02.27.13 6:00 PM ET
Does Austerity Work? Ask the Euros
In the past few years, austerity has been highly regarded as the best means to end the Euro crisis. Paul Krugman of the New York Times has consistently been outspoken against austerity, and now calls it a failure. This is exemplified by the recent election in Italy, which has seemingly left the government in disarray.
The fundamental fact is that a policy of austerity for all — incredibly harsh austerity in debtor nations, but some austerity in the European core too, and not a hint of expansionary policy anywhere — is a complete failure. None of the nations under Brussels/Berlin-imposed austerity has shown even a hint of economic recovery; unemployment is at society-destroying levels…
I wish I believed that the Italian election would serve as a wake-up call — a reason to, for example, give the ECB a green light for more expansion, a reason for Germany to do some stimulus and for France to call off its unnecessary belt-tightening. My guess, however, is that we’ll just have more lectures to the Italians and everyone else about how they just aren’t trying hard enough. And there may be worse figures than Beppe Grillo lurking in Europe’s future.