Let me explain slowly and clearly-
The problem is overcapacity and lack of aggregate demand.
Austerity by definition means less spending and less aggregate demand.
Irish Debt Woes Revive Concern About Europe
By LANDON THOMAS Jr., The New York Times
Published: November 7, 2010
LONDON – When interest rates soared last week on Irish government bonds, it served as a grim warning to other indebted nations of how difficult and even politically ruinous it could be to roll back decades of public sector largess.
An Irish bond market already in free fall plunged further after Ireland announced on Thursday that it planned to nearly double its package of spending cuts and tax increases to try to rein in its huge deficit. Investors took it not as a sign of resolve but rather of Ireland’s desperation and uncertainty about the true extent of its problems.
…
A year ago, as cascading mortgage defaults brought down the biggest Irish banks, Ireland became the first major developed nation to impose an austerity program. The country was hailed worldwide as an exemplar of probity and national consensus.But as the full extent of the banking and real estate bust became evident, it was clear that the government of Prime Minister Cowen, which has been in power since the onset of the crisis more than two years ago, had underestimated the cost of fiscal recovery. Now the possibility that he will be forced from office or compelled to call a new election grows by the day.
…
The British chancellor, George Osborne, perhaps the keenest deficit hawk among policy makers in the developed nations, was taken to task last week by lawmakers. They accused him of exaggerating the extent of the country’s fiscal problems to justify broad cuts in middle-class benefits like universal payments to parents with children.“How many children will be forced to leave their homes?” demanded one furious member of Parliament. “Will the numbers of homeless increase or decrease under your government? Will there be a reduction in special needs education for children in our schools?”
Pitchforks.
I’m reliably informed Keith will be back tomorrow.
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