On 14 November millions of workers across Europe will engage in a Day of Action against austerity and deregulation. There will be general national strikes in Spain, Portugal, Greece and Italy, with sector and company level strikes in other member states. Workers will also be marching on the streets in France, Poland, Czech Republic, Romania and Slovenia. From other member states, solidarity declarations, accompanied by punctual actions, will be made.

Here in Brussels, trade unions will hand over the ‘special Nobel prize of for Austerity” to the president of the Commission, José Manuel Barraso. Workers in Europe are more than right to stand up against a Europe of austerity and flexibility.

Indeed, what the financial and political elite in Europe has done in the aftermath of the 2009 financial crisis defies all imagination. In the formal thinking of the Commission and the Council, it’s not financial markets but public spending and wages that spiralled out of control and caused the crisis. In this way, those who are the victims of the crisis are declared responsible for it.

However, the true story is exactly the opposite: the crisis was not caused by high-rising public spending or wages eating up profits.

The crisis was caused by stupid capital flows, generating unsustainable housing and financial bubbles in many member states and saddling them up with a heritage of enormous private sector debt loads.

When these bubbles came to burst, economies collapsed and governments in charge had no choice but to resort to deficit spending to finance the holes in public budgets resulting from unemployment benefit shooting up and falling tax revenue.

In the end, rising public deficits, even if accompanied by rising public debt ratios, were the circuit breaker that saved Europe in 2009 and 2010 from entering in a new Great Depression.

Disastrous policies

Moreover, this reinterpretation of the causes of the crisis has not been limited to a purely intellectual exercise. Most unfortunately, and pressed by a European Central Bank identifying the sovereign debt crisis as an excellent opportunity to push through its own and free market biased policy priorities, fiscal policy across the whole of Europe became restrictive.

From Spain to the UK, from Greece to Latvia, from Hungary to Ireland, from Romania to France, member states engaged in sweeping deficit reduction programs, mainly based on spending cuts and hikes in value-added tax rates.

These fiscal savings, when all of these programs are totalled, amount to hundreds of billions of purchasing power being taken out of the European economy over a short period of time. This type of policy has been disastrous.

What the zealots of austerity have managed to do is to short-circuit the recovery and to push the economy back into recession. Economic activity in Europe has shrunk by 0.3 per cent this year. Moreover, no real recovery is expected to take place in 2013.

For next year, the Commission merely hopes for 0.1 per cent growth in the Eurozone. Such a dismal performance is unconvincing and should be seen, not as a ‘delayed recovery’ but as a continuation of economic stagnation.

And with economic activity in the doldrums, there’s little hope for the jobless: unemployment, already standing at a record high of 11.6 per cent across the Eurozone (as of October 2012) will continue to rise.

More austerity?

Despite these disastrous outcomes, the basic response of the financial and political elite in Europe is not to change track but to continue with the policy of austerity. According to Commission analysis, the economy is back in recession, not because there has been too much fiscal austerity but too little!

To arrive at this conclusion, the Commission is once again drawing upon the old and tired argument of confidence. Their claim is that fiscal cuts have not been sufficient since they failed to restore financial market trust and credit flows to the real economy, thereby hampering investment and economic activity.

In other words, the Commission view is that if governments would have gone for moreausterity, then financial markets would have stabilised and credit flows would have been restored and (despite fiscal austerity), the economy would have started to expand again.

One look at the facts and figures shows that this argument is absurd.

According to the latest IMF fiscal monitor, Eurozone governments engaged in consolidation programs amounting to three to four per cent of GDP between 2010 and 2012-2013. Put bluntly, by cutting public sector wages, jobs and investments and social expenditures, member states have taken €300 to €400 billion of demand and purchasing power out of the economy in only two years.

The question therefore becomes that if €400 billion of savings and cuts are not enough to calm financial markets, will €600 or €800 or €1000 billion do the trick?

Isn’t it time for the European policy elite to consider that if the patient is dying it may be, not because the patient did not get enough medicine, but because he or she has been given an entirely wrong and even deadly treatment?

The reality is that markets not only care about financial indicators, they also care about the real economy because they know very well that the risk of debt default goes up if jobs and investment go down.

Finally, and reflecting an old German saying that ‘if the government does not agree with the people, it should re-elect another people’, the discussion is taking on an absurd and dangerous dimension.

For example, over summer 2012, a prime minister of one large member state (who himself was never elected), publicly declared that it’s the responsibility of governments, after having agreed policy decisions in Brussels, to educate their national parliaments on the necessity of these policy choices.

Even worse is the new term of ‘market-conforming democracy’, a term that was recently launched into German public opinion by its prime minister.

What these policy deciders are actually saying is that the competence of national democracies should be subordinate to what the economic and financial elite considers necessary to save the single currency.

Tomorrow, workers in Europe will not only be fighting against the policy of austerity or fighting to safeguard the social dimension. They will also be fighting to save the essence of democracy in Europe from narrow and unbalanced rules imposed and dictated by a certain elite.