Crippling austerity and unlimited bank bailouts have been the sole focus of policy in the EU.
The consequences of these policies are; rising unemployment; declining growth; mortgage distress; emigration; inequality; poverty – a downward spiral of social, economic and political stability.
Unemployment increases social welfare bills and reduces exchequer receipts. Together with pay cuts, this reduces the amount of disposable income in the economy which hits the retail sector especially hard with outlets closing at an alarming rate. This in turn causes manufacturers to cut back on production, resulting in even more unemployment. A vicious circle created by the greed of bankers, international investors (gamblers) and developers compounded by economically illiterate decision makers in Europe imposing anti-growth programmes on member states.
The policies of light touch banking regulation; unsustainable tax regimes; cheap money; and aggressive lending all combined to create an unsustainable boom followed by a predictable catastrophic crash.
But instead of tackling the source of the problem which began as a crisis created by bankers, speculators, developers and politicians (encouraged by the European Commission) the EU decided the people should pay for it through a policy of austerity.
Through failure to accept the causes of the crisis and therefore identifying the wrong course of action to address the problem, political leaders have plunged the entire Eurozone into crisis.
Focusing on deficit reduction is important but attempting to achieve it through cuts in public spending combined with increased regressive taxation is a mistake. Such measures serve only to undermine consumer confidence and reduce disposable income.
Of course the two most urgent questions facing the Eurozone are how to reduce unsustainable levels of debt and increase investment in job creation to stimulate economic growth and social regeneration.
The Eurozone problem is not lack of fiscal discipline by the peripheral states – as France and Germany in particular would have us believe.
While the crisis originated in the unregulated availability of cheap money and corrupt banking practices, the problem now is the drought of both public and private investment in job creation projects which is causing a decline in living standards and depressing domestic economies. On top of this, crippling bank debt being imposed on taxpayers and the futile policies of austerity not only fail to resolve the crisis but actually make it worse.
What we need is a massive investment in job creation – through national and European Investment Bank funds - to get people off the dole and back to work, replenishing exchequer receipts and reducing the social welfare budget.
You can-not balance the books with mass unemployment. You cannot cut and tax your way out of a crisis.
Only through real and substantial investment in jobs, increasing productivity can you return to growth, rebuild consumer confidence and reduce the deficit to sustainable levels.