Calls for Growth Rises to Counter Austerity

Paul Krugman has been saying for a long time that the austerity programs in Europe were a mistake.

http://www.nytimes.com/2012/04/24/wo...y.html?_r=1&hp


BERLIN — With political allies weakened or ousted, Chancellor Angela Merkel’s seat at the head of the European table has become much less comfortable, as a reckoning with Germany’s insistence on lock-step austerity appears to have begun. “The formula is not working, and everyone is now talking about whether austerity is the only solution,” said Jordi Vaquer i Fanés, a political scientist and director of the Barcelona Center for International Affairs in Spain. “Does this mean that Merkel has lost completely? No. But it does mean that the very nature of the debate about the euro-zone crisis is changing.”

A German-inspired austerity regimen agreed to just last month as the long-term solution to Europe’s sovereign debt crisis has come under increasing strain from the growing pressures of slowing economies, gyrating financial markets and a series of electoral setbacks.

Time to change the subject. Our petty arguments are entertaining for sure but there are definitely serious issues to be discussing. Of course its only 2 of us doing the talking. How boring.

Austrian economic theorists and followers like mr. seriouslyWrong are conspiciously silent about whats going on with austerity in Europe.

Quote:

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Originally Posted by Havakasha

Austrian economic theorists and followers like mr. seriouslyWrong are conspiciously silent about whats going on with austerity in Europe.

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Greece has no money, and they cannot print money to inflate their way out of it. The only solution is to cut. No one will lend them money on the open market at a reasonable rate (for a good reason). It's common sense Lloyd.

Yes, austerity hurts. Years of fiscal mismanagement needs to time to equilibrate. Remember, "Europe's pain is coming our way".

Curse the idiot who put the "G" in this equation - GDP = C + I + G + (X - M).

Well there are many who now think that Austerity without growth measures will backfire on the European economies. Should be fascinating to watch and follow these living examples.

Across the Atlantic in Europe, a different type of haircut has been debated. The Greek debt crisis is a catastrophic confluence of events. Internal mismanagement and external economic forces have resulted in a recession the depths of which a modern country has never seen. Private creditors (mainly banks) have grudgingly agreed to take a haircut of up to 78% of their debt, but only after they secured a recapitalization plan and only after an agreement was made to use bailout funds almost exclusively to shore up European banks instead of for assistance for the Greek people (read more about that tragedy here and here).

While the Greek government was used essentially as a pass-through to shore up the European banking system against a sovereign Greek default, Greek citizens watched as their social safety net was set on fire:

Greece, one of three eurozone nations to need an international bailout, has cut spending on just about everything it can — public sector salaries, pensions, education, health care and defense. As a result, unemployment has soared to over 21 percent, fueling social unrest that has sometimes turned deadly. In the last two years, riots have erupted frequently and the country's near-daily strikes and demonstrations have shut down schools, airports, train stations, ferries and harmed medical services.
If you ever wondered what Social Darwinism looks like, that's it.

http://www.washingtonpost.com/busine...y.html?hpid=z2

By Howard Schneider, Published: May 13

ALBURQUERQUE, Spain— When officials in Madrid slashed support for alternative-energy programs this year as part of the campaign of government austerity sweeping Europe, ripples quickly hit this rural town with the cancellation of plans for a solar energy plant.

The decision forced several dozen layoffs at the company that would have built and run the project, adding to an unemployment rate that is running at 30 percent in the region. The move also undercut hopes at local firms that had expected to provide heavy equipment and fencing for the plant. At a cement company that was to supply material for the project, mixers now sit idle and the fear of further layoffs looms.

Euro-zone unemployment hits record high, fuels recession fears: The euro-zone’s unemployment rate surged to a record 10.9 percent in March, the highest since the euro currency was established in 1999, the Associated Press reports. According to official data from Eurostat, seven out of the 17 euro-zone countries have unemployment rates of 10 percent or more. Here’s a look at the seven countries and how their residents have been grappling with high unemployment rates. Unemployment figures are according to an AP report.
Gallery

Europe’s debt crisis: Leaders continue negotiations, protesters take to the streets: Government officials work to enact laws and agreements that they hope will save the euro. Meanwhile, citizens demonstrate against the austerity measures their governments have put in place.

The economic debate consuming Europe comes down to the question of whether struggling countries should choose austerity by clamping down on government spending to rein in unsustainable deficits or pursue growth stimulated by more spending.

Spain is wrestling with the problem facing much of the region: how to tame the deficits that have fueled Europe’s debt crisis without undermining vital growth. The euro zone’s tilt toward austerity has contributed to an economic slowdown that is itself making it harder for governments to balance their budgets.