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Is era of austerity really over?

Tuesday, April 23, 2013 - 02:13

April 23 - France and Spain fell short of their budget deficit goals last year and debt levels swelled across the euro zone but the pressure may be easing on Paris and Madrid as the European Commission signals an end to sharp spending cuts. Sonia Legg asks whether the era of austerity really is over?

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Cyprus's pain is only just beginning. It needs to find 13 billion euros to secure emergency funding and save itself from bankruptcy, as part of its bailout deal. Finance Minister Harris Georgiades. (SOUNDBITE)(English) CYPRIOT FINANCE MINISTER HARRIS GEORGIADES ON PARLIAMENT VOTE ON BAILOUT, SAYING "We acknowledge our mistakes, we are ready to tackle them, to fix them and to move ahead. There is no alternative. But there is some hope for Cyprus and others like them. The age of austerity could be on its way out. The European Commission has suggested it wants to end the sharp spending cuts which have led to recession, increased unemployment and stunted growth. Toms Vosa is from National Australia Bank (SOUNDBITE) (English) Tom Vosa, National Australia Bank, saying: "What we are really seeing here is the wagons being circled in Brussels, and an attempt by the frankly fed-up populous of Europe that they are sharing their pain and most importantly by preventing disruptive political parties from becoming more powerful within the euro zone and the wider European sphere they can keep the European project on track for now." The shift is being welcomed in larger euro zone countries too Spain and France both fell short of their deficit goals last year. They may now get more time to achieve them that - says Tobias Blattner from Daiwa Capital Markets - is a sensible move. (SOUNDBITE) (English) Tobias Blattner, Daiwa Capital Markets, saying: "When we do this now in a slower framework but nevertheless the aim is still there to bring debt down but just at a slower pace - then I think this is probably just the right medicine for the current period." (SOUNDBITE) (English) Tom Vosa, National Australia Bank, saying: "Investors are looking for a growth agenda - we have realised that while we have seen some reductions in spending and increases in taxation, we have seen some structural reform, there is no growth agenda so equities look unattractive." Protesters may not agree, but austerity has achieved something. The euro zone's combined fiscal deficit has been reduced. It was 3.7 percent of GDP last year - compared to 6.5 % in 2010. But crippling unemployment and outbreaks of violence have prompted the policy shift, although how big it'll be isn't yet clear.

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Is era of austerity really over?

Tuesday, April 23, 2013 - 02:13