While the Greek debt crisis and subsequent decline of the euro continue to worry investors around the world, the people of Europe are preparing for severe austerity measures, and not just in the troubled south.
With hundreds of billions of euros pledged to stabilize the common currency, European leaders are forced to make major cutbacks at home.
The new Conservative-Liberal Democratic coalition ruling Britain unveiled its financial plans on Tuesday. Shortly after Queen Elizabeth II opened Parliament, Chancellor of the Exchequer George Osborne and his Chief Secretary to the Treasury David Laws announced a reduction in public spending of £6 billion to be enacted this year.
Nearly all departments of government in the United Kingdom will be affected by the spending cuts except education. According to The Blue Nation, not included in the £6 billion savings are those set to be made in the departments for health, international development and defense as they are to be reinvested in the “frontlines” of those services.
The money saved will be allocated almost entirely to reducing Britain’s deficit. Business leaders were quick to support the measures while further encouragement came from growth figures also released on Tuesday. The British economy was able to boast a modest growth rate of 0.3 percent compared to last quarter.
The German government announced heavy spending cuts on Monday. Starting next year, Germany will have to cut at least €10 billion each year until 2016 to bring its public finances back under control. Chancellor Angela Merkel is reportedly considered to raise taxes in order to bring down the deficit — in spite of her campaign promise not to.
The Dutch are already among the most heavily taxed people of Europe yet they, too, will be confronted with spending cuts in health care and social services. The retirement age is set to be raised with two years, from 65 to 67, while several political parties have proposed to drop out of the Joint Strike Fighter Program in order to save billions of euros.
Italy, finally, joined the ranks of other South European economies as Portugal and Spain in announcing multibillion euro spending cuts. The Berlusconi government is preparing to cut so much as €25 billion both in 2011 and 2012 according to plans leaked to Italian media. Gianni Letta, the prime minister’s lieutenant, spoke of the need to make “heavy sacrifices” lest Italy follow down the path paved by Greece.
In order to rein in spending, government will freeze salaries in Italy while refraining from hiring additional public servants. Financial support for provincial and local governments will be cut with almost €6 billion and measures to fight tax evasion are expected to be announced soon.
The situation is complicated by politics in many of the aforementioned countries. While the British just elected a new Parliament, the necessary spending cuts have become part of election campaigns in Germany and the Netherlands. Angela Merkel’s ruling coalition was robbed of its upper house majority earlier this month after losing a local election in Germany’s most industrious of states. The Dutch are likely to elect a center-right government once again two weeks from now to deal with the cutbacks while the Italians may also head for the polls ahead of schedule as Silvio Berlusconi’s governments appears on the brink of collapse.