Europe June 14, 2010, 9:01AM EST

Europe's Economy 'Returning to 1930s'

With governments slashing budgets to rein in huge deficits, the head of Europe's unions fears the Old World may return to the Great Depression

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The chief of Europe's trade union chiefs, John Monks, has warned that the austerity packages being imposed across the bloc will send the continent "back to the 1930s." He reported that European Commission President Jose Manuel Barroso also fears member states will turn their back on democracy—but for the opposite reason.

"This is extremely dangerous. This is 1931, we're heading back to the 1930s, with the Great Depression and we ended up with militarist dictatorship," the general secretary of the European Trades Union Congress (ETUC) said in an interview with EUobserver. "I'm not saying we're there yet, but it's potentially very serious, not just economically, but politically as well."

Mr. Monks reported that Mr. Barroso has similar concerns, but based on diametrically opposed reasoning. He said the commission chief believes the austerity packages will save Europe from returning to the darkest days of the last century rather than precipitating the fall.

"I had a discussion with Barroso last Friday about what can be done for Greece, Spain, Portugal and the rest and his message was blunt: 'Look, if they do not carry out these austerity packages, these countries could virtually disappear in the way that we know them as democracies. They've got no choice, this is it'."

"He's very, very worried. He shocked us with an apocalyptic vision of democracies in Europe collapsing because of the state of indebtedness."

In recent weeks, a wave of enthusiasm for draconian austerity measures has swept the continent well beyond the bloc's most troubled economies, which were forced to embrace such cuts in return for EU-IMF bail-outs. Spain has announced a package of austerity measures amounting to €13 billion.

Greece's austerity package amounts to €24 billion; Italy too is slashing by €24 billion. Germany has announced a whopping €80 billion in such measures and the new UK government has said it will cut spending by £6.25 billion (€7.51 billion), although based on earlier Tory pronouncements, experts believe Westminster will eventually unveil cuts amounting to £60 billion (€72 billion). France, which until this weekend had resisted austerity as a strategy, has said it too will cut by €45 billion.

While the composition of the Dutch governing coalition is so far unknown, the leading party in last week's elections wants to cut spending by €45 billion. Ireland last year introduced measures worth €4 billion and Portugal's €2 billion includes a privatisation of 17 different government enterprises. Hungary's new right-wing government, which campaigned on easing the IMF-imposed austerity measures of the previous centre-left administration has instead announced further cuts of 120 billion forints, while the harshest of Europe's austerity measures, Romania's plans for across-the-board public sector wage cuts of 25 percent and pension reductions of 15 percent, have produced the country's biggest demonstrations since the fall of Communism.

In the Baltics, Estonia's cutbacks worth 10 percent of GDP resulted in a 14 percent contraction of the economy and a jump in unemployment from 11 percent to 19.8 percent; and Lativa's almost identical cuts produced a contraction of 18 percent and a rise in joblessness to 22 percent.

Trade unions, which have so far mounted a number of general strikes and protests in different countries, are intensifying their offensive against the austerity plans despite Brussels' misgivings, and are for the first time beginning to co-ordinate their actions across member states.

Mr. Monks said his executive committee has agreed to call a Europe-wide "day of action" on 29 September, including strikes, demonstrations and meetings with government ministers in all European countries.

The date is scheduled to coincide with a meeting in Brussels of finance ministers.

The ETUC did shy away from calling an outright European general strike, however.

"We're encouraging members to take strike action as part of a menu of different types of activities, but it's not a general strike," Mr. Monks explained.