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Austerity and Growth: Dispelling Confusion with Some Facts

Tamborini, R., (2013), “Austerity and Growth: Dispelling Confusion with Some Facts”, EconoMonitor, 24 Οκτωβρίου.

A lot of confusion surrounds the quarrel about austerity and growth in and among the Euro-countries. Confusion helps neither the assessment of the current policies nor the choice of the correct ones. Critics of austerity argue that it is mainly responsible for the extent and persistence of low or negative growth rates after the Great Recession of 2008-09.  The orthodox pro-austerity pedagogy revolves around the following arguments: 1) poor growth of Euro-countries is a long-lived structural problem and it is not due to recent austerity measures; 2) stronger fiscal stimuli are either useless of harmful; 3) austerity is not enemy of growth, rather it is a means to foster sustainable growth; 4) austerity may depress growth (in the short run) if it is badly implemented, i.e. too little, too late, too much taxation rather than expenditure cuts, and no structural reforms.

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