"Shock Doctrine" Applied to Europe

Jacob Lew was in Brussels yesterday where he appeared at a press conference with Herman Van Rompuy, head of the European Council. Annie Lowrey covers it in a story, "In Effort to ‘Rebalance,’ Europe Appears Committed to Austerity Plan," that appears in this morning's paper:

“Our economic recovery is gathering strength,” Mr. Lew said. “The U.S. economy has expanded for 14 consecutive quarters, and although the pace of job creation is not as fast as we would like, the private sector has added jobs for 37 straight months.”

In contrast, the euro zone continues to struggle with shrinking economies and rising unemployment, with Germany, France and Spain all contracting in the fourth quarter of 2012. That has made meeting Europe’s goals of reducing fiscal deficits even harder.

Van Rompuy stuck to the austerity script:

But Mr. Van Rompuy reaffirmed the Continent’s strategy, rather than indicating a change in direction despite the rising unemployment and worse than expected contraction. 

“The European economies face a high level of debt, deep structural medium-term challenges and short-term economic headwinds that we need to confront,” he added. “There is no room for complacency.”

We've always been told in this country that Europe, because of its parliamentary system and strong labor unions, has a richer social democracy than the United States. Well, the welfare state in Europe is being dismantled, and this is bad news for the rest of us wherever it is that we live.

The financial system failed, but it is the social safety net that must be cut. It's a complete validation of the Naomi Klein's book The Shock Doctrine. Crises provide cover to implement neoliberal "reforms," even when neoliberal reforms create the crises to begin with (such as the repeal of Glass-Steagall). It's not clear that we have a way out of this circle of cannibalization. If Europe can't do it, we're in serious trouble.

The fact that Portugal's constitutional court pushed back against austerity is good news. Possibly the judiciary can do what the people's representatives in the legislature and executive have up until now failed to do -- halt the cannibalization. Raphael Minder's story today, "Portugal Warns Citizens of More Economic Pain," reports on plutocratic worries over developments in Portugal as revealed in a Fitch report from yesterday:

The decision has now called into question how the government can meet its budgetary goals in the near term and raised the broader issue of just how much austerity will be tolerated, not only by disgruntled citizens but also by justices who often act as the guardians of the Continent’s cherished social welfare system.

“The ruling could be interpreted as saying that all public spending cuts that affect civil servants are unconstitutional,” Fitch, the credit rating agency, wrote on Monday. “If that interpretation is correct, the ruling represents a setback to future fiscal adjustment efforts in Portugal.” 

It added, “This is a greater concern than its immediate impact.”