Greece and the Limits of Anti-Austerity
Judging from the modest recovery in the US versus non-recovery in Europe, American policy accommodation is performing better than European austerity. But that is not the whole story: Europe’s microeconomic structure makes the same growth-based macroeconomic policies less effective in the EU than in the US.
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CAMBRIDGE – Is austerity dead? At last month’s G-8 meeting at Camp David, the German-led austerity program for the eurozone’s troubled southern members ran up against substantial resistance. Likewise, France’s recent presidential election bolstered those who argue that Europe must grow its way out of its debt-heavy public sector, rather than aim for immediate fiscal orthodoxy. And there is no guarantee that Greece’s newly elected center-right New Democracy party, which favors honoring the country’s bailout terms, will be able to form a majority government.