Has austerity gone too far?

Moderator:  Giancarlo Corsetti

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Lead Commentaries

Giancarlo Corsetti, 02 April 2012

Is austerity self-defeating? Is it keeping Europeans underemployed for years and destroying the very growth needed to pay off the debt? Or is it steering nations clear of Greek-like tragedies? So starts a new debate on Vox on austerity, introduced in this column.

Manfred J M Neumann, 17 April 2012

Debt finance of public consumption has clearly gone too far in several countries, reaching the borderline of sustainability. Have austerity measures now gone too far as well? This column argues it seems too early to sound the alarm. First, the global economy is likely to grow by 3.3 % this year, and second, reversing the fiscal stance or exiting the euro are worse options than austerity.

John Van Reenen, 27 April 2012

Many policymakers in Europe seem to stick to the idea that fiscal consolidation might inspire confidence and help the economy to grow. This column argues these sentiments may be understandable but are basically wrong. For countries like the UK where borrowing is relatively cheap and sovereign default unlikely, slowing down the pace of fiscal consolidation would be a rational response. The obsession over the fiscal stance is a distraction from sustainable long-run growth.

J. Bradford DeLong, 06 April 2012

The Vox debate on austerity rages on. Here Brad DeLong draws on his recent research with Larry Summers to argue that unless long-term real borrowing costs in the Eurozone exceed 5%, the short-term contractionary effects of spending cuts are likely to erode rather than bolster the overall fiscal situation.

Marco Buti, Lucio R Pench, 20 April 2012

Most economists agree that European economies share the need to reduce public deficits and debts. This column stresses that while gradual consolidations are in general more likely to succeed than cold-shower ones, the superiority of a gradual strategy tends to evaporate for high levels of debt and is also less pronounced for consolidation episodes following a financial crisis.

Europe’s embrace of austerity has sparked a debate among economists. This column argues that the debate has gone astray. Until the critical principle – ‘how’ is as important as ‘how much’ – is embraced, the austerity debate in Europe will continue to be completely out of line with the real economic trade-offs.

Carlo Cottarelli, 20 April 2012

As with austerity itself, the austerity debate shows no sign of disappearing any time soon. This column argues that the last thing that the world economy needs at this uncertain moment is a knee-jerk reaction from fiscal policy. While the column agrees that governments need to make cuts, it stresses they should not lose sight of the bigger picture.