Alesina and Giavazzi on the fairytale about the evil austerity policy

Columnist Wolfgang Münchau has claimed in the leading article of the Monday edition of the Financial Times that Prime Minister Mario Monti's austerity policy has led Italy into a recession. The fairytale about the evil austerity policy is becoming more and more popular, the economists Alberto Alesina and Francesco Giavazzi lament in the liberal-conservative daily Corriere della Sera: "So budgetary discipline is supposed to be the reason for the ongoing recession and the high unemployment. … Even the International Monetary Fund is warning Europe to go easy on fiscal discipline now. Wolfgang Münchau is singing the same tune and comparing Mario Monti with Heinrich Brüning, the last chancellor of the Weimar Republic whose attempt to fix the national budget allegedly brought about the end of the last democratic experiment before the Nazis seized power. … As in other countries, a relaxed budget policy would not have led to more growth but simply increased the risk premiums on government bonds and perhaps triggered a debt restructuring and undermined the banks' finances. It would have conjured up a another crisis year like 2008. … It's amazing that the Financial Times would publish such rubbish."

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More from the press review on the subject » Fiscal Policy, » Economy, » Italy
All available articles from » Alberto Alesina, » Francesco Giavazzi
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