Has austerity gone too far?

  • Giancarlo Corsetti, 02 April 2012

    Is austerity self-defeating? Is it keeping Europeans underemployed for years and destroying the very growth needed to pay off the debt? Or is it steering nations clear of Greek-like tragedies? So starts a new debate on Vox on austerity, introduced in this column.

  • Alberto Alesina, Francesco Giavazzi, 03 April 2012

    Europe’s embrace of austerity has sparked a debate among economists. This column argues that the debate has gone astray. Until the critical principle – ‘how’ is as important as ‘how much’ – is embraced, the austerity debate in Europe will continue to be completely out of line with the real economic trade-offs.

  • J. Bradford DeLong, 06 April 2012

    The Vox debate on austerity rages on. Here Brad DeLong draws on his recent research with Larry Summers to argue that unless long-term real borrowing costs in the Eurozone exceed 5%, the short-term contractionary effects of spending cuts are likely to erode rather than bolster the overall fiscal situation.

  • Manfred J M Neumann, 17 April 2012

    Debt finance of public consumption has clearly gone too far in several countries, reaching the borderline of sustainability. Have austerity measures now gone too far as well? This column argues it seems too early to sound the alarm. First, the global economy is likely to grow by 3.3 % this year, and second, reversing the fiscal stance or exiting the euro are worse options than austerity.

  • Carlo Cottarelli, 20 April 2012

    As with austerity itself, the austerity debate shows no sign of disappearing any time soon. This column argues that the last thing that the world economy needs at this uncertain moment is a knee-jerk reaction from fiscal policy. While the column agrees that governments need to make cuts, it stresses they should not lose sight of the bigger picture.

  • Marco Buti, Lucio R Pench, 20 April 2012

    Most economists agree that European economies share the need to reduce public deficits and debts. This column stresses that while gradual consolidations are in general more likely to succeed than cold-shower ones, the superiority of a gradual strategy tends to evaporate for high levels of debt and is also less pronounced for consolidation episodes following a financial crisis.

  • John Van Reenen, 27 April 2012

    Many policymakers in Europe seem to stick to the idea that fiscal consolidation might inspire confidence and help the economy to grow. This column argues these sentiments may be understandable but are basically wrong. For countries like the UK where borrowing is relatively cheap and sovereign default unlikely, slowing down the pace of fiscal consolidation would be a rational response. The obsession over the fiscal stance is a distraction from sustainable long-run growth.

  • Anis Chowdhury, United Nations ESCAP, 20 November 2014

    Anis Chowdhury (United Nations Economic and Social Commissions for Asia and the Pacific) and Iyanatul Islam (International Labour Organization).Whether it is EU28 or EA18, the European region has suffered two to three years of negative growth between 2008 and 2014. The projected recovery in 2015 is well below the rate of growth that is expected to be achieved by other advanced economies.1 Some...

  • Anis Chowdhury, United Nations ESCAP, 04 October 2012

    Anis Chowdhury (United Nations Economic and Social Commissions for Asia and the Pacific) and Iyanatul Islam (International Labour Organization). A fiscal rule represents legislated and long-term numerical limits on budgetary aggregates pertaining to debts, deficits, expenditures and revenues. In a recent IMF working paper1, Schaechter et al (2012) have reported on a database of fiscal rules...

  • Thomas Grennes, Department of Economics, North Carolina State University, USA, 29 June 2012

    By Thomas Grennes, North Carolina State University, and Andris Strazds, Nordea Bank Relevance of Latvia's experience to other countries The Latvian government responded to a severe economic shock in 2008 and 2009 by implementing a fiscal austerity program that has received praise from some outside observers and criticism from others. Olivier Blanchard expressed mild approval, but he expressed...

  • Anis Chowdhury, United Nations ESCAP, 27 June 2012

    Latvia: Going beyond the fiscal austerity debate Iyanatul Islam and Anis Chowdhury[1] ‘What is it about Latvia’, laments Simon Wren-Lewis, that leads commentators to suspend their ‘critical faculties’ when discussing the current economic circumstances of this Baltic state?[2] Latvia is at the epicentre of the debate on ‘expansionary’ fiscal austerity. Can one really claim that the best way to...

  • Beatriz de Blas, Universidad Autonoma de Madrid, 07 June 2012

    Fines and other sanctions are an indirect and counterproductive way of eliminating deficit bias. A more direct and credible way to solve the moral hazard problems in Eurozone fiscal policy would be for each member state to delegate executive power over an effective fiscal instrument to a European budgetary authority.   European debt levels now hovering around 100% of GDP represent a painful...

Moderated By

Giancarlo Corsetti

Professor of Macroeconomics, University of Cambridge and Programme Director, CEPR