Break the euro and admit austerity has been a disaster? That's a great horror, recommends Nobel Prize-winning economist Paul Krugman, tongue planted firmly in cheek. People and companies aren't spending in the wake of government belt-tightening, so something needs to give.
Many individuals lose jobs over revolt
France, Greece and various other European nations have shown signs of revolt over dire economic circumstances that have cost many people their jobs. Both France and Greece held political elections May 6, and in both countries, voters cast a firm majority vote for candidates willing to jettison economic austerity policies. While a clear policy option to austerity has yet to be defined, Krugman recommends that the "unwashed masses" are through with the type of austerity that learned officials suggested and enacted.
French President Nicolas Sarkozy's economic strategy was clearly not really working, according to Krugman. Still, Franois Hollande's defeat concerns the Economist. It believes that Hollande is taking a dangerous path with the new policies.
When slashing does nothing
The economic depression got even worse when austerity measures were put into place. Getting rid of jobs and cutting spending made it extremely hard for people to spend more. They did not have the money to do so. The economy was not getting any better.
Austerity measures in Ireland were done to make an effort to get the bond markets up and the media called this a success regardless of the fact that it was clearly not succeeding at all. A lot of people would assume austerity would work for that, but really it just brought on borrowing costs to remain much higher in Ireland than it was in many other nations.
The next place for Europe
Krugman suggests that the euro should be abolished. If Greece, Spain, Ireland and other nations in economic trouble still had their own currency, Europe wouldn't be in such a pickle. Troubled nations could quickly restore cost-competitiveness and exports via devaluation of the currency. Iceland did it to the krona and allowed its banks to fail, and the country is now on the road to recovery.
There may be difficulties for a while when the Euro is killed, but eventually Europe would become whole again and would be better than ever. Krugman does point out that the European Union would become obsolete with the change. He also says that one choice that could help every person is having nations with increased inflation helping their neighbors out through trade. He believes this could really help everyone's economy.
The European Central Bank would need to focus on economic growth rather than inflation if anything were to work.
Many individuals lose jobs over revolt
France, Greece and various other European nations have shown signs of revolt over dire economic circumstances that have cost many people their jobs. Both France and Greece held political elections May 6, and in both countries, voters cast a firm majority vote for candidates willing to jettison economic austerity policies. While a clear policy option to austerity has yet to be defined, Krugman recommends that the "unwashed masses" are through with the type of austerity that learned officials suggested and enacted.
French President Nicolas Sarkozy's economic strategy was clearly not really working, according to Krugman. Still, Franois Hollande's defeat concerns the Economist. It believes that Hollande is taking a dangerous path with the new policies.
When slashing does nothing
The economic depression got even worse when austerity measures were put into place. Getting rid of jobs and cutting spending made it extremely hard for people to spend more. They did not have the money to do so. The economy was not getting any better.
Austerity measures in Ireland were done to make an effort to get the bond markets up and the media called this a success regardless of the fact that it was clearly not succeeding at all. A lot of people would assume austerity would work for that, but really it just brought on borrowing costs to remain much higher in Ireland than it was in many other nations.
The next place for Europe
Krugman suggests that the euro should be abolished. If Greece, Spain, Ireland and other nations in economic trouble still had their own currency, Europe wouldn't be in such a pickle. Troubled nations could quickly restore cost-competitiveness and exports via devaluation of the currency. Iceland did it to the krona and allowed its banks to fail, and the country is now on the road to recovery.
There may be difficulties for a while when the Euro is killed, but eventually Europe would become whole again and would be better than ever. Krugman does point out that the European Union would become obsolete with the change. He also says that one choice that could help every person is having nations with increased inflation helping their neighbors out through trade. He believes this could really help everyone's economy.
The European Central Bank would need to focus on economic growth rather than inflation if anything were to work.
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