Europe is again learning the hard way that austerity applied in the teeth of a major financial crisis leads to depression. That was a key lesson of Herbert Hoover's policies in the US in the early 1930's – and of Heinrich Brüning's policies in Weimar Germany. Unfortunately, Germany, of all countries, insists on forgetting it.
BERLIN – Europe’s situation is serious – very serious. Who would have thought that British Prime Minister David Cameron would call on eurozone governments to muster the courage to create a fiscal union (with a common budget and tax policy and jointly guaranteed public debt)? And Cameron also argues that deeper political integration is the only way to stop the breakup of the euro.
A conservative British prime minister! The European house is ablaze, and Downing Street is calling for a rational and resolute response by the fire brigade.
Unfortunately, the fire brigade is being led by Germany, and its chief is Chancellor Angela Merkel. As a result, Europe continues to try to quench the fire with gasoline – German-enforced austerity – with the consequence that, in a mere three years, the eurozone’s financial crisis has become a European existential crisis.
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