The following is an unedited version of an article appearing in this week’s issue (n. 46) of the EIR Strategic Alert weekly.
European nations should cut social expenses in order to finance government debt, the IMF said in a study presented at the House of the Euro in Brussels Nov. 4. In the next 15 years, the average debt ratio in Europe could rise to 130 per cent. If continued, deep cuts would be required in the European model and social contract, IMF European director Alfred Kammer said. “The potential savings from these more fundamental changes are substantial. For instance, if all European countries were to reduce the share of public financing in health, education, pensions, infrastructure and energy security, to the OECD average, then this could generate savings of up to 3 percent of GDP on average.”
Two weeks earlier, Kammer had called for financing investments in defense and energy with common EU debt issues. In an interview with Reuters, Kammer had said: “We recommend to finance this increase in the EU budget with common debt.”
In other words, the IMF calls for increasing spending (and debt) for rearmament, while at the same time cutting spending (and debt) for welfare, health etc.
This self-exposure of the reactionary IMF policy—which is the same as the policy of the EU supranational elite—does require commentary. It also provides the opportunity to expose how the policy premises are completely wrong.
The IMF starts from the premise that government debt of major EU countries (Germany, France, Italy) is getting out of control, and is unsustainable. The figure of a 130% debt to GDP ratio is given as the threshold for a sovereign debt crisis. This is totally arbitrary, and the example of Japan demonstrates it.
