Europe eases the austerity whip — a little
Associated Press
Copyright 2013 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Updated 6:16 am, Friday, March 15, 2013
The European Union is slowing its enforcement of deficit limits until the region's economy turns around; countries that were bailed out by their European neighbors are being given more time to repay loans, easing the pressure to cut budgets further; and financial leaders, including the head of the European Central Bank, say it's time to place more emphasis on reviving growth. The bank's pledge last summer to buy unlimited amounts of government bonds is largely responsible for taming Europe's financial crisis. Over time — as the economy of the 17 European Union countries that use the euro descended into recession — evidence grew that slashing spending and raising taxes were less effective at reducing deficits than initially thought, and perhaps counter-productive. Why? Because as economies shrink, so do tax revenues, making it harder to close budget gaps. With unemployment at a record 11.9 percent and Europeans expressing their discontent at the polls and in the streets, many of the region's political and financial leaders are willing to postpone budget-cutting and deficit targets. — ECB President Mario Draghi last week urged indebted governments to move beyond spending cuts and tax hikes and introduce labor reforms and other measures that would boost growth and reduce the "tragedy" of unemployment. The rethinking of austerity gained momentum late last year after economists at the International Monetary Fund produced research that showed Europe's austerity policies had been far more damaging than policymakers thought. In last month's election in Italy, most voters supported parties that opposed the austerity policies of departing Prime Minister Mario Monti. [...] last week, the finance minister of France, the eurozone's second-largest economy, said his country had ruled out more budget cuts despite a deficit of 4.6 percent of GDP. Reported by SeattlePI.com 2 days ago.
Associated Press
Copyright 2013 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Updated 6:16 am, Friday, March 15, 2013
The European Union is slowing its enforcement of deficit limits until the region's economy turns around; countries that were bailed out by their European neighbors are being given more time to repay loans, easing the pressure to cut budgets further; and financial leaders, including the head of the European Central Bank, say it's time to place more emphasis on reviving growth. The bank's pledge last summer to buy unlimited amounts of government bonds is largely responsible for taming Europe's financial crisis. Over time — as the economy of the 17 European Union countries that use the euro descended into recession — evidence grew that slashing spending and raising taxes were less effective at reducing deficits than initially thought, and perhaps counter-productive. Why? Because as economies shrink, so do tax revenues, making it harder to close budget gaps. With unemployment at a record 11.9 percent and Europeans expressing their discontent at the polls and in the streets, many of the region's political and financial leaders are willing to postpone budget-cutting and deficit targets. — ECB President Mario Draghi last week urged indebted governments to move beyond spending cuts and tax hikes and introduce labor reforms and other measures that would boost growth and reduce the "tragedy" of unemployment. The rethinking of austerity gained momentum late last year after economists at the International Monetary Fund produced research that showed Europe's austerity policies had been far more damaging than policymakers thought. In last month's election in Italy, most voters supported parties that opposed the austerity policies of departing Prime Minister Mario Monti. [...] last week, the finance minister of France, the eurozone's second-largest economy, said his country had ruled out more budget cuts despite a deficit of 4.6 percent of GDP. Reported by SeattlePI.com 2 days ago.
