No Easing in the European Crisis — The American Magazine: " . . . Sadly, there are two fundamental reasons to think that ECB action alone will not be sufficient to prevent a deepening European crisis. The first is that ECB support is premised on countries in the European periphery committing themselves to multiyear budget austerity programs along the lines proposed by the European Commission. Since those programs imply budget deficit reductions of between 2 and 3 percentage points of GDP a year at a time of economic recession, it is difficult to see how the application of such a severe degree of budget austerity will not lead to a deepening in the European periphery’s recession in 2013. The consensus European economic forecast is that the worst of the crisis is now behind us and that a gradual European economic recovery will be underway before year-end. This would particularly appear to be the case since the prospective fiscal policy tightening will be occurring at a time when the European banks continue to restrict credit and at a time when the global economic environment is now souring. This would hardly appear to be a recipe for economic recovery. After all, it was that very same policy mix of severe budget austerity at a time of a credit crunch that sank the European periphery deeply into recession this past year. There would seem to be very little reason to think that the application of similar policies under worse circumstances will produce any better a result in 2013 than it did in 2012. A second reason not to be complacent about the European outlook despite strong ECB action is the political deterioration currently underway in the European periphery. . . . "
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