EU finance ministers defend austerity

AP News
Posted: Apr 09, 2011 8:08 AM
EU finance ministers defend austerity

European finance ministers on Saturday defended painful austerity measures as a necessary means to defeat the region's crippling debt crisis.

Their meeting just outside Budapest will be followed by large union protests in the Hungarian capital against a recent deal to crack down on uncompetitive salary increases and unsustainable pension systems.

Budget cuts "are necessary because we need to grow and grow better and reduce our deficit to be able to continue paying for the state of well-being," Spanish Finance Minister Elena Salgado said.

In recent months, Spain's Socialist government has launched new austerity measures to get a grip on the country's large budget deficit. Even though unemployment remains at around 20 percent _ the highest in the European Union _ the cuts appear to have succeeded _ at least for the moment _ in re-establishing some market confidence in the Spanish economy.

"While we understand their position perfectly, we would like them to understand ours too," Salgado said of the protesters.

Salgado's counterparts also tried to convince voters concerned over their pensions and job security that new measures to improve the competitiveness _ and fiscal sustainability _ of their economies did not constitute an attack on Europe's social model.

"The people have to understand that we're not saving to upset them, but we are saving so that we can finance investments into social policies in the future," Luxembourg Finance Minister Luc Frieden said.

Sweden's Anders Borg said he didn't really see a need to protest at the moment. "It is quite clear that the European social model is being safeguarded," he told reporters.

On Friday, EU finance ministers agreed to grant financial help to Portugal once the debt-ridden country has signed on to a radical overhaul of its economy.

Similar bailouts for Greece and Ireland last year have sparked voter outrage as well as questions over how the deep spending cuts will affect those countries' ability to grow again.

German Finance Minister Wolfgang Schaeuble said it was not entirely clear whether a recent decision to cut the interest rate and extend the repayment deadline on Greece's euro110 billion rescue loan was enough to get the country back to health. In return for those better conditions, Greece also agreed to a euro50 billion privatization program.