* Iron Lady's firm leadership and conviction politics
* Euro zone rim's problems could be too tough even for
* Inequality, social strain are price of free-market legacy
By Alan Wheatley, Global Economics Correspondent
LISBON, April 9 Even in the depths of recession,
southern Europe is showing a sneaking regard for the
single-minded way that Margaret Thatcher rammed through some of
the very policies that are now putting the region on the rack.
The free-market principles of the former British prime
minister, who died on Monday aged 87, are too radical for those
on the euro zone periphery - and elsewhere - who instinctively
look to the state for a helping hand.
But commentators and economists said Europe badly needed the
sort of leadership that Thatcher showed in the early 1980s in
reviving a country that, like the euro zone now, was alarmingly
low on confidence.
"She took over a bankrupt country hit by strikes,
hyperinflation, very strong unions, paralysis of public
services, high taxes on labour and little wealth creation,"
Portuguese academic Bernardo Pires de Lima wrote in the daily
Diario de Noticias.
His appreciation was headlined "Thanks, Thatcher".
Thatcher's remedy for the economic ills she inherited was to
cut public spending in the teeth of a recession, tame powerful
unions and roll back the state through a bold programme of
liberalisation and privatisation - pretty much what is being
prescribed for the euro zone periphery today.
George Zombanakis, an economist with the Greek central bank,
said pursuing a similar agenda, even if less aggressively than
Thatcher did, would solve a lot of southern Europe's problems.
"We're in exactly the same position as Britain was back in
those days, lagging behind in terms of competitiveness," he
said. "We have to understand that if we do nothing, China, India
and others will become better off at the expense of Europe."
Zombanakis said southern Europe might be less amenable to
Thatcherism than Britain was. But Thatcher, too, faced fierce
opposition initially to her radical policies and yet prevailed.
"The lesson is the lack of leadership in Europe," he said.
"It's the determination that makes the difference."
Yet the malaise on the rim of the euro zone is so deep that
some wonder whether even someone with Thatcher's steel would be
able to stop the rot.
"She would be facing a complete depression, a state of
despair," said Riccardo Barbieri, an economist with Mizuho in
London. "There's a point where even a gutsy politician with very
clear ideas would find it almost impossible to do what she did."
Barbieri said a smaller, more efficient state would be a
priority for Thatcher. Spending would be cut. But, since the
euro zone economy is in a currency straitjacket, she would not
share the fixation with deficit reduction, through tax increases
if necessary, pushed by Germany and the European Commission.
"I wouldn't be surprised if today's Margaret Thatcher argued
that, along with supply side and public sector reforms, you
would also need more leeway on the budget front," Barbieri said.
"Let the automatic stabilisers work. So she would not be fussed
with a deficit that is higher than 3 percent of GDP."
That economists are even wondering how Thatcher would tackle
today's problems shows her lasting impact.
"Having someone who says you cannot count only on the
government to solve your problems was a bit revolutionary for
us. You always had that in the United States, but in Europe in
the 1970s no one was thinking like that," said Filipe Garcia
with Informacao de Mercados Financeiros, a consultancy in Porto.
Thatcher's legacy, of course, is not unblemished.
Garcia, for instance, argued that the current generation is
paying for the fallout of the extensive financial deregulation
that Thatcher championed, epitomised by London's "Big Bang"
financial reforms of 1985.
Former European Commission President Romano Prodi agreed,
saying Thatcher's policies "created the conditions for the
explosion of the most dramatic financial (and now economic)
crisis of the postwar period".
Prodi, a former centre-left prime minister Of Italy, said
Thatcher's low-tax doctrine had also widened the gap between
rich and poor. "Let us tell it how it is: Thatcher reduced the
state to nothing," Prodi wrote in business daily Il Sole 24 Ore.
On the other side of Italy's political spectrum, Silvio
Berlusconi, another ex-prime minister, said Thatcher's lessons
were more valid today than ever.
"When I entered politics in 1994 I always remembered her
lesson: with liberal ideas, it is possible to save a country
that has been the victim of the left's state control and
unions," he said.
In an editorial, the left-leaning Spanish newspaper El Pais
acknowledged both points of view. Thatcher had jolted a
paralysed country back to life, albeit at a heavy social cost.
"But no British leader has undone her main reforms," it said.