Hannes Swoboda: ‚Eurozone needs more time to reduce public debts and deficits‘

„The Commission is relying on an outdated economic model which has hugely underestimated the impact of budget austerity on growth and jobs. The eurozone needs more time to reduce its public debts and deficits“, stated today S&D Group leader Hannes Swoboda, ahead of the European Commission’s economic recommendations.

Excessive spending cuts imposed on fragile economies are simply plunging European economies into deeper recession and putting even more people out of a job“, he added.

His warning follows the alarming findings of an independent report commissioned by the S&D Group and written by three renowned economic institutes: l’Observatoire français des conjonctures économiques (OFCE) in Paris, the Macroeconomic Policy Institute (IMK) in Düsseldorf and the Economic Council of the Labour Movement (ECLM) in Copenhagen.

The report was presented to the press today in the European Parliament in Brussels by Hannes Swoboda, alongside Philippe Weil, president of the OFCE and two co-authors Xavier Timbeau and Jérôme Creel, Andrew Watts, deputy director of the IMK, and Lars Andersson, director of the ECLM.

In their report, the experts predict that Europe will face another year of recession next year with a fall of 0.3% in GDP and a new surge in unemployment due to the current austerity measures in most EU countries. In its forecasts published last November, the European Commission predicts that the eurozone will see moderate growth with an increase of 0.1% in GDP.

The independent economists say that the European Commission is underestimating the impact of austerity measures across Europe.

They propose to delay and spread the fiscal consolidation in respect of current EU fiscal rules.

“ Instead of austerity measures of nearly €130 billion for the whole euro area, a more balanced fiscal consolidation of 0.5 point of GDP, in accordance with treaties and fiscal compact, would give a margin for manoeuvre of more than €85 billion for 2013 alone“, they write. „It would also save 1.5 million jobs.“

Hannes Swoboda concluded: „Many economists around the world, including experts from the International Monetary Fund, have acknowledged that the cure in the eurozone is too brutal. This report shows that it is crucial to have an alternative to the European Commission’s economic analysis and recommendations. The Commission’s view has been too orthodox and should not have a monopoly in this area.

„It is time that the Commission acknowledged its mistakes and made the recommendations that will lead the eurozone out of the crisis. Wasting more time will simply make things worse.“

The S&D Group is ready open the debate with the Commission in the European Parliament. S&D Euro MP Elisa Ferreira will draft the report on the annual growth survey.