"Not So Fast on European Austerity"

A quick one from the side of the road:

Hey, Not So Fast on European Austerity, by Christina Romer, Commentary, NY Times: European policy makers just don’t get it. To hear them talk, you’d think that Europe was on the right path. Troubled countries just need more of the same, they say — more fiscal austerity, more labor market flexibility, more price stability — and the European crisis will be licked.

Have they looked at their own numbers? It has been two years since moves to austerity started, but the crisis is still with us. Growth in European gross domestic product was negative in the last quarter of 2011. Unemployment in the entire euro zone in February was 10.8 percent; in Spain it was an astounding 23.6 percent. And judging from the renewed turbulence in bond markets, investors don’t believe that prosperity is just around the corner.

Fiscal austerity is normally a sensible response to a loss in confidence in a country’s solvency, as has occurred in parts of Europe. But the current situation is exceptional. ...[continue reading]...