The last month has seen a virtual earthquake in the framework for economic policy following the 2008 collapse. The conclusions of Reinhart-Rogoff paper, which has been widely cited as the basis for austerity, were shown to be driven by spreadsheet errors. The corrected calculations provide no evidence for the dreaded debt cliff. Furthermore, subsequent analysis has shown that whatever link exists between debt and slow growth is almost exclusively the result of causation running from slow growth to high debt.
This new evidence should be sufficient to prompt a serious rethinking of the austerity agenda, especially in the euro zone countries where it has caused the most damage. Unfortunately, no change of course seems likely with top officials in the European Central Bank and the European Union remaining determined to pursue their austerity agenda regardless of what the evidence shows.