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2012-03-12

This was not what was supposed to happen

- These days, austerity-induced depressions are visible all around Europe’s periphery, enligt Paul Krugman i New York Times, 11 March 2012

Greece is the worst case, with unemployment soaring to 20 percent even as public services, including health care, collapse.

But Ireland, which has done everything the austerity crowd wanted, is in terrible shape too, with unemployment near 15 percent and real G.D.P. down by double digits.

Portugal and Spain are in similarly dire straits.

And austerity in a slump doesn’t just inflict vast suffering.

There is growing evidence that it is self-defeating even in purely fiscal terms, as the combination of falling revenues due to a depressed economy and worsened long-term prospects actually reduces market confidence and makes the future debt burden harder to handle.

This was not what was supposed to happen.

Two years ago, as many policy makers and pundits began calling for a pivot from stimulus to austerity, they promised big gains in return for the pain.


“The idea that austerity measures could trigger stagnation is incorrect,” Jean-Claude Trichet, then the president of the European Central Bank, declared in June 2010.
Instead, he insisted, fiscal discipline would inspire confidence, and this would lead to economic growth. 


Jag stannar upp. 

Är det verkligen möjligt att han kan ha sagt det? 

Ett kort googlande leder mig till en artikel av Reuters.
Mycket riktigt.
 

"As regards the economy, the idea that austerity measures could trigger stagnation is incorrect," Trichet said, according to an English-language transcript published on the ECB's Internet site.

"I firmly believe that in the current circumstances, confidence-inspiring policies will foster and not hamper economic recovery, because confidence is the key factor today."
 

Full text Trichet at Reuters


“There is no crisis of the euro,” Mr Trichet declared.
 Speaking in Aachen, Germany, Mr Trichet called for a European Union that would be “a confederation of sovereign states of an entirely new type”, FT 2nd June 2011

Krugman skriver vidare:


- You may ask what alternative countries like Greece and Ireland had, and the answer is that they had and have no good alternatives short of leaving the euro, an extreme step that, realistically, their leaders cannot take until all other options have failed — a state of affairs that, if you ask me, Greece is rapidly approaching.

Full text  Krugman

News about EMU


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