Breaking the eurozone's self-defeating cycle of austerity

[marmar]

Breaking the eurozone's self-defeating cycle of austerity
While a beleaguered IMF and ECB try to hold the line, voters all over Europe are rebelling against their punitive fiscal orthodoxy

Mark Weisbrot
guardian.co.uk, Friday 27 April 2012



[font size="1"]A man plays an accordion in the doorway of a closed down bank in Madrid, Spain – where the youth unemployment rate has reached 52%. Photograph: Sergio Perez/Reuters[/font]


It has become a ritual: every six months, I debate the IMF at their annual meetings, the last two times represented by their deputy director for Europe. It takes place in the same room of that giant greenhouse-looking World Bank building on 19th Street in Washington, DC. And each time, the IMF's defense of its policies in the eurozone does not get any stronger.

Maybe, it's because most economists at the IMF don't really believe in what they are doing. The fund is, after all, the subordinate partner of the so-called "troika" – with the European Commission and the European Central Bank (ECB) – calling the shots. And most fund economists know their basic national income accounting: fiscal tightening is going to make these economies worse, as it has been doing. Those that have tightened their budgets the most – for example, Greece and Ireland – have shrunk the most, as would be predicted.

The Spanish government, which on Friday announced a 52% unemployment rate among its youth, has projected that the planned budget tightening for this year would by itself take 2.6 percentage points off of 2012 growth. With the eurozone and now even the UK in recession, with the German economy shrinking and France barely growing, the rebellion against the self-inflicted harm of austerity is spreading to the richer northern countries.

In the Netherlands, which is also in recession, the government fell this week after failing to get its austerity package through parliament. The irony of this happening to one of the most pro-austerity governments in Europe was not lost on the continent. ..................(more)

The complete piece is at: http://www.guardian.co.uk/commentisfree/cifamerica/2012/apr/27/breaking-eurozone-self-defeating-cycle-austerity