By now, it’s been thoroughly proven by events that austerity policies backfire. Cut public spending in a deep downturn, and you only worsen the slump. Europe is the more extreme version of the proof, but even the United States, which is technically out of recession, faces a needlessly slow recovery. We’ve reduced deficits by slashing spending, raising taxes, and making sequester deals, but the supposed reward in the form of restored business confidence never arrives. Austerity, as Mark Blyth writes, neither restores growth not reduces the debt ratio, because slow growth (and in some cases negative growth) makes the debt loom that much larger.
|By: Robert Kuttner Sunday August 18, 2013 1:59 pm|
|By: David Dayen Monday December 10, 2012 12:40 pm|
Markets in Italy are freaking out today, mainly because of the pronouncement of one man, Silvio Berlusconi. The former Prime Minister plans to run for office yet another time, and Mario Monti, the current caretaker leader, has resigned, setting up new elections probably in February.
|By: David Dayen Tuesday November 13, 2012 1:40 pm|
Greece’s international creditors have delivered a minor lifeline to the ruined country, extending the deadline for when they must meet EU budget targets by two years. However, at the same time, the Eurozone finance ministers delayed the releast of a new tranche of bailout funds from Greece, worth 31.5 billion euro.
|By: David Dayen Saturday October 20, 2012 12:00 pm|
The EU wrapped up its summit, and the major policy announcement was an agreement for a single Eurozone bank regulator, a step on the road to common depository insurance. This is a couple years off, and leaders announced that no country would be able to get bailout funds for its banks until the regulator was in place, which could pressure Spain into tapping that bailout fund for its government operations, if they’re on the hook for rescuing their own banks in the near term. In addition, Germany and France appear divided over the next steps on fiscal integration, with Germany emphasizing budget discipline and France warning against recession.
|By: David Dayen Saturday October 13, 2012 10:00 am|
The Nobel Peace Prize for 2012 has been awarded to the European Union, in what the Nobel Committee describes as a kind of lifetime achievement award for keeping Europe mostly out of war with one another since 1945.
“The Norwegian Nobel Committee has decided that the Nobel Peace Prize for 2012 is to be awarded to the European Union (EU). The union and its forerunners have for over six decades contributed to the advancement of peace and reconciliation, democracy and human rights in Europe.”
|By: David Dayen Thursday October 11, 2012 7:20 am|
IMF managing director Christine Lagarde has been in the “stop the austerity” camp for a little while now, but this was perhaps her most explicit statement yet on the policy that’s gradually killing off Europe’s economy.
|By: David Dayen Friday September 28, 2012 7:12 pm|
France has announced a massive redistributive tax program which would send the top tax rate soaring and increase taxes broadly on the top 10% of society.
|By: David Dayen Tuesday September 25, 2012 12:45 pm|
We have a little schizophrenia happening in Germany. On the one hand, they lead Europe in demanding that Spain ask for their bailout already. Michael Meister, a top aide to Angela Merkel and her Christian Democratic Union party, said that Spanish Prime Minister Mariano Rajoy “must spell out what the situation is,” and he warned that any bailout will come with strict conditions, or else the German parliament would reject it. Meister warned of a domino effect, with other troubled countries asking for bailouts without conditionality if Spain gets one.
At the same time, however, Germany wants to slow down the rush to bail out countries like Spain, for domestic political reasons.
|By: David Dayen Thursday September 6, 2012 9:55 am|
European Central Bank President Mario Draghi wrapped up his major press conference this morning, and the news was pretty much what we heard yesterday. Draghi announced the formation of the OMT, or Outright Monetary Transactions. It’s an unlimited sovereign debt purchase scheme for those countries which submit to giving the ECB a vote on their fiscal policies.
|By: David Dayen Wednesday September 5, 2012 11:10 am|
This is about the worst possible policy announcement the ECB could make. The only hope is that the bond market finds it credible enough to never test it.