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Europe’s Economics Chief Tries to Peel Off ‘Mr. Austerity’ Label Europe’s Economics Chief Tries to Peel Off ‘Mr. Austerity’ Label
(about 1 hour later)
BRUSSELS OLLI REHN, the European Union’s top economic policy maker and scourge of debt-fueled budget deficits, is fed up with austerity. Or at least with being tarred by a term that “is clearly used to label somebody as an unworthy person who is almost eating children.” BRUSSELS
OLLI REHN, the European Union’s top economic policy maker and scourge of debt-fueled budget deficits, is fed up with austerity. Or at least with being tarred by a term that “is clearly used to label somebody as an unworthy person who is almost eating children.”
With more than 26 million Europeans out of work and the economies of the 27-nation bloc shrinking over all for six quarters in a row, Mr. Rehn, the commissioner for economic and monetary affairs, has become a lightning rod in recent months for swelling anger across Europe against the harsh belt-tightening policies generally known as austerity.With more than 26 million Europeans out of work and the economies of the 27-nation bloc shrinking over all for six quarters in a row, Mr. Rehn, the commissioner for economic and monetary affairs, has become a lightning rod in recent months for swelling anger across Europe against the harsh belt-tightening policies generally known as austerity.
But in an interview, Mr. Rehn, 51, described himself as a “doctrinaire agnostic in terms of economic policy” who has read and found much of value in the writings of the British economist John Maynard Keynes, whose name is synonymous with the idea of economic stimulus in times of crisis.But in an interview, Mr. Rehn, 51, described himself as a “doctrinaire agnostic in terms of economic policy” who has read and found much of value in the writings of the British economist John Maynard Keynes, whose name is synonymous with the idea of economic stimulus in times of crisis.
A onetime semiprofessional soccer player in Finland, Mr. Rehn (pronounced ren) said the depth of Europe’s economic gloom, which has led to widespread public disillusionment with the European Union even in richer countries, had shown that no single prescription had all the answers. A onetime semiprofessional soccer player in Finland, Mr. Rehn (pronounced ren) said the depth of Europe’s economic gloom — which has led to widespread public disillusionment with the European Union, even in richer countries — had shown that no single prescription had all the answers.
“If there were a silver bullet, we would have used it already,” he said. “There is no single silver bullet.” He indicated that policies long criticized as too focused on budget cuts were being relaxed now that the financial markets had calmed down after panic swept them at the onset of Europe’s debt crisis four years ago.“If there were a silver bullet, we would have used it already,” he said. “There is no single silver bullet.” He indicated that policies long criticized as too focused on budget cuts were being relaxed now that the financial markets had calmed down after panic swept them at the onset of Europe’s debt crisis four years ago.
On Wednesday, he met for lunch in Brussels with the French president, François Hollande, a frequent critic of austerity, and agreed to give Paris two extra years to reach a budget deficit target of 3 percent of gross domestic product, a goal it was supposed to reach this year.On Wednesday, he met for lunch in Brussels with the French president, François Hollande, a frequent critic of austerity, and agreed to give Paris two extra years to reach a budget deficit target of 3 percent of gross domestic product, a goal it was supposed to reach this year.
France’s more pressing problem is its flagging ability to compete, Mr. Rehn said. France enacted legislation this week to slightly loosen notoriously rigid employment rules, and Mr. Rehn said he was “looking forward to the reforms that they will continue to work on,” particularly to the country’s labor market and pension system.France’s more pressing problem is its flagging ability to compete, Mr. Rehn said. France enacted legislation this week to slightly loosen notoriously rigid employment rules, and Mr. Rehn said he was “looking forward to the reforms that they will continue to work on,” particularly to the country’s labor market and pension system.
Spain and the Netherlands, he added, will probably be given extensions, too, when the European Commission, the union’s Brussels-based executive arm, makes proposals at the end of the month for how each country should proceed.Spain and the Netherlands, he added, will probably be given extensions, too, when the European Commission, the union’s Brussels-based executive arm, makes proposals at the end of the month for how each country should proceed.
Asked whether policy had changed, Mr. Rehn, paraphrasing President John Quincy Adams, said, “I see no change in policy, only a change in circumstances.” This, he said, contained “more than half the truth” to explain the European Union’s evolving economic policy.Asked whether policy had changed, Mr. Rehn, paraphrasing President John Quincy Adams, said, “I see no change in policy, only a change in circumstances.” This, he said, contained “more than half the truth” to explain the European Union’s evolving economic policy.
