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TheStreet Open House

Europe Eases The Austerity Whip _ A Little

"We are all fully conscious of the debate, the mounting frustrations and even despair of people," said Herman Van Rompuy, president of the European Council, after the meeting ended.

"We also know there are no easy answers."

With unemployment at a record 11.9 percent and Europeans expressing their discontent at the polls and in the streets, many of the region's political and financial leaders are willing to postpone budget-cutting and deficit targets.

A few recent examples:

â¿¿ EU officials have hinted Spain, France, Portugal and Greece might be allowed more time to reduce their deficits to within the limits specified by European Union rules.

â¿¿ European finance ministers last week agreed in principle to grant Ireland and Portugal more time to repay bailout loans to other eurozone countries. While the countries cannot abandon deficit-reduction plans they agreed to in return for loans, it does allow them to cut budgets more slowly.

â¿¿ ECB President Mario Draghi last week urged indebted governments to move beyond spending cuts and tax hikes and introduce labor reforms and other measures that would boost growth and reduce the "tragedy" of unemployment.

The rethinking of austerity gained momentum late last year after economists at the International Monetary Fund produced research that showed Europe's austerity policies had been far more damaging than policymakers thought.

It's hardly news to Ines Mendes of Lisbon, a 26-year-old flight attendant and mother of a 4-year-old. She said income tax hikes this year will cost her and her partner the equivalent of more than a month's pay each over the year, further squeezing her family budget.

"We could really use a break," Mendes said. "I don't know why they're doing this to us. It doesn't make sense, it's just killing our economy," she said of the EU's austerity demands imposed as part of the country's 2010 bailout.

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