Newswise — As recession tightens its grip on several nations in the European Union, international bodies have agreed to bailouts, but at a price: austerity, a policy in which public spending is drastically reduced with a commensurate reduction in services and public support. Emanuel Oliveira, an economist at Michigan Technological University, thinks that may be a bad idea.
Oliveira favors stimulus policies during severe recessions in order to prevent further socioeconomic decline.
“What I find quite surprising is that most countries around the world are implementing stimulus whereas the European Union is mainly implementing austerity,” Oliveira says. “Even more astonishing is that peripheral EU countries persist in implementing such policies despite experiencing significant socioeconomic turmoil such as severe unemployment rates, decreases in real GDP per capita, heavily discounted privatizