Péter Felcsuti doubts Keynes is the solution to the crisis

Europe has elected the Keynesian approach to overcome the economic crisis, notes former bank director Péter Felcsuti in the online edition of the left-liberal weekly Magyar Narancs. However he doubts that this is the right approach. "We must be aware that every crisis emerges as the result of a loss of confidence and ends once confidence is restored. So if increased government spending boosts demand, confidence returns, and the whole operation can be deemed successful. But if it fails, the patient dies or at least falls into a coma. … In reaction to the economic and financial crisis the European states have applied the Keynesian approach, with the result that many EU member states have become indebted owing to overspending. The government money pumped into the economy has not restored the confidence of the major players. Consequently neither the economy has been boosted nor have tax revenues increased. As the main buyers of government bonds the banks have been 'infected' by the high levels of public debt. In response the banks have cut down on granting loans, which has been a shock for the real economy. And ever since this process has turned into a vicious circle."

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