Nobel Prize-winning economist Paul Krugman is not a lover of economic austerity measures. He argues that populist strife across Europe that has come from a tightening of the purse strings has done nothing great for consumer confidence or economic recuperation. Just because a government reduces spending doesn't mean that all will abruptly become right in the world.
Revolt means loss of jobs
France, Greece and numerous other European nations have shown indications of revolt over dire economic conditions that have cost many people their jobs. Both France and Greece held political elections May 6, and in both countries, voters cast a firm majority vote for candidates willing to jettison economic austerity policies. While a clear policy alternative to austerity has yet to be defined, Krugman suggests that the "unwashed masses" are through with the sort of austerity that learned officials suggested and enacted.
Franois Hollande's defeat of French President Sarkozy was painted in ominous tones by The Economist, which considers Hollande's turn from malfunctioning orthodoxy to be "rather dangerous." However, from an economic standpoint, Sarkozy's strategies - enacted in close tandem by neighboring political ally Chancellor Angela Merkel of Germany - clearly weren't working, says Krugman. Two years of austerity have done nothing but grind into the public, and the voters had enough.
Strategies need to be changed
The austerity measures were started in an attempt to try and get results in the tough economy. The issue was that people could not spend more because they did not have the money with all spending slashes and job eliminations. The economic depression just got worse with the measures.
Austerity measures in Ireland were done to make an effort to get the bond markets up and the media called this a success despite the fact that it was certainly not succeeding at all. Most people would assume austerity would work for that, but really it just brought on borrowing costs to remain much higher in Ireland than it was in many other nations.
The next place for Europe
Europe itself would not be doing this badly without the euro, according to Krugman. He believes that Greece, Spain and Ireland would not be hurting Europe as a whole if they had their own currency. Iceland let the krona banks fail, and now it is beginning to recuperate again. Cost-competitiveness could be restored, and nations could export depending on devaluation of currency.
Killing the euro would be disruptive for a time and an utter defeat for the concept of the European Union. But Europe as a whole would not be financially compromised. Krugman wonders whether there is one more way out, via an economic road once paved by Germany. By trading with nations facing an inflationary boom, countries with above-normal inflation can experience a trade surplus in contrast to its struggling neighbors, provided interest rates are low.
If that were to work, and the European Central Bank were to change its focus from inflation to economic growth, the chance for real change could emerge, Krugman argues.
Revolt means loss of jobs
France, Greece and numerous other European nations have shown indications of revolt over dire economic conditions that have cost many people their jobs. Both France and Greece held political elections May 6, and in both countries, voters cast a firm majority vote for candidates willing to jettison economic austerity policies. While a clear policy alternative to austerity has yet to be defined, Krugman suggests that the "unwashed masses" are through with the sort of austerity that learned officials suggested and enacted.
Franois Hollande's defeat of French President Sarkozy was painted in ominous tones by The Economist, which considers Hollande's turn from malfunctioning orthodoxy to be "rather dangerous." However, from an economic standpoint, Sarkozy's strategies - enacted in close tandem by neighboring political ally Chancellor Angela Merkel of Germany - clearly weren't working, says Krugman. Two years of austerity have done nothing but grind into the public, and the voters had enough.
Strategies need to be changed
The austerity measures were started in an attempt to try and get results in the tough economy. The issue was that people could not spend more because they did not have the money with all spending slashes and job eliminations. The economic depression just got worse with the measures.
Austerity measures in Ireland were done to make an effort to get the bond markets up and the media called this a success despite the fact that it was certainly not succeeding at all. Most people would assume austerity would work for that, but really it just brought on borrowing costs to remain much higher in Ireland than it was in many other nations.
The next place for Europe
Europe itself would not be doing this badly without the euro, according to Krugman. He believes that Greece, Spain and Ireland would not be hurting Europe as a whole if they had their own currency. Iceland let the krona banks fail, and now it is beginning to recuperate again. Cost-competitiveness could be restored, and nations could export depending on devaluation of currency.
Killing the euro would be disruptive for a time and an utter defeat for the concept of the European Union. But Europe as a whole would not be financially compromised. Krugman wonders whether there is one more way out, via an economic road once paved by Germany. By trading with nations facing an inflationary boom, countries with above-normal inflation can experience a trade surplus in contrast to its struggling neighbors, provided interest rates are low.
If that were to work, and the European Central Bank were to change its focus from inflation to economic growth, the chance for real change could emerge, Krugman argues.
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