November 28, 2011
The euro zone economies continue to operate well below their potential GDP, with large amounts of excess capacity and huge numbers of unemployed workers. In this context, the main impact of the austerity being demanded by Germany of countries across the euro zone will be a further reduction in growth and increase in unemployment. Slower growth will worsen budget deficits across the region.
This point should have been mentioned in a Washington Post article on the pursuit of austerity in euro zone countries. Many Post readers may not recognize that the predicted effect of these policies is to slow growth and raise unemployment.
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