by Summary:
The tragedy is that the contraction is being helped along by a deliberate political choice made by Europe's own governments: Their effort to rein in deficit spending, to cut fiscal stimulus, and to balance their budgets in the 10-year aftermath of the 2008 financial crisis. "Austerity," as it's known, has shrunk the potential size of the European economy and retarded its ability to grow again. And now that the manufacturing sectors of Italy, France and Germany are all stagnating or shrinking, austerity is hurting their ability to pull out of the dip. That is the conclusion of analysts at both The Institute of International Finance and — in a paper published last week — Oxford Economics. Both independently looked at the difference between actual GDP growth in Europe and "potential" GDP
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The tragedy is that the contraction is being helped along by a deliberate political choice made by Europe's own governments: Their effort to rein in deficit spending, to cut fiscal stimulus, and to balance their budgets in the 10-year aftermath of the 2008 financial crisis. "Austerity," as it's known, has shrunk the potential size of the European economy and retarded its ability to grow again. And now that the manufacturing sectors of Italy, France and Germany are all stagnating or shrinking, austerity is hurting their ability to pull out of the dip. That is the conclusion of analysts at both The Institute of International Finance and — in a paper published last week — Oxford Economics. Both independently looked at the difference between actual GDP growth in Europe and "potential" GDP
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Mike Norman considers the following as important:
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The tragedy is that the contraction is being helped along by a deliberate political choice made by Europe's own governments: Their effort to rein in deficit spending, to cut fiscal stimulus, and to balance their budgets in the 10-year aftermath of the 2008 financial crisis. "Austerity," as it's known, has shrunk the potential size of the European economy and retarded its ability to grow again. And now that the manufacturing sectors of Italy, France and Germany are all stagnating or shrinking, austerity is hurting their ability to pull out of the dip.
That is the conclusion of analysts at both The Institute of International Finance and — in a paper published last week — Oxford Economics. Both independently looked at the difference between actual GDP growth in Europe and "potential" GDP growth, before and after the 2008 recession. In both studies, the analysts concluded that Europe inflicted on itself permanently lower actual GDP growth, following the crisis.
It didn't solve the debt issue either, Colthorpe says. By making its economy smaller, Europe became less able to handle its debts. "By lowering GDP permanently, fiscal consolidation increased the long-run debt burden rather than reducing it (as was the aim)," the told clients.
Business Insider