Industrialized Cyclist Notepad

Stiglitz: Austerity Will Make Matters Worse

Pretty good little essay here from Joe Stiglitz.


Europe’s single-minded focus on austerity is a result of a misdiagnosis of its problems. Greece overspent, but Spain and Ireland had fiscal surpluses and low debt-to-GDP ratios before the crisis. Giving lectures about fiscal prudence is beside the point. Taking the lectures seriously – even adopting tight budget frameworks – can be counterproductive. Regardless of whether Europe’s problems are temporary or fundamental – the eurozone, for example, is far from an “optimal” currency area, and tax competition in a free-trade and free-migration area can erode a viable state – austerity will make matters worse.


Just listening to the news you’d think Spain and Ireland were deeply in debt prior to the fraudtastic financial crisis, but no.


Unemployment in Spain
February 12, 2012, 08:33
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From a post on Naked Capitalism.

Yield on Italy 10-year bonds
January 9, 2012, 11:40
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Via Econbrowser via Bloomberg.

Debt as percentage of GDP, Neurozone
December 13, 2011, 05:26
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From Credit Writedowns..

Post-Euro currency values
December 5, 2011, 23:18
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From Nomura via Calculated Risk/FT Alphaville.