The commoners of Europe are putting the message out to their leaders that austerity is not working to revive their economies. The latest installment in the saga is the collapse of the Dutch coalition government. The right wing nationalist party exited government with its leader declaring no more "diktats from Brussels". Europe is in recession and austerity government budgets are intensifying the effects of recession:
Unemployment is rising as government spending decreases in an attempt to bring down national deficits.
However, most Keynesian economists hold that less spending is exactly the opposite of the fiscal policy that should be in place during enevitable down cycles.
As Keynesian Paul Krugman
penned in his NYT column, "the confidence fairy has died". Many experts are admitting the myth of austerity bringing back investor confidence and thus an upswing in economic activity, is just that--a myth*. 85% debt to GDP is hardly Greece level indebtedness. Europe could still go some spending to stimulate the Continent's economies and ease the recession. France's economy is slowing down with unemployment at the
highest level in twelve years and 13.5% of the population in poverty. French president Nicholas Sarkozy, unmistakably identified with the austerity policies of Brussels and Frankfurt, lost the first round in the election against his socialist rival as a result, and will probably loose the run-off. Irish unemployment is at 14.7% after three years of fiscal austerity. The founding party of the free state, Fianna Fail, has lost every one of it's seats in parliament. But as long as the plutocrats who fear only inflation are in control of the ECB stimulus spending is not going to happen. ECB head Mario Draghi told the Wall Street Journal recently, "there was no alternative to fiscal consolidation". Fiscal austerity is self-defeating, and now even the
boulevardiers know it.
*On this side of the pond, Arthur Laffler, he of the infamous curve of voodoo economics, convinced "Darth' Cheney then serving in the House of Representatives, that cutting taxes on the rich would generate more tax revenue. We all know now that the only thing the delusion generated was a ballooning federal deficit. In 1984 after Reagan's tax cut and again in 2006 after the Bush cut, the Treasury came to the logical conclusion that tax cuts cause a loss of revenue and have no beneficial effect on the national economy. The only question that remains in US Person's mind is did the supply-siders really believe their nonsense would work, or was it simply a cynical cover to reduce taxes on their wealthy sponsors, regardless of the national good?
