commitment without unduly burdening a tense population in a very short time.
After the 27-nation bloc had to emerge from a COVID-19 recession and other recessions loom with Russia’s war in Ukraine worsening inflation, the challenge is to overcome manageable investment and debt levels.
“Of course, times are changing,” EU Economy Commissioner Paolo Gentiloni said, addressing the difference between existing proposals and previous Commission decisions.
During the debt crisis, troubled nations from Greece to Portugal were banned from using more traditional strategies, such as large loans to get out of bad times, and instead had to tighten their belts. noted as having exacerbated the crisis for many.
Gentiloni almost said the same thing on Wednesday. Debt relief “succeeded because regulations were less and less in line with reality. And when you have an unrealistic path, in the end you don’t have any path. “
Later, reflecting on the devastating consequences of the crises that almost brought the euro to its knees, he stepped back and said, “I don’t think we can blame those regulations for the huge crisis and difficulties. “
In retrospect, even EU officials claimed that there was excessive austerity for a short period after the 2008 currency crisis, aggravated by the sovereign debt crisis in part of a dozen EU countries a few years later.
The EU’s response, coordinated through the commission, to impose strict austerity on nations that had spiraled uncontrollably into debt while several nations were on the verge of bankruptcy.
Although most EU countries used the same currency, the euro, economic and monetary policy was still in national capitals. Germany complied with any rules that kept debt as low as possible, while much poorer nations like Greece saw public spending to get richer.
Investors stopped lending cash to Greece in 2010 after Athens admitted to misreporting key tax data. To keep the country afloat, its European partners and the International Monetary Fund approved 3 rescue loan schemes with a duration from 2010 to 2018 totaling 290 billion euros ($293 billion).
In return, foreign creditors demanded what many Greeks remain a pound of meat: deep cuts in state spending and wages, tax increases, privatizations and other radical reforms aimed at restoring public finances.
The economy contracted by more than a quarter and professional professionals emigrated en masse. Poverty and unemployment soared and, at one point, more than a quarter of the labor force was unemployed.
These spillover effects show why EU proposals now focus on giving nations a greater sense of self-determination and making sure investments are maintained rather than stifled by them.
“With the wisdom that can be had after the crisis, we can say that we have not been able to maintain the investment point as it has been in the 10 years since the economic and monetary crisis,” Gentiloni said. “And that’s anything. “
The German reaction was swift and predictable. Finance Minister Christian Lindner said that “it is transparent that any reform of European fiscal regulations must correspond to the basic precept of ensuring monetary stability. “
“On the one hand, we want a pro-growth policy, but on the other hand, the debt ratios of the European Union will have to be decisively reduced,” Lindner told reporters in Berlin.
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AP Geir Moulson in Berlin and Elena Becatoros in Athens contributed to the report.
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