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Europe elections aside, experts say austerity is far from dead

Europeans voted for change this weekend, and some politicians even promised it. But the reality of today’s Europe is that there’s little change possible.

While worried voters in France and Greece clamored for government stimulus and an end to austerity measures that have cut hundreds of thousand of government jobs, economists come back to a simple fact: Only Germany might have the needed cash – and it has no intention of sending it around the continent.

Despite French President-elect Francois Hollande’s proclamation that growth, not austerity, is the new path for Europe, there’s little chance of that becoming true in the immediate term. Even as German Chancellor Angela Merkel on Monday invited Hollande to Berlin for economic talks expected next week – the new president’s first international trip – she noted that the European fiscal treaty that mandated spending cuts and strict discipline won’t be renegotiated. European growth, Merkel added, requires first getting Europe’s spending and debt under control.

And while Greeks plead for a path out of their ruined economy, there is only political paralysis: The leader of the party that finished a weak first place in Sunday’s voting abandoned his attempt to form a new coalition government after just six hours.

Richard Whitman, a European policy expert at the University of Kent, in England, said German opposition – and fiscal sanity – mean European leaders don’t have many options.

“It’s clear that we’ll see a lot of lip service to stimulus growth spending, but it will all be politics,” Whitman said. “Germany has done the maximum of what they’re going to do.”

If Merkel offers some concessions to Hollande and the pro-stimulus camp, however, experts say that Greece, with all its structural problems, shouldn’t expect even that much. France may have deep debt issues, but Greece’s per capita debt almost doubles it. While France is a founding member and central player in the new Europe, Greece from the start has been little more than a sentimental member, allowed into the eurozone despite widespread sentiment that it’s a nation of great history but a bleak future.

Holger Schmieding, chief economist of Berenberg Bank, Germany’s oldest private bank, said that it would be a mistake to lump German willingness to listen to the plans of the new French president with pleas for a lessening of demands on Greece. Greek voters on Sunday tossed out the two incumbent parties that had backed a plan of painful austerity measures under the terms of an international economic bailout, but it wasn’t clear what a new government in Athens would be able to do differently.

“Greece is a separate issue – they have been told what is expected and there will be no change of course,” Schmieding said. “But for Hollande, there will be something from his visit to Berlin. To justify falling in line with a course of austerity, he has to come away with something. It won’t be much, but it will look good in headlines.”

White House Press Secretary Jay Carney reiterated that President Barack Obama favored a balanced approach under which Europe would deal directly with its massive deficits but also work to grow the economy.

“That’s an approach that he thinks ensures that the recovery continues but also gets our fiscal house in order,” Carney said.

On a deep level, this weekend’s French election and the continuing Greek crisis might mean clearer definition of what it means to be European. When times were good, eurozone members talked of building a “post-national” era in which old European borders faded away.

As Whitman noted, “This crisis then opened wounds from which all the old national issues poured out.” Instead of being Europeans, those on the continent again identified themselves as Germans, Belgians, French and, of course, Greek.

At least for the short term, analysts say, the expressions of fury from European voters mean little. German leaders are staunchly against further spending, and almost two-thirds of Germans said in a poll that they oppose further Greek bailouts. A Berlin taxi driver, Heike Schirmer, as she prepared to pay her German tax bill, called the national finance office Monday and asked: “Do I still send the money to you, or does it go straight to Athens these days?”

The deepening fiscal reality across the continent is that the ways of the past were unsustainable. Adriaan Schout, a European policy expert at the Dutch Clingendael Institute, said that as the number of workers dwindles, pensions represent a crippling cost across the eurozone. Spanish labor laws need reforming, too. French debt is too high. Italians admit problems collecting taxes. Across the continent, nations struggle with rising health care costs.

Polls show that 89 percent of French and 82 percent of Dutch say that economic reforms, while painful, are necessary.

“There will be some slight adjustments made to accommodate France,” Schout said. “But the course is set. The question now is whether or not Europe continues with Greece aboard, or without Greece.”

The odds, many feel, are against Greece staying in the eurozone. Greece’s choice: Cut about 3 percent a year from government spending for the next decade, or refuse and let higher interest rates on borrowing force even more draconian austerity measures.

“It’s difficult to imagine any country could abide such cuts,” Schout said. “Of course, if they can’t, it’s difficult to imagine Europe allowing them to stay.”

Steven Thomma of the Washington Bureau contributed from Washington, McClatchy special correspondent Claudia Himmelreich from Berlin.

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