Five years after the beginning
of the most recent economic crisis, European Commission members are now
starting to recognize that austerity measures, although fundamentally right in
stabilizing economic indexes during critical financial periods, cannot possibly
sustain political and economic support in the long run. According to the article, austerity policy
never had consensus behind it, violating the sovereignty of European nations that
were affected by it (Cyprus, for instance) without the support of the
population being affected by those policies, lacking hence, democratic
legitimacy. Austerity is now considered widely discredited. Nations like
France reject it, as President Francois Hollande said only
recently that "sticking with austerity would condemn Europe not just to
recession but an explosion".
Austerity, however, was also
a key policy in reducing spending and deficits and preventing a break-up of the
Eurozone, despite the costs that it implied (rising unemployment, reducing
aggregate demand, recession, social unrest and labor force emigration). However, its intellectual underpinning is now
being challenged by the international community. Two economists formed a thesis
which predicted that if deficit grew above 90% of GDP, growth would decline
sharply (also called “the 90% rule”) but this view has raised serious doubts
about its accuracy. Deficit targets have been established mostly arbitrarily,
exposing how politicized and magnified the deficit cut issue has become. The
question that now remains is, to what extent were the devastating effects of
austerity an enhancer of the European economic crisis.
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