Fareed’s Take: Is democracy part of Europe’s economic problems?

By Fareed Zakaria, CNN

Everyone is looking at Europe these days as economic and political protests mount across the continent.

The downward spiral has produced a great debate about the virtues of “austerity,” the idea that governments with large budget deficits must reduce these deficits -– mainly by cutting spending. If they don’t get their budgets in order, so the idea goes, they won’t be able to borrow money and will face a fiscal nightmare of ever-rising interest rates.

The problem is that as these governments cut spending in very depressed economies, it has caused growth to slow even further -– you see government workers who have been fired tend to buy fewer goods and services, for example -– and all this means falling tax receipts and thus even bigger deficits.

So, economists like Paul Krugman urge: abandon the austerity program, spend more and get budgets in order once the economy has recovered. The problem, in the mind of Keynesians like Krugman, is that European elites, particularly in Germany, have embraced the wrong economic doctrine.

Now, having been in Europe briefly earlier this week, I don’t think Europe’s elites -– especially German elites -– have really embraced some alternative view of economics. Most do understand that cutting spending during a recession slows down the economy further.

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Categories: Europe

0 replies

  1. Democracy from being a virtue to a sin!
    This is very interesting. For decades we have sung the virtues of democracy and even insisted exporting it on the point of sword.

    What a turn around, Democracy from being a virtue to a sin!

  2. Well, in difficult times democracy is not the best form of government. When the majority ‘decides’ not to reduce their own benefits that may be understandable, but if they at the same time do not stipulate where the money is supposed to come from then what? Sure way to state bankruptcy. Greece is coming closer …

    Let’s just hope that the next Hitler is not around the corner…

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