In the early period of Europe’s current crisis, Mr. Rehn said, Greece, Portugal and other countries burdened with heavy debts lost access to financial markets and simply could not cover their expenses, leaving policy makers no choice but to push for swift budget cuts and tax increases.In the early period of Europe’s current crisis, Mr. Rehn said, Greece, Portugal and other countries burdened with heavy debts lost access to financial markets and simply could not cover their expenses, leaving policy makers no choice but to push for swift budget cuts and tax increases.
“We now have more room for maneuver,” he said, explaining that cutting deficits is no longer such an urgent priority and can be pursued at a “slower pace” as long as countries recognize “that we cannot solve this crisis by building up new debt.”“We now have more room for maneuver,” he said, explaining that cutting deficits is no longer such an urgent priority and can be pursued at a “slower pace” as long as countries recognize “that we cannot solve this crisis by building up new debt.”
The progress that Latvia, Estonia and Lithuania have made in repairing their economies through tough austerity programs shows that “fiscal consolidation” can work, he said, but does not offer a template for others. “You can never apply the experiences of one country to another,” he said.The progress that Latvia, Estonia and Lithuania have made in repairing their economies through tough austerity programs shows that “fiscal consolidation” can work, he said, but does not offer a template for others. “You can never apply the experiences of one country to another,” he said.
A cerebral soccer enthusiast with degrees from Macalester College in Minnesota and the University of Helsinki and a doctorate from Oxford, where he focused on industrial competitiveness, Mr. Rehn started out as a striker with Mikkelin Palloilijat, a soccer club in his hometown, Mikkeli, in southern Finland, but decided against making a career in sports.A cerebral soccer enthusiast with degrees from Macalester College in Minnesota and the University of Helsinki and a doctorate from Oxford, where he focused on industrial competitiveness, Mr. Rehn started out as a striker with Mikkelin Palloilijat, a soccer club in his hometown, Mikkeli, in southern Finland, but decided against making a career in sports.
“I learned the limits of my talent, fortunately early enough. But I’ve enjoyed a great deal of the game for the past 45 years,” he said, speaking in his Brussels office, decorated with soccer memorabilia, a large map of Europe, a small tree and a soft toy of a grimacing bird from the wildly popular game Angry Birds, created by a Finnish game developer. He said he planned to give the bird to his 15-year-old daughter.“I learned the limits of my talent, fortunately early enough. But I’ve enjoyed a great deal of the game for the past 45 years,” he said, speaking in his Brussels office, decorated with soccer memorabilia, a large map of Europe, a small tree and a soft toy of a grimacing bird from the wildly popular game Angry Birds, created by a Finnish game developer. He said he planned to give the bird to his 15-year-old daughter.
He roots for Manchester United, his favorite club for decades, and still plays soccer, now in an amateur international league in Brussels, though he said he had trouble in recent months finding time for matches. Many of the other players are half his age.He roots for Manchester United, his favorite club for decades, and still plays soccer, now in an amateur international league in Brussels, though he said he had trouble in recent months finding time for matches. Many of the other players are half his age.
Another passion is economic theory. “This is not just my job, but my special interest,” Mr. Rehn said, adding that he had followed the controversy over an influential 2010 research paper by the Harvard scholars Carmen M. Reinhart and Kenneth S. Rogoff. The paper, which academics at the University of Massachusetts Amherst exposed last month as deeply flawed, had been embraced by austerity advocates as evidence that high levels of debt smother economic growth. Mr. Rehn himself, in a letter to European finance ministers early this year, cited the research as proof of the perils of letting government debt grow too big.Another passion is economic theory. “This is not just my job, but my special interest,” Mr. Rehn said, adding that he had followed the controversy over an influential 2010 research paper by the Harvard scholars Carmen M. Reinhart and Kenneth S. Rogoff. The paper, which academics at the University of Massachusetts Amherst exposed last month as deeply flawed, had been embraced by austerity advocates as evidence that high levels of debt smother economic growth. Mr. Rehn himself, in a letter to European finance ministers early this year, cited the research as proof of the perils of letting government debt grow too big.
BUT he denied that the flawed Harvard paper had played an important role in shaping the European Union’s economic policies. “We don’t base our economic policy on a single piece of research,” Mr. Rehn said. He added that the basic premise that high debts should be avoided still held up even if the precise danger threshold identified by Ms. Reinhart and Mr. Rogoff had now been put in question. But he denied that the flawed Harvard paper had played an important role in shaping the European Union’s economic policies. “We don’t base our economic policy on a single piece of research,” Mr. Rehn said. He added that the basic premise that high debts should be avoided still held up even if the precise danger threshold identified by Ms. Reinhart and Mr. Rogoff had now been put in question.
