Thursday, 26 April 2012
Government policy: first big austerity then less: why are most countries doing the opposite and lose?
That is how you win elections, see Nixon who was a master how to play the election cycle.
Still most countries in Europe are increasing the austerity every year more. That is a depressing strategy. In 2013 austerity goes up in several countries like the Netherlands, so the Netherlands will lag European growth even more than they do already. Confidence cannot recover with this kind of policy. Some countries have done better like Ireland (applause) and Germany (but Germany didn’t need to do much, so that was easy). There is hope the pace of austerity next year can diminish in Spain, Italy, Ireland. Hollande will maybe prevent the necessary big austerity step for France, that could create all kind of problems.
In the US you will get the fiscal cliff of 2013. The next president should be wise (like Nixon c.s.) and repair no more than half of this cliff, otherwise economic growth will remain low in the US for a long time. He also should continue infrastructure investing and do the austerity elsewhere (necessary but difficult). Still the consensus says: this time is different, in the year after the election we will not do too much fiscal austerity. Would they be as stupid in the US as in Europe?