Public spending can be cut down particularly when there is growth and economy expands. One has only to look at the US’ GDP to learn a powerful lesson: austerity untimely implemented does more harm than good.
Articles by Miguel Navascués
About the Author
Why has gas prices in Europe escalated up so much more than in the US? Why should taxpayers fill the gap when politicians play with green magic that turns unaffordable? Renewable energy sounds right but costs should be explained.
Austerity is increasingly becoming a danger, not only for the euro peripheral economies, but for the rest of the developed economies, too. Will the European Central Bank take action?
MADRID | This year, the budget cut therapy ordered by Brussels upon the euro area’s weakest economies will have to pass an exam in Dublin. If the Irish economy burdens itself with more public debt while missing growth, the failure could make current European Union policies untenable.
Deficit per GDP reduction in cold blood increases the debt per GDP ratio. We have been there, already. The sensible thing to do is to finance economic growth to shorten the deficit, even if it prolongs for a certain period the increase of debt.
If Mario Monti achieves his goal and sits again as the prime minister of Italy, the message sent to the rest of the periphery will be one of great uncertainty and suspicion: lack of democracy and national accountability will not spark popular support to reforms, but most probably the opposite.
The ability of central banks to raise investors’ confidence is wearing off. More so when the European Central Bank has become a liability for the US Federal Reserve.
Do you remember the vast injections of public cash in insurer AIG and the TARP operation to clean banks’ balance sheets? They cost American taxpayers no penny at all, and have now been completed with success. Hello, Brussels, anyone listening?
Mr Draghi, governor at the European Central Bank, should listen to his American colleague at the Federal Reserve. And follow suit by means of expnasionary monetary policies even if inflation reaches 4 percent.
MADRID | European Central Bank governor Mario Draghi may retain more power than presidents and Economy ministers of the euro area country members, but does he has the same insight? Not at all. The entire EU is condemned to recession.