AP May front small

28 September 2012

Resize: A A A Print

'Europe’s Austerity Madness', by Nobel Prize in Economics winner Paul Krugman

New York Times, 27 September 2012

Anti-austerity protest in Ireland

The public is saying that it has reached its limit. With unemployment at Great Depression levels and with erstwhile middle-class workers reduced to picking through garbage in search of food, austerity has already gone too far

By PAUL KRUGMAN

New York Times

SO MUCH for complacency. Just a few days ago, the conventional wisdom was that Europe finally had things under control. The European Central Bank, by promising to buy the bonds of troubled governments if necessary, had soothed markets. All that debtor nations had to do, the story went, was agree to more and deeper austerity – the condition for central bank loans – and all would be well.

But the purveyors of conventional wisdom forgot that people were involved. Suddenly, Spain and Greece are being racked by strikes and huge demonstrations. The public in these countries is, in effect, saying that it has reached its limit. With unemployment at Great Depression levels and with erstwhile middle-class workers reduced to picking through garbage in search of food, austerity has already gone too far. And this means that there may not be a deal after all.

Much commentary suggests that the citizens of Spain and Greece are just delaying the inevitable, protesting against sacrifices that must, in fact, be made. But the truth is that the protesters are right. More austerity serves no useful purpose; the truly irrational players here are the allegedly serious politicians and officials demanding ever more pain.

Consider Spain’s woes. What is the real economic problem? Basically, Spain is suffering the hangover from a huge housing bubble, which caused both an economic boom and a period of inflation that left Spanish industry uncompetitive with the rest of Europe. When the bubble burst, Spain was left with the difficult problem of regaining competitiveness, a painful process that will take years. Unless Spain leaves the euro – a step nobody wants to take – it is condemned to years of high unemployment.

But this arguably inevitable suffering is being greatly magnified by harsh spending cuts; and these spending cuts are a case of inflicting pain for the sake of inflicting pain.

First of all, Spain didn’t get into trouble because its government was profligate. On the contrary, on the eve of the crisis, Spain actually had a budget surplus and low debt. Large deficits emerged when the economy tanked, taking revenues with it, but, even so, Spain doesn’t appear to have all that high a debt burden.

It’s true that Spain is now having trouble borrowing to finance its deficits. That trouble is, however, mainly because of fears about the nation’s broader difficulties – not least the fear of political turmoil in the face of very high unemployment. And shaving a few points off the budget deficit won’t resolve those fears. In fact, research by the International Monetary Fund suggests that spending cuts in deeply depressed economies may actually reduce investor confidence because they accelerate the pace of economic decline.

In other words, the straight economics of the situation suggests that Spain doesn’t need more austerity. It shouldn’t throw a party, and, in fact, it probably has no alternative (short of euro exit) to a protracted period of hard times. But savage cuts to essential public services, to aid to the needy, and so on actually hurt the country’s prospects for successful adjustment.

Why, then, are there demands for ever more pain?

Part of the explanation is that in Europe, as in America, far too many Very Serious People have been taken in by the cult of austerity, by the belief that budget deficits, not mass unemployment, are the clear and present danger, and that deficit reduction will somehow solve a problem brought on by private sector excess.

Beyond that, a significant part of public opinion in Europe’s core — above all, in Germany — is deeply committed to a false view of the situation. Talk to German officials and they will portray the euro crisis as a morality play, a tale of countries that lived high and now face the inevitable reckoning. Never mind the fact that this isn’t at all what happened — and the equally inconvenient fact that German banks played a large role in inflating Spain’s housing bubble. Sin and its consequences is their story, and they’re sticking to it.

Worse yet, this is also what many German voters believe, largely because it’s what politicians have told them. And fear of a backlash from voters who believe, wrongly, that they’re being put on the hook for the consequences of southern European irresponsibility leaves German politicians unwilling to approve essential emergency lending to Spain and other troubled nations unless the borrowers are punished first.

Of course, that’s not the way these demands are portrayed. But that’s what it really comes down to. And it’s long past time to put an end to this cruel nonsense.

If Germany really wants to save the euro, it should let the European Central Bank do what’s necessary to rescue the debtor nations – and it should do so without demanding more pointless pain.

2014 – A YEAR OF CHANGE

2014 year of change

A chara,

Sinn Féin is in government in the North and is a major political party in the Dáil and in local government across this island.

We are the only all-Ireland political party and with each passing day our membership is increasing, our organisational capacity is improving, and we are presenting realistic alternative policies to meet the needs of 21st century Ireland.

On May 22nd and May 23rd, more than 350 men and women will be standing for Sinn Féin in the European and local government elections, north and south.

For those who reject austerity and want a different future, a better future; who want hope for themselves and for their families; who want jobs and prosperity; and who want a real republic on this island – Sinn Féin is that future.

Make 2014 a year of change.

If you want a new future – a New Republic – help Sinn Féin in our fundraising efforts by contributing to our election campaign.

Thank you for whatever you can afford.

Lánaigí libh agus beirigí bua!

Is mise,

Gerry Adams TD

Irish Vols Ad March 2014

Fascinating insights into

Irish revolutionary history

for you to read online

Every week over the next two years, An Phoblacht is making all the editions of The Irish Volunteer – the newspaper of the Irish Volunteer movement – available online exactly 100 years after they were first published

The Irish Volunteer — tOglác na hÉireann was first published on 7 February 1914 and every week until 22 April 1916, just days before the Easter Rising.

Acting as the official newspaper of the Irish Volunteers it outlined the political views of the leadership and reported on the and important events, such as the Howth Gun Running of 1914.

Included in its pages alongside political opinions and news reports are various advertisements for such items as revolvers, bandoliers and military uniforms from stockists across Ireland.

You can now read these fascinating insights into Irish revolutionary history with an online subscription to An Phoblacht for just €10 per year. This includes a digital copy of each new edition of the paper and Iris magazine, access to our digitised historic archives as well as copies of The Irish Volunteer.

Premium Online Service For Only €10 Per Year

For less than €1 a month, you get An Phoblacht’s Premium Online Service. Sign up today!

PREMIUM SERVICE:

  • Full access to all An Phoblacht articles
  • Interactive online PDF Booklet of each edition
  • Access to our historic Archives
  • Discounts for the Online Sinn Féin Shop

Only €10 Per
Year Get It Here

GUE NGL wide ad gif

Follow us on Facebook

An Phoblacht on Twitter


An Phoblacht
44 Parnell Sq.
Dublin 1
Ireland
SSL

Powered by Phoenix Media Group