Fiscal Policy And Economic Growth In Eurozone

Paul Krugman used the IMF's measure of fiscal policy and plotted it against growth in GDP.  The result   is not surprising.  There is a strong relationship between the degree of austerity and the decline in economic growth.  Ordinarily, that would prove to most people that austerity has been the wrong medicine in the eurozone.  On the other hand, the desire to punish countries in the periphery for their "profligate" ways has required the imposition of austerity on them.  A dose of punishment and a belief in the confidence fairy has been a deadly combination in the eurozone.  Unfortunately, the disease has been contagious.  It has been used for political purposes in the UK and in the US by politicians who have used budget deficits as an excuse to shrink government.