Two years into the euro zone debt crisis without any marked improvement, the IMF, Germany, France, and the European Central Bank have simply refused to adjust their strategy to end the crisis. World leaders have insisted on an austerity-only approach to the crisis—a policy that has only worsened the euro zone economies. Despite continued financial devastation throughout Southern Europe and Ireland, world financial leaders have refused to mix austerity with policies that foster economic growth largely due to inflationary fears and perceived threats from credit rating agencies and bankers. As a result, these countries not only remain on the financial cliff, but their societies are at a breaking point.
Let’s start with the realities of the fiscal crisis. After two years of deep austerity, euro zone debt continues to rise. Not only has austerity failed to decrease debt levels, it has caused painful contractions in euro zone economies. Italy's GDP contracted 0.7% in the first quarter of 2012, Ireland’s economy shrunk by 0.2%, Spain’s GDP contracted 0.3%, Greece’s GDP grew by 0.2% during that period after it shrunk 7.6% in 2011. Austerity has only increased borrowing costs, as investors look at a country’s economy when assessing the country’s ability to repay their loans.
The suicide rates in Ireland, Italy, and Greece are increasing, as their populations endure the pressures of austerity.
From 2007 to 2009, male suicides have increased by 24% in Greece and 16% in Ireland. In Italy, suicides deemed motivated by economic difficulties have increased by 52% from 2005 to 2010. Researchers have concluded that austerity measures have intensified the trend.
If the European Central Bank refuses to supplement austerity with policies that pump cash back into these drowning economies, the EU and the government in Berlin will be the death of the euro zone, not lax Southern European politicians. Bad public policy has been commonplace since the EU called for strict austerity in Southern Europe. In Italy for example, the government has decided not to pay its debts to struggling business owners as a way to balance its budget, killing economic growth to satisfy the EU. The austerity-only approach seems more like a kind of punishment handed down to spend-crazy children from fiscally responsible parents, and not a real plan to tackle the debt issue.