The election of François Hollande as the new president of France signals the end of that country’s attempt to starve itself to financial prosperity. And Paul Krugman approves of the change.
What’s wrong with the prescription of spending cuts as the remedy for Europe’s ills? One answer is that the confidence fairy doesn’t exist — that is, claims that slashing government spending would somehow encourage consumers and businesses to spend more have been overwhelmingly refuted by the experience of the past two years. So spending cuts in a depressed economy just make the depression deeper.
Meanwhile, Greece held parliamentary elections over the weekend, and while they didn’t choose a solid majority for the new leadership — they had everything to choose from radical leftists to neo-Nazis — they made it clear that the present government was not going to continue on with their austerity measures.
The European debt crisis is different than what caused our problems here. The Eurozone has the problem of a group of countries, rich and poor, linked by a common currency and little else. What works for Germany in terms of monetary policy doesn’t work in Greece. The only thing they seem to agree on is that austerity isn’t working. Britain is already into their second recession, and voters there are giving every indication that if an election was held today, the Tories would be out.
So what’s the lesson for us over here? Well, at one point the Republicans were all talking about trying a little European-style austerity, but now it looks like the solution might be to elect a Socialist. Oh, wait…