The Spectre Haunting Europe: Debt Defaults, Austerity, and Death of the 'Social Europe' Model

A spectre is haunting Europe: the illusion that Latvia’s financial and fiscal austerity is a model for other countries to emulate. Bankers and the financial press are asking governments from Greece to Ireland and now Spain as well: “Why can’t you be like Latvia and sacrifice your economy to pay the debts that you ran up during the financial bubble?” The answer is, they can’t – without an economic, demographic and political collapse that will only make matters worse.

Only a year ago it was recognized that decades of neoliberalism had crashed the U.S. and several European economies. Years of deregulation, speculation and lack of investment in the real economy had left them with rising inequality and little consumer demand, except for what was financed by running up debt. But the financial press and neoliberal policymakers counterattacked, using the “Baltic Tigers” as an exemplary battering ram to counter Keynesian spending policies and the Social Europe model envisioned by Jacques Delors.'

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