Saturday, February 7, 2015

Bad Economic Policies In Eurozone Stalled Recovery And Local Politics Blocks Solutions

The financial crisis in the EZ triggered a deep recession.  The austerity policies demanded by the EZ leadership were designed to reduce the debt to GDP ratios in the nations that were hit hardest by the recession.  That strategy has not worked.  Government spending has been reduced, but consumer spending and business investment, has not grown fast enough to compensate for the reduction in government spending.  Debt to GDP ratios are still high in the most distressed economies.  That has led to a political dilemma.  Left wing political movements have been spawned by the failure of the austerity measures that have been imposed by the EZ leadership. However, it would be difficult for nations like Germany and The Netherlands to alter policies that are politically popular in their own countries.  That would stimulate support for right wing parties in the North.  The ECB has been left with the task of using monetary policies to stimulate growth when interest rates in EZ are already at historically low levels.

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