Lunchtime Must-Read: Mark Blyth: Europe’s Goldilocks Dilemma

Mark Blyth: Europe’s Goldilocks Dilemma: “The policy of austerity has twin goals…

…reducing growth in public debt and boosting investor confidence. On both counts, the eurozone’s attempts have been an unmitigated failure…. The confidence-inspiring powers of what was curiously called ‘expansionary fiscal contraction’, the idea that budget cuts today make people spend more since they will have lower taxes in the future, haven’t been any better. European consumer confidence dropped precipitously during the crisis and has yet to return to positive territory. Investment expectations, as measured by business confidence surveys, similarly fell as austerity took its toll and are now barely positive. Growth rates track these declines but with a North-South twist: Germany is pulling ahead, France is flat-lining, Italy is stagnating, and the periphery remains in negative territory. Unemployment rates (outside the export-driven North) are stuck at levels last seen on the eve of World War II. Given all this, you would think a halt to such self-defeating policies would be a good idea. And indeed, it is. But that doesn’t mean that Brussels and Berlin can actually stop austerity…