From austerity to stagnation how to avoid the deflation trap
Résumé
Five years after the beginning of the financial turmoil in 2008, the euro area is
still in crisis. However, there are some positive signs which have emerged. Some
say that the main imbalances are on their way toward resolution. Others claim
that the euro’s survival of what has proven to be a major crisis is a step forward in
creating a prosperous and sound European Union. Some may rationalize that the
European integration process has always progressed by desperate responses to
critical situations. Some may even interpret migration flows from peripheral countries
to the core, to escape the misery of the crisis, as showing that the optimality
of the currency area has improved.
Our analysis of the state of the European Union and the euro area is strikingly
different. We think that the policies conducted so far, in particular austerity, have
failed and that such a failure has a cost. Imbalances have not been solved but only
displaced, from current account to unemployment, from public deficit to inequalities.
Despite tremendous efforts, private or public debt ratios are still high and
deleveraging still stands as the only objective. A large majority of European citizens
live in countries still stuck in the crisis and for whom recovery is an abstract
concept (table and Figure 1). We think that alternative policies were possible. In
addition, we believe that other policies can and should be implemented now to
really exit the crisis.
Domaines
Economies et finances
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