There was a time when European governments couldn’t utter a fiscal policy statement without mentioning the word “austerity.” Now, the concept seems to have all but disappeared from public discourse.
Is the era of austerity finally over, and did austerity policies — essentially, those encompassing spending cuts and tax increases — achieve what they were supposed to achieve?
‘Austerity is over’
Those were the words of U.K. Prime Minister Theresa May when she spoke to her Conservative Party delegates at its annual conference in early October. Speaking to the embers of a party that had itself introduced an austerity program eight years previously, May said: “A decade after the financial crash people need to know that the austerity it led to is over.”
Britain’s austerity program saw dramatic cuts to welfare spending and public services and tax increases introduced in the hope of reducing the U.K.’s budget deficit (where spending outweighs revenues). The measures hit local councils hard (which are allocated funding from the government) with many reporting funding gaps.
Ten years on from the financial crisis and austerity measures seemed to have died on the continent too as a wave of populist politics has swept through Europe, turning much of the public against their established political parties and their unpopular programs.
Portugal, Spain, Greece and Italy — arguably those hit the most by the sovereign debt crisis — have all been relaxing their economic policies.
“We’re seeing around the world a push for more fiscal spending. In Europe, governments are trying to capitalize on popular discontent with promises of more spending.”
In Lisbon, the 2015 general election led to a socialist government that campaigned on ending austerity. The minimum wage has been increased every year since the appointment of this government and it’s set to break the 600 euros ($688) per month threshold next year. The same salary was 485 euros back in 2014.
Spain’s latest budget plan also intends to raise the minimum wage by 22 percent, the biggest increase in 40 years, according to newspaper El Pais.
In Rome, the anti-establishment government has challenged the EU with measures that will increase public spending and fulfil its biggest campaign pledges.
In Greece, the government was until August forced to implement policies dictated by its creditors. Now that the country is no longer subject to a bailout program, Athens is also looking to show that austerity is over, mainly ahead of a General Election next year.