Written by Julie Bishop Thursday, 25 October 2012
The announcement last month that the Swiss Government was launching two weeks of military exercises to prepare for the impact of widespread civil unrest within and beyond its borders was a surprise to many people.
Protests have occurred in nations most affected by the European debt crisis, with thousands taking to the streets in Greece, Spain, Portugal and Italy. The only nation of that group to share a border with Switzerland is Italy. The Swiss Minister for Defence Ueli Maurer said, “I can’t exclude that in the coming years we may need the army.”
A spokesperson for the Swiss Defence department said “It’s not excluded that the consequences of the financial crisis in Switzerland can lead to protests and violence. The army must be ready when the police in such cases requests … help.”
There are additional reports of plans for military police in the Swiss army to be on standby to protect key facilities of national importance including manufacturing centres, airports and the offices of international companies.
While there is some scepticism about political motives for the military exercises, it does reflect genuine concern about the ongoing debt crisis and whether it can be brought under control without a deeper crisis. Provisional data indicates the situation in Greece continues to worsen.
Several rounds of bailouts and rescue packages appear to have done little to stem the flow of red ink, with debt increasing and the Budget deficit higher than forecast. Public officials in Greece are under enormous pressure to stop this debt spiral while simultaneously dealing with increasingly violent protests by groups and individuals opposed to the painful budget cuts.
While public debt in France is much lower than that of Greece, it is sufficiently high that President Francois Hollande recently introduced the type of austerity measures in the budget against which he argued during the election campaign only a few months ago.
The government of President Hollande was facing a budget deficit of €37 billion ($46.5 billion) and was forced to adopt a range of cuts to services while introducing a new top tax rate of 75% for people earning more than €1 million per year.
France’s Prime Minister Jean-Marc Ayrault said the increase in public debt to 91 per cent of gross domestic product is “unsustainable“. He warned that, “We have to break with this spiral of ever increasing debt. If we don’t say stop now, our taxpayers will just go on paying indefinitely purely to meet the interest payments.”
This is remarkably similar to warnings from former head of the Australian Future Fund and former Commonwealth Bank CEO David Murray, who recently said that, “To keep providing more Government entitlement that is debt funded, is not very smart, and it is the track that Europe has been down. The whole point about leadership at Government level, business level, family, anywhere, is to get a grasp on reality – that is what Europe has not been doing.”
Mr Murray rejected the argument of the current federal government that Australia had nothing to worry about because government debt was relatively low compared to the crisis-stricken nations of Europe.
“The risk is about the shape of the Australian economy, not the shape of somebody else’s economy. The other risk is that we’re talking about a measurement for Australia and comparing it with measurements for other countries that are severely bad. So, we are comparing 20-30 per cent of GDP in Government debt with countries that have 50-100. But 100 per cent is a ridiculous number. It shouldn’t even go close to that, ever,” he said.
Australia has experienced the fastest and largest descent into debt in our history under Treasurer Wayne Swan and Prime Minister Julia Gillard. The Coalition has been warning for some time that the government had to stop its wasteful spending and to put the national finances on a sustainable footing.
Unfortunately this year’s Budget and the just released MYEFO included contortions and manipulations that would never have been allowed by a private sector company reporting its finances. That will inspire little confidence in the Labor government’s ability to get spending and debt under control.
The task of restoring the national finances will fall once again on the shoulders of the next Coalition government and that task becomes more difficult with each passing day.