In recent months, European governments have moved to combat the region's debt crisis with what often seem like savage budget cuts at national, local, and township levels.
The cuts, especially in the UK, are likely to have implications for all sectors of the economy and particularly for high-tech equipment manufacturers, as governments -- which have in recent years boosted spending to spark growth -- curb expenditure and hiring.
Almost all 27 EU nations have plans to curb spending and reduce debts to contain a financial crisis that has threatened Europe’s currency union. Deficits measures introduced to deal with the aftermath of the financial crisis include social and military spending cuts as well as tax increases. (See Portugal fears more budget cuts may be required: Minister and Europe budget cutters outpace U.S.)
Some of these cuts will pinch the high-tech sector hard. Defense equipment and component suppliers are likely to feel the impact in cutbacks to future orders. Europe, which has championed efforts to reduce the impact of pollution on the environment, is canceling subsidies, driving up prices, and tamping down on demand. Suppliers of wind and photovoltaic equipment are likely to see reduced demand as a result of subsidy cutbacks in Spain and Greece. (See European Renewables Industry Staggered First by Recession, Now Budget Cuts.)
Jose Maria Barroso, the president of the European Union, summed up the prevailing sentiment when he noted that governments could not abandon current efforts to reduce swelling debt and deficit because there is now "an emergency situation from a financial point of view.” What does this mean for Europe? In its largest economies, Germany, France, and United Kingdom, the belts are being pulled tighter while the smaller countries are implementing severe austerity measures.
In the UK, Chancellor George Osborne plans to pare £81 billion from the budget. This will significantly hurt recruitment and equipment purchase for the police, military, welfare, and healthcare departments. One report said as many as "a million public sector jobs are to disappear, almost all ministries will see drastic budget reductions, and even the Queen will have to become more parsimonious."
Don't get comfy on the other side of the Atlantic either: The Republican victory in the midterm elections could also bring budget cuts in the United States.