Break the euro and admit austerity has been a disaster? That's a great horror, suggests Nobel Prize-winning economist Paul Krugman, tongue planted firmly in cheek. People and businesses aren't shelling out in the wake of government belt-tightening, so something has to give.
Many people lose jobs over revolt
France and Greek held political elections on May 6, and both nations showed a strong support for candidates who were against austerity policies. Lots of people have lost their jobs in European nations because of revolts over the conditions. The "unwashed masses" are done with austerity measures proposed and passed now, although a new policy has not been passed, according to Krugman.
Franois Hollande's defeat of French President Nicolas Sarkozy was painted in ominous tones by The Economist, which considers Hollande's turn from malfunctioning orthodoxy to be "rather dangerous." However, from an economic standpoint, Sarkozy's strategies - passed in close tandem by neighboring political ally Chancellor Merkel of Germany - clearly weren't working, says Krugman. Two years of austerity have done nothing but grind to the public, and the voters had enough.
Cutting not helping
The austerity measures were started in an attempt to try and get outcomes in the tough economy. The problem was that people could not spend more because they did not have the cash with all spending cuts and job eliminations. The economic depression just got worse with the measures.
In Ireland, austerity measures were passed to get favor and improve the nation's standing in the bond markets. Conventional wisdom suggested austerity would work on that level, but what really occurred in Ireland is borrowing costs remained significantly higher than those in Spain, Italy and Germany. The European press drank the Kool Aid legislators were serving and declared Ireland's measures a success, regardless of obvious evidence to the contrary.
Europe's next move
One suggestion Krugman gives is to allow the euro to be abolished. He believes that if nations could export depending on the devaluation of the currency, it would be much better. Iceland let banks fail, leading it to recuperation. Krugman believes that Europe would not be in such a bad place if there were not so many troubles in Greece, Spain and Ireland financially because of the euro.
There may be problems 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 states that one choice that could help everyone is having nations with increased inflation helping their neighbors out through trade. He believes this may really help everyone's economy.
According to Krugman, none of this will work unless the European Central Bank changes from thinking about inflation to thinking about economic growth.
Many people lose jobs over revolt
France and Greek held political elections on May 6, and both nations showed a strong support for candidates who were against austerity policies. Lots of people have lost their jobs in European nations because of revolts over the conditions. The "unwashed masses" are done with austerity measures proposed and passed now, although a new policy has not been passed, according to Krugman.
Franois Hollande's defeat of French President Nicolas Sarkozy was painted in ominous tones by The Economist, which considers Hollande's turn from malfunctioning orthodoxy to be "rather dangerous." However, from an economic standpoint, Sarkozy's strategies - passed in close tandem by neighboring political ally Chancellor Merkel of Germany - clearly weren't working, says Krugman. Two years of austerity have done nothing but grind to the public, and the voters had enough.
Cutting not helping
The austerity measures were started in an attempt to try and get outcomes in the tough economy. The problem was that people could not spend more because they did not have the cash with all spending cuts and job eliminations. The economic depression just got worse with the measures.
In Ireland, austerity measures were passed to get favor and improve the nation's standing in the bond markets. Conventional wisdom suggested austerity would work on that level, but what really occurred in Ireland is borrowing costs remained significantly higher than those in Spain, Italy and Germany. The European press drank the Kool Aid legislators were serving and declared Ireland's measures a success, regardless of obvious evidence to the contrary.
Europe's next move
One suggestion Krugman gives is to allow the euro to be abolished. He believes that if nations could export depending on the devaluation of the currency, it would be much better. Iceland let banks fail, leading it to recuperation. Krugman believes that Europe would not be in such a bad place if there were not so many troubles in Greece, Spain and Ireland financially because of the euro.
There may be problems 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 states that one choice that could help everyone is having nations with increased inflation helping their neighbors out through trade. He believes this may really help everyone's economy.
According to Krugman, none of this will work unless the European Central Bank changes from thinking about inflation to thinking about economic growth.
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