Krugsandra laments the state of Spain and the Eurozone… again. Despite the ongoing failure of the austerity measures imposed on the Eurozone by the ECB and Germany, things are not improving.
Nonetheless, the prescription coming from Berlin and Frankfurt is, you guessed it, even more fiscal austerity.
This is, not to mince words, just insane. Europe has had several years of experience with harsh austerity programs, and the results are exactly what students of history told you would happen: such programs push depressed economies even deeper into depression. And because investors look at the state of a nation’s economy when assessing its ability to repay debt, austerity programs haven’t even worked as a way to reduce borrowing costs.
What is the alternative? Well, in the 1930s — an era that modern Europe is starting to replicate in ever more faithful detail — the essential condition for recovery was exit from the gold standard. The equivalent move now would be exit from the euro, and restoration of national currencies. You may say that this is inconceivable, and it would indeed be a hugely disruptive event both economically and politically. But continuing on the present course, imposing ever-harsher austerity on countries that are already suffering Depression-era unemployment, is what’s truly inconceivable.
The policies of austerity are exactly what Paul Ryan has proposed for us. Cut, cut, cut in a time of great economic weakness. He would like to see the US follow Europe down the rabbit hole of depression. It’s truly shocking that anyone takes him seriously anymore. European leaders continue to double-down on their failed policies because, as we know, if it didn’t work 10 times before, surely it will work now.