Pros and Cons of European Austerity

Team reporting by:
Sophie Belch, Junior, Riverview High School
Brenna Carse, Junior, Upper St. Clair High School
Josh Strawins, Senior, East Allegheny High School
Mara Greenberg, Senior, Taylor Allderdice High School

As Europe continues to descend into the debt crisis, the European Union is debating whether austerity is the best measure to reverse the direction of the declining economy. On October 19, a diverse group of delegates at the One Young World Summit 2012 gathered to discuss this issue.

At the beginning of the debate, moderator Tonis Kuusk, a native Estonian, asked delegates whether they were in favor of austerity, against the policy or did not have a concrete opinion.  Half of the thirty delegates said that they were in favor, while the remaining fifty percent was either against the policy or had no opinion.

Delegate Milenko Pilic, originally from Bosnia and Herzegovina but currently residing in Greece, began the debate by affirming the boons of austerity. He said that the deficit-reducing methods that are hallmarks of austerity cut unnecessary government spending and encourage the growth of the private sector, specifically small businesses.

Greek delegate Dimitrios Psarris countered by saying that he had been pro-austerity until the recent deepening of the debt crisis. He cited the fact that unemployment is at an all-time high in Greece and other PIGS countries, and thus, austerity clearly has negatively affected the economy and impeded growth.

Others in the room suggested that austerity is not an entirely negative policy; the European Union has simply been implementing austerity policies in the wrong climate of economic growth.

Many of the delegates agreed with the position espoused by economist John Maynard Keynes that austerity measures must be employed in times of prosperity and not during a recession. Thus governments are able to save money to use for a country-wide stimulus should a recession ever occur.

The delegates then offered several solutions to reduce the debt. An Indonesian delegate working and residing in the United Kingdom brought up the idea of a “euro bond.” People across the globe, according to him, are weary of investing in struggling European economies. A euro bond would allow investors to buy bonds backed up by every eurozone country, thereby increasing the flow of money into the European Union.

Devaluing currency was also discussed as a viable method of combating debt. When a country devalues its currency, it prints money to deflate the economy. Thus, domestic goods become relatively inexpensive to produce, increasing local consumption and exports while driving down the import level. However, due to the single monetary policy of the eurozone, delegates said that this debt-reducing method would not be feasible to implement.

It was at this point that a Swedish delegate suggested that Greece be permitted to leave the eurozone. Several delegates agreed while others dissented.

After this discussion, the completely opposite policy of total European unification was brought to floor. At first, delegates wholeheartedly disagreed with this, stating that the varied cultures of Europe would not take well to a single government and that leaders would be unwilling to relinquish power.

The delegates were more receptive to the idea of economic union because the stability of the continent would be increased under a single economic policy. The delegates also want to maintain the political independence of their countries in the face of economic challenges.

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