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Saturday, March 2, 2013

Krugman et al on Europe....again!

Paul Krugman doesn't tire drawing attention to the damaging effects of austerity in Europe, citing Wren-Lewis and Mazower this time to underline the political risks.
Brad DeLong says:CONTRACTIONARY POLICY IS CONTRACTIONARY and links to another column by Krugman on the topic. (good reads, all)

As always, politics interferes with economics, and in Europe political choices are strongly influenced, if not outright made, by what we call the core-countries, and more concretely by Germany, who has developed as the veto political and economic player in the EE.

Now, Germany has had the best crisis among the top world economies. The political elite in Germany attribute this success to the austerity programme initiated by the SPD in the early 2000's. I, for what it 's worth, would not argue with that and have not come across a refutation.

Update: 6 March Daniel Gros ""Learning from Germany""

The problem is that the political elite, but also the German people, think that if austerity proved good for them, it will have a good outcome in the other countries of the EZ, too.

Will politics blow up Europe before the austerity fairy does its magic?

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