Reform of eurozone design and the policy frameworks that have resulted in the monetary union’s performance is crucialWhen the euro crisis began half a decade ago, Keynesian economists predicted that the austerity being imposed on Greece and the other crisis countries would fail. It would stifle growth and increase unemployment – and even fail to decrease the debt-to-GDP ratio. Others – in the European commission, the European Central Bank, and a few universities – talked of expansionary contractions. But even the International Monetary Fund argued that contractions, such as cutbacks in government spending, were just that – contractionary.We hardly needed another test. Austerity had failed repeatedly, from its early use under US president Herbert Hoover, which turned the stock-market crash into the Great Depression, to the IMF “programs” imposed on east Asia and Latin America in recent decades. And yet when Greece got into trouble, it was tried again. Continue reading...
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