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Opinion | Still time to avoid economic abyss
A recent Rambøll poll shows that nearly two-thirds of Danes – 63.2 percent – would vote against adopting the euro if a referendum were held today. Given that the country has otherwise long been evenly divided on the question, the results indicate that opposition to it has risen considerably.
The results, though, are predictable, prudent and quite natural in light of the EU’s towering sovereign debt crisis. Time is about to run out on the euro – Europe’s ultimate prestige product. Before the end of the first quarter of 2012, Greece will in all likelihood cease to be a part of the Eurozone. The effects of this will be brutal on the Greeks, but the alternative – remaining a part of the Eurozone – would be even more painful.
The crisis is only going to get worse once it becomes apparent how caught up Italian banks are in Greece’s economy. From there, the landslide will continue through Spain and then Portugal. But even before that scenario unfolds, we’re already seeing France brought to its knees by its own banks and their deep dependence on Europe’s problem economies.
With the vast extent of the sovereign debt crisis and its dire consequences, it’s hard not to criticise Danish law makers for sitting on their hands. Maybe they believe that the crisis will come to an end on its own. Or maybe they fear a voter backlash if they openly admit that they, in reality, have lied about how bad the situation looks and about what the consequences will be if we continue on the same path – a path that ends in a 100 billion kroner deficit next year.
Each time the EU’s leaders meet from now on, we’re going to see them repeat the same charade: empty promises about cleaning up the situation, more money for a European bailout fund and more pressure on Germany to donate. All of this will be followed by a few days of improved market confidence. But it won’t take long for the markets to realise that it will be impossible to make good on those promises given the way the EU is put together.
Being able to make good on their promises would essentially require putting an end to national sovereignty in order to allow for a consistent fiscal policy for the entire Eurozone. This, though, is neither a political nor a democratic reality. Much is already being said about the agreement struck in October, and how it was the moment Angela Merkel “once and for all took charge”. In a few years, though, we’ll be looking back at it as the beginning of the EU’s end.
Are there any bright points on Europe’s horizon? Unfortunately, the answer appears to be ‘no’, but there are countries that have a chance – minimal though it might be – of not getting caught in the landslide. Sweden, the Czech Republic and Germany, all come to mind. The Swiss, too, have already taken action to put themselves on somewhat safe ground. And here’s the good news in all of this: if those countries can, Denmark can too. Why not? Since we haven’t adopted the euro, all we need is 90 members of parliament to do the responsible thing and vote to pull us out of the Euro Plus Pact. We can choose a different path, and if we act swiftly and resolutely we can put ourselves among the winners.
We can unilaterally carry out thorough reforms. Among the proposals put forth by the Liberal Alliance are: reducing the number of public sector employees by 40,000, a 40 percent income tax, a 50 percent reduction of corporate tax rates, and an increase in the retirement age.
During the election, our economic plan was criticised for being everything from ultra-liberal to totally unrealistic. Taking dramatic steps was totally unnecessary, our opponents said. I hope they’re ready to take back their words, because if we want to steer Denmark around the growing chasm of the debt crisis, we’re going to need Liberal Alliance’s plan.
The challenge is enormous: we need to eliminate our debt, we need to be more competitive, and public spending needs to come down. There is no other choice. And if we wait too long, we’re just going to be caught up in the collapse. We can compare our situation to being swept down a river with the rest of the EU and heading directly towards a waterfall. The longer we wait to save ourselves, the stronger the current gets and the harder we have to swim to save ourselves (read as: the more drastic our reforms need to be). If we wait too long, there will be nothing we can do. This is where Greece is right now, and others are following right after.
If we don’t do something now, we will be forced to carry out reforms that are far more drastic than those proposed by the Liberal Alliance. If we continue our policy of burying our heads in the sand, it won’t be long before we find ourselves looking for a 10-20-30-40 plan to save the country. Ten, in this instance, is for 10 percent corporate tax. Twenty, a 20 percent reduction in public spending. Thirty for a 30 percent income tax, and 40 a maximum tax burden of 40 percent – compared with the current 50 percent.
That sounds rough, but it could become reality if we don’t show the courage to do the right things: pull out of the Euro Plus Pact, trim the public sector, lower taxes, and increase the retirement age.
The alternative to thorough, liberal reforms is recession that lasts years, mass unemployment, and debt for generations to come.
Is it fair that we let our fear of voters lead us into economic ruin? I personally don’t think so.
The author is the leader of the Liberal Alliance party.
This opinion piece was originally published by Berlingske.