'There will be sustained growth in Europe only when governments, and not citizens or businesses, finally bear the brunt of austerity.'

<blockquote>'If politicians want to keep the borrow-and-spend party going “just one more election cycle” and if no one takes away the punchbowl, the Bang! moment will most certainly arrive. That is the clear lesson of history. It is almost irrelevant whether that number is 90% or 120% or 80%. It will be a different number for each country, depending on the confidence that investors have in the ability of a country to pay back its debt. Investors in sovereign debt are almost by definition the most risk-averse investors there are. You do not invest in a country’s debt to increase your risk exposure; you expect to get paid. There are other factors at play in determining the critical threshold, too: What was the purpose of the debt? How fast is the economy growing?

Can Italy, beset by recession, high unemployment, and a political crisis, grow its debt-to-GDP to Japan’s 240% level? I think any serious observer would say no. Can it get to 130%? 140%? Maybe. We will not know until it’s too late whether Italy or any other country (Spain, Japan, France, or the US) has more debt than the market is willing to absorb. But that is a line any politician should want to avoid crossing.'

- John Mauldin, Austerity Is a Consequence, not a Punishment, April 23, 2013</blockquote>


'There will be sustained growth in Europe only when governments, and not citizens or businesses, finally bear the brunt of austerity.'

<blockquote>'As we can see, government spending has never stopped rising in the Union as a whole since the beginning of the financial crisis, except in 2011 when it remained constant (Figure 3). Spending grew by 6.3 percent in the last three years, in other words during the period when “austerity” policies were supposed to have been applied.

..

Governments have not been borrowing as much—although they still borrow heavily, and public debt keeps increasing. Instead, they tax their citizens more to fund their growing expenditures (Figures 5). And this is the case even in countries such as France where “austerity” has been most strongly criticized. France leads the pack both among countries where spending has risen the most and among those where taxes have climbed most sharply.

..

Conclusion

Governments in almost all European Union countries are therefore as large as they were when the crisis started in 2007 or even larger today.

If we define austerity as the measures taken to reduce budget deficits, then in that sense austerity is indeed responsible for the crisis. If, however, we define it more properly as policies bringing about a reduction in the size of government, then these policies cannot be held responsible for the crisis in Europe because they were never applied.

Unfortunately, confusion over the meaning of austerity impedes a better understanding of the situation and precludes a more relevant debate over the causes of the crisis.

Keynesians will, of course, regret that there haven’t been even larger spending increases, greater borrowing and expanded deficits in the past few years to stimulate the economy. But, from an Austrian perspective, bloated governments, and higher taxes certainly help explain why European economies are still in the doldrums, several years after the financial crisis.

What Europe needs is smaller governments, not just in terms of public spending but also as regards deregulation of the job market and other structural reforms to encourage entrepreneurship, private investment, and job creation. There will be sustained growth in Europe only when governments, and not citizens or businesses, finally bear the brunt of austerity.'

- Martin Masse, Is “Austerity” Responsible for the Crisis in Europe? June 11, 2013</blockquote>


Context ((Hapto)praxeology) - '..Mises’s warning to the world .. not to suppress the market rate of interest in the name of creating prosperity.'

<blockquote>'..Germany will reach budget balance in 2015..' - 'In 2009, learning from the Swiss, Germany introduced its own balanced budget amendment..

'..to supplant the welfare state..' - 'What you can count on is that we will return to the traditional mode of assembling human habitats..'

'..abolish the Fed and get rid of fractional reserve lending .. inflation.'


Money Cannot Buy Growth - By Andy Xie

'The Prison of Debt'