Nations must end 'brutal austerity' to tackle debt: Unions

EU finance ministers were warned tonight to abandon “brutal austerity” as the answer to the sovereign debt crisis and instead give struggling countries a chance to restore collapsing economies.

EU finance ministers were warned tonight to abandon “brutal austerity” as the answer to the sovereign debt crisis and instead give struggling countries a chance to restore collapsing economies.

An emergency resolution agreed at the start of a conference of trade union leaders in Athens said the drastic measures so far taken in the form of financial bailouts for Ireland and Greece in return for severe domestic public spending cuts were plunging the countries further into debt.

John Monks, general secretary of the European Trade Union Confederation, said the ETUC was in Greece for its congress because the country was “in the eye of the storm” and to show solidarity with Greek public sector workers demonstrating against deep wage cuts and job losses.

The solidarity did not impress Greek demonstrators who welcomed the union leaders with posters outside the conference centre proclaiming “ETUC bureaucrats go home!”.

Inside the building Mr Monks told 500 union delegates from 36 countries: “We are not bureaucrats on holiday as some posters proclaim in the streets of Athens. Greece was the first country in trouble but it is not the last.”

Mr Monks acknowledged that the Greek crisis was partly the fault of the Greek authorities but added that the EU-IMF bailout terms were too tough.

Tonight’s resolution was targeted at EU finance ministers meeting in Brussels to formally approve an economic bailout package for Portugal of €78bn over three years, with similar terms and conditions to the one granted to Ireland.

In a letter to the ministers accompanying the resolution, Mr Monks said: “The ETUC calls on you to immediately change course. Brutal austerity, both in terms of public finance and in terms of wages, is not working but is instead undermining the economies of countries such as Greece and Ireland.”

The crisis was a financial market failure which was now being used as an alibi “to provide European policy makers with the power to intervene in wages and national wage formation systems”.

Mr Monks added that the answer was to “change the logic” of the current financial bailouts, “allowing the countries involved to grow out of debt”.

The remarks will bolster Ireland’s case for a cheaper loan interest rates deal as EU ministers discuss Ireland's progress in keeping to its national austerity programme.

The Irish Government is studying the terms of the Portuguese bailout as well as the behind-the-scenes efforts to revise the Greece deal, amid deepening debt and mounting public anger in Athens.

British Chancellor George Osborne, in Brussels to assess the economic state of play across Europe and endorse the Portuguese bailout, earlier ruled out any UK involvement in a second Greek bailout as Britain was not involved in the first.

But the UK is part of the subsequent €60bn European Financial Stability Mechanism used to help underwrite a bailout of Ireland and is being used as part of the Lisbon deal. Until the mechanism is replaced in 2013 by a permanent bailout fund committing only eurozone countries, the UK remains exposed to the debt.

Meanwhile, International Monetary Fund chief Dominique Strauss-Kahn had been invited to attend the Brussels talks and the ETUC congress in Athens. He had already turned down the ETUC invitation before his latest personal troubles but his absence from Brussels was because he was arrested in New York for an alleged sex assault in a hotel in the city.

Tonight the IMF, crucially involved in the European bailout crisis, insisted the organisation remained “fully functional” and that a deputy was sent to Brussels to represent the organisation alongside EU finance ministers.

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