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.
The impact of austerity in Europe doesn’t get enough attention. It is eroding civilization, and that is no hyperbole. Check out the link below. Not as severe as what Krugman points out, but speaks to the measure of erosion.
http://artinfo.com/news/story/799842/radical-italian-museum-director-begins-burning-art-in-incendiary-anti-austerity-protest
There may be light, though. I’m surprised Krugman didn’t mention it: The Institute for New Economic Thinking, The Centre for International Governance, & The Mercator Research Institute on Global Commons and Climate Change just hosted its third plenary conference in Berlin last week. With any luck, more innovative economic minds will jog some sense into the situation.
It’s not Euro-style austerity that’s required, nor a retreat from the Euro, but local competence in recording income from local business and collecting taxes from businesses and individuals. These countries are ignoring taxation and operating on a barter or cash & carry basis by and large. They view Eurodollars as the enemy, much as local economies viewed Federal money in the USA after the Revolution and Civil wars.