French Austerity, Really?

Paul Krugman

Photo: NYtimes.com

Sigh. France cuts growth targets, unveils austerity plan. We’re told that it is doing so because it expects slower growth — which the austerity will make even slower.But France faces soaring interest rates, right? No. At this point the entire advanced world is doing exactly what basic macroeconomics says it shouldn’t be doing: slashing spending in the face of high unemployment, slow growth, and a liquidity trap. It’s a global 1937. And if the result is another recession, the witch-doctors will just demand more bleeding.

See the full story at The New York Times >

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