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June 19, 2013 / 11 Tammuz, 5773
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Europe’s Wrongheaded Austerity Policies

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Greeks protest austerity reforms

Photo Credit: Ouria Tadmor/Flash90

The VAT rise, the government said, was a tough, but necessary step in getting Britain back on the road to economic recovery. The Dutch government has just announced it will raise the VAT from 19% to 21%, a measure which Mr. Wilders, who wants to lower it to 18%, vigorously opposes. Earlier, German Chancellor Angela Merkel, too, had raised the VAT in Germany from 16% to 19% as part of her efforts to fill holes in public spending; Mrs. Merkel is also expected to fare badly in next year’s general elections.

Early this month, the British Conservatives suffered widespread losses in local elections as voters punished the party for austerity measures and a stalled economy. A poll among members of Cameron’s own party revealed that they see the tax rises on ordinary families as one of the biggest barriers to Cameron’s reelection. Ever so often, Mr. Cameron expresses his approval of taxing people even more. “Taxes must rise to reform elderly care,” he said. “Green taxes must increase in order to protect the environment.”

Austerity policies, which consist mainly of extra taxes, not only keep the European governments from finding long-term solutions to their overspending, while worsening the economic situation; they also make these government increasingly unpopular. Almost 40 years after Arthur Laffer drew his famous curve on a napkin, one wonders why European politicians, keep closing their eyes to an evident truth instead of putting in place incentives for growth. But then even their American colleagues often do not want to see this truth.

President Obama’s efforts at the G8 meeting last Saturday to help Merkel and Hollande reach a consensus on how to proceed will not help. Merkel and Hollande do not need to reach a consensus on how to proceed; they need to reverse course.

Originally published by Gatestone Institute http://www.gatestoneinstitute.org

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About the Author: Peter Martino is a European affairs columnist for the Gatestone Institute.


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