France, Greece are electing politicans that have rejected austerity policies which African leaders gladly accepted in 80s and 90s.
“In all the capitals, beyond government leaders and state leaders, there are people who, thanks to us, are hoping, are looking to us, and want to put an end to austerity,” with these liberating words the newly elected president of France, Socialist François Hollande assured French people and the rest of debt-ridden Eurozone that the delving austerity measures are not welcomed in the economic landscape of Eurozone.
With the defeat of pro-austerity President Nicolas Sarkozy, the newly elected president of France Hollande and the changing Greece parliament have rejected austerity measures and structural adjustment programs.
African leaders were quick to accept austerity measures for their respective countries when they were overloaded with foreign debts that were accumulated from mismanagement and manipulation of interest rates together with the surged arrears. That was in 1980s and 1990s when many African countries were experiencing economic downturn similar to Eurozone.
The architectural model for bailing-out nations in Eurozone that was enshrined with austerity measures was fabricated by Germany’s Chancellor Angela Merkel. International monetary Fund (IMF) endorsed the prescription and maintained that a healthy economic reform is necessary for Eurozone to move away from anemic growth and recession. IMF participated in the bail-out for Greece by providing the funds but at same time insisting that spending must be cut significantly and that stringent economic reforms must be implemented.
Wall Street Journal reported that Standard and Poor’s was not favourable to stringent austerity policies: “Real risk facing the euro zone is if its member countries are pushed too hard to accept austerity measures that result in economic malaise and social unrest.”Challenges facing the periphery will take time to fix,” said Moritz Kraemer, head of sovereign ratings for Europe, Middle East and Africa at Standard & Poor’s Corp. “The real risk is if you push them too hard,” Kraemer said while speaking at a Euromoney conference in London a day after lowering Greece’s sovereign debt rating to selective default, the first ever default rating in the currency bloc.”
Many of these nations in Eurozone especially Greece whose debt to GDP ratio of 165 percent in 2011 was compelled to accept austerity measures for her debt restructuring to be feasible. This entails that the bloated public sector and richly endowed social programs should be surgically curtailed and drastically reduced.
Even the first class nation like France, struggling with huge debt and deficit was recommended to trim down mountainous public sector, thus cutting down on spending in order to stimulate her economy and to remain competitive in the global market.
IMF and Merkel’s Germany oversight is becoming futile as economic troubled European nations were reluctant to swallow the bitter pills of austerity measures that African nations imbibed in 80s and 90s which comes with adverse consequences. That was why the voting public in France and Greece chose new directions and rejected austerity measures with election of anti-austerity politicians.
Many of the African leaders were not matured and advanced in the global politics of international finance and geo-politics of negotiation. They were quick to accept rules and prescriptions coming from IMF and foreign entities without having the negotiating skills and sophistication to handle IMF officials and creditors.
In placating those entities at the expense of their people, they negate their sovereignty and foremost responsibility which is to protect the interest of their citizens. The structural adjustment program as it was favorably called to mask it deadly austerity measures did more harm than good. For in the first place, African nations do not have economic structures to be adjusted. Even with its noble and naïve attempt to cure the infected patient, austerity prescriptions ended up prolonging the ailment. The local citizens were disoriented and economic dislocation was apparent. The poor became poorer and rich got richer while capital flight was entrenched.
The respective currencies of those African counties were substantially devalued and importation of essential commodities and raw materials for production were banned. Moreover the public sectors sacked many of their employees and high unemployment became the order of the day. Poverty and hopelessness quadrupled while economic activities came to screeching halt. IMF could not point to any African nation that austerity measures have any positive and intended results.
Implementation of mild austerity measures that implies the trimming of spending may be necessary in some cases. The paradigm of investing in human capital and provision of fund to loosen liquidity should become the uttermost goal. But the draconian implementation of austerity policies that turns a nation upside down, impairing their sense and sensibility has proven to be unacceptable and self-defeating.