Friday, 4 May 2012

the no-more austerity consensus

is slowly emerging. I am not talking about having to "evacuate" the university building yesterday because of student protests. Or the asinine expectation that the ECB (one a "fact-finding" mission to Barcelona, where they sipped champagne in the most luxurious hotel in town) would introduce new measures to fight the crisis. No less a grand pundit than Paul Krugman is starting to tell people what I have been saying for two years now - at the rate at which we are going, the Euro won't survive, and it's unclear that it should. When I first said it, people shook their heads and mumbled "other-worldly economic historian". It's becoming clear rapidly that the transfers from the North of Europe won't continue, and that belt-tightening is hitting a limit in the South. Via Paul Krugman's "Conscience of a Liberal":

Austerity AlternativesRyan Avent writes what I’ve been meaning to write about the backlash against the austerity backlash. It’s all about attacking a straw man. Nobody — certainly not me — believes that, say, Spain or even France can simply go back to Keynesian policies unilaterally. Instead, the point is that if European leaders want the euro to survive, they have to recognize that the austerity thing isn’t working, and offer Europe-wide alternatives.....
For in the end, Spain and others do have an alternative to endless austerity, one that may be forced on them by events: exit the euro, with all the financial and political fallout that follows. And on the current course, that’s what’s coming.

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