Is this the end of austerity? Top EU official warns cuts have lost 'political and social support' as it is revealed even Germany is suffering from downturn

  • Jose Manuel Barroso says EU-wide austerity policy has 'reached its limits'
  • New business survey suggests German economic activity is contracting
  • Angela Merkel warns that EU will soon be dictating national budgets

By Hugo Gye

|

Europe's punishing austerity policies could soon be coming to an end after a top EU official suggested that the pace of spending cuts should be slowed.

Jose Manuel Barroso, president of the European Commission, said that austerity had 'reached its limits' and worried that the programme had lost 'political and social support'.

The dramatic U-turn came after new economic figures suggested that Germany was facing an economic slowdown and Angela Merkel warned that Brussels might soon be dictating national budgets.

Shock: Jose Manuel Barroso, president of the European Commission, seems to have turned against austerity

Shock: Jose Manuel Barroso, president of the European Commission, seems to have turned against austerity

The majority of European countries are currently undergoing sharp spending cuts and tax rises in an attempt to bring down their deficits to sustainable levels.

But critics have blamed the austerity measures for suppressing growth across the eurozone as well as in the UK, and claim that the policy might even prove counter-productive by reducing the size of the economic base which governments draw on for their funding.

 

In a speech in Brussels yesterday, Mr Barroso said: 'While this policy is fundamentally right, I think it has reached its limits in many aspects.'

Pointing to austerity's widespread unpopularity, he added: 'While this policy is fundamentally right, I think it has reached its limits in many aspects.'

The head of the powerful Commission admitted that it may have been a mistake to force cuts on economies as different as Greece, Ireland, France and Italy.

Angela Merkel
Britain's Chancellor of the Exchequer, George Osborne

Failure? Austerity is favoured by leaders such as Angela Merkel and George Osborne, but has been criticised

'We have to have tailor-made situations for each individual country,' he said. 'We cannot apply a one-size-fits-all programme to the European countries.'

He insisted, however, that he still believed austerity would eventually see positive outcomes, saying: 'It is a painful programme, but it is working.'

Europe's continued economic struggles were laid bare today when a major survey showed that Germany's business activity slowed in April for the first time this year.

The purchasing managers' index for Germany, measuring growth in companies ranging from hotels to banks, fell to 49.2 in April from 50.9 the previous month.

This meant the index slipped below the crucial 50 point dividing growth and contraction for the first time since November.

'Whereas we'd seen evidence that the economy had bounced back quite nicely in the first quarter... there are suggestions that we could see a renewed downturn in the second quarter,' said Chris Williamson, chief economist at Markit.

Controversy: The EU is increasingly attempting to have a say over the national budgets of eurozone countries

Controversy: The EU is increasingly attempting to have a say over the national budgets of eurozone countries

It was also revealed yesterday that both France and Spain fell short of their budget deficit goals last year as debt levels rose across the eurozone.

France posted a deficit of 4.8 per cent of economic output, higher than its 4.5 per cent target, statistics agency Eurostat revealed.

Spain's budget shortfall was the largest in the EU, with the deficit reaching a total of nearly 11 per cent, well up on the previous year and even higher than Greece.

The eurozone's combined burden of sovereign debt reached a record 90.6 per cent of total GDP last year.

The stage is now set for a further showdown between governments such as Germany and Britain which are keen for more tough action on deficits, and weaker economies, backed by the International Monetary Fund, which are looking for breathing space.

German chancellor Angela Merkel yesterday suggested that the EU should act over eurozone governments which are unwilling to streamline their budgets.

‘We seem to find common solutions when we are staring over the abyss. But as soon as the pressure eases, people say they want to go their own way,’ she said.

‘We need to be ready to accept that Europe has the last word in certain areas. Otherwise we won’t be able to continue to build Europe.’

 

The comments below have not been moderated.

Oh I see... So it's not about saving Europe from economic catastrophe, it's about political expediency

Click to rate     Rating   5

We all know Barroso is pet dog!!

Click to rate     Rating   3

austerity is not for the rich, its for the poor. I read a report yesterday that says wealth held by the richest 7% of households rose 28% 2009 through 2011, while the net worth of the other 93% of households dropped 4%.

Click to rate     Rating   3

So what...borrow more? What planet do these people live on? More cuts are needed to rebalance these Western economies who think that they are still rich. We are in debt and global economics are changing. Emerging economies are the new power houses. All we will do is end up in bigger debt trouble. We need to adjust to a new emerging global economy.

Click to rate     Rating   5

Barroso would know for he got Portugal into trouble with unchecked spending.

Click to rate     Rating   8

isn't it strange how austerity is only affecting the poor whether working or not some middle class but no rich at all because they get tax breaks especially the bankers who caused this we have food banks who are feeding the poor and taking over the govts job because of these cuts 350000 people used food banks recently this is ridiculous stop overseas aid close the borders and look after our own , and the should be a rule that companies must take on at least half their workers being born in britain , one sandwich chain has 80 per cent staff who are not from britain

Click to rate     Rating   12

EU leaders are doing very nice with there flash cars and expense accounts and not to mention there big fat wage cheques I suggest we give them 6 months to give us all our tax back or we lock the thieves up

Click to rate     Rating   14

A hint that the ECB is going to print unlimited quantities of money? If the austerity stops, where does the money come from?

Click to rate     Rating   9

we gotta get out of this stupid EU vote UKIP

Click to rate     Rating   12

Oh nice to know that it's only when Germany starts feeling the pinch do people start stating THE OBVIOUS! Unbelievable. And Obama is trying to adopt this bloody model for Americans whlei at the same time cutting social security - he's an IMBECILE.

Click to rate     Rating   13

The views expressed in the contents above are those of our users and do not necessarily reflect the views of MailOnline.

We are no longer accepting comments on this article.