Austerity backers in Europe in retreat ? Barroso calls for re-orientation to growth.

The head of the European Commission José Manuel Barroso has called for Europe to downgrade its austerity policies and re-emphasize policies which stimulate growth. He argues in a speech today , according to The Wall Street Journal,that austerity no longer has the necessary political or social backing to keep the policy in place. If Barroso is able to get this policy change implemented in a serious way this will be a major improvement. He appears co-incidently to have the backing of the manager of one of the world’s largest bond funds, Bill Gross of Pimco who explains today in the Financial Times that Europe has been following the wrong policy in terms of its austerity and that bond buyers like equity markets prefer growth in the short term through spending money. He argues that it was a mistake of interpretation on the part of the policy makers to have believed that the bond markets wanted severe belt tightening by governments. Long term budget balance and a stable ratio of debt to GDP is a long run objective but the way to achieve that was through promoting short term growth not austerity. These two statements coupled with the critical discussion of Rogoff and Reinhart’s  errors in their study of the effect of debt on growth will, I hope, help create the necessary climate for an all out push to reduce the unemployment rates in Europe and North America as a top priority and permit the long overdue renaissance of Keynesian policy which I have been calling for for a very long time.


About haroldchorneyeconomist

I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
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