So, austerity isn't working again. How surprisng is that?
Not at all.
The last time the euro area’s inflation rate went negative in 2009, the economy was struggling to recover from the recession that followed the collapse of Lehman Brothers Holdings Inc. This time, the decline was partly driven by sluggish growth and a drop in crude oil prices of about 50 percent in the past year.RtO has said it many times but it won't hurt to repeat it, because hardly anybdy gets it -- deflation is the worst of ecnomic trends and the one no one knows how to remedy.
Anybody my age grew up hearing endless warnings and laments about inflation, so it is not so surprising that the word sets off alarm bells even when it is no longer a problem. We have a whole political party -- not, a big one, true -- devoted to inflation alarmism.
The Bloomberg story is not detailed. Some of Europe's economic problems predate the switch to the euro, continent-wide attempts to force smaller government deficits and other remedies beloved of Tea Partiers and mental inhabitants of the last century generally. Southern Europe is less educated and less modern than northern Europe. It mimics the situation in the United States for the 150 years fter the end of the Civil War. (A situation that continues to drag down the overall American economic performance.)
If tempted to make too close comparisons to other areas, it is also important to recall that Europe's fundamental stimulus and problem has not changed for over 500 years -- it is not a resource extraction area, with the exception of North Sea oil -- an asset in deep discount for the moment.
Bottom line: Keynesianism works better than austerity, at least in modern,highly-ramified economies, and no economy is more modern than Europe's.