One of Mr. Rehn’s most prominent critics has been Paul Krugman, a Nobel winner in economic science and Op-Ed columnist for The New York Times who in a February blog post described the commissioner’s three-year stewardship of European Union economic policy as a “Rehn of Terror.” Mr. Rehn complained that “American commentators often think that Europe is the mirror image of the United States.”One of Mr. Rehn’s most prominent critics has been Paul Krugman, a Nobel winner in economic science and Op-Ed columnist for The New York Times who in a February blog post described the commissioner’s three-year stewardship of European Union economic policy as a “Rehn of Terror.” Mr. Rehn complained that “American commentators often think that Europe is the mirror image of the United States.”
Though accused by Mr. Krugman and others of ignoring the lessons of the Great Depression and the policy prescriptions of Keynes, Mr. Rehn noted that a book he published last year in Finland, “Eye of the Storm,” has nearly 20 references to Keynes but only two to Milton Friedman, the monetarist economist celebrated by many fans of austerity, and just one to Friedrich August von Hayek, Keynes’s great theoretical rival, who scorned the notion that government intervention in the economy could create anything but trouble.Though accused by Mr. Krugman and others of ignoring the lessons of the Great Depression and the policy prescriptions of Keynes, Mr. Rehn noted that a book he published last year in Finland, “Eye of the Storm,” has nearly 20 references to Keynes but only two to Milton Friedman, the monetarist economist celebrated by many fans of austerity, and just one to Friedrich August von Hayek, Keynes’s great theoretical rival, who scorned the notion that government intervention in the economy could create anything but trouble.
In Europe, Mr. Rehn has faced fierce criticism from trade unions, left-wing political groups and a constellation of mostly young, anti-austerity activists. In his own country, however, Mr. Rehn has been accused of not being tough enough on bailout-seeking nations.In Europe, Mr. Rehn has faced fierce criticism from trade unions, left-wing political groups and a constellation of mostly young, anti-austerity activists. In his own country, however, Mr. Rehn has been accused of not being tough enough on bailout-seeking nations.
But he bristled at suggestions that northern nations like Finland, where disdain of spendthrift southern Europeans is widespread, have fared better simply because they are more disciplined and responsible. “It’s not a morality play,” he said.But he bristled at suggestions that northern nations like Finland, where disdain of spendthrift southern Europeans is widespread, have fared better simply because they are more disciplined and responsible. “It’s not a morality play,” he said.
The European Parliament, meanwhile, has summoned Mr. Rehn repeatedly to explain his policies.The European Parliament, meanwhile, has summoned Mr. Rehn repeatedly to explain his policies.
At a hearing in April, Jean-Paul Gauzès, a French center-right member of Parliament, accused Mr. Rehn and his colleagues in the European Commission of surrendering the principle of fiscal discipline.“It is a very bad sign if we are now turning away from austerity,” Mr. Gauzès said. At a hearing in April, Jean-Paul Gauzès, a French center-right member of Parliament, accused Mr. Rehn and his colleagues in the European Commission of surrendering the principle of fiscal discipline."It is a very bad sign if we are now turning away from austerity,” Mr. Gauzès said.
And leftists lambasted Mr. Rehn, saying he was pushing Europe to ruin. “You don’t need to put on your earphones,” shouted Elisa Ferreira, a socialist member of Parliament from Portugal, referring to a headset providing simultaneous translation, “You just need to memorize a single word: basta. This is enough.” And leftists lambasted Mr. Rehn, saying he was pushing Europe to ruin. “You don’t need to put on your earphones,” shouted Elisa Ferreira, a socialist member of Parliament from Portugal, referring to a headset providing simultaneous translation. “You just need to memorize a single word: basta. This is enough.”
He said he still slept soundly despite the clamor against his policies, or at least against what many think are his policies, and complained that he had been misrepresented as a doctrinaire champion of budget cuts.He said he still slept soundly despite the clamor against his policies, or at least against what many think are his policies, and complained that he had been misrepresented as a doctrinaire champion of budget cuts.
“I sleep tight and as long as I can,” Mr. Rehn said, “but what I’m concerned about is the unacceptably high level of unemployment in Europe. We have an employment crisis in Europe. This keeps us alert. We have to do whatever we can.”“I sleep tight and as long as I can,” Mr. Rehn said, “but what I’m concerned about is the unacceptably high level of unemployment in Europe. We have an employment crisis in Europe. This keeps us alert. We have to do whatever we can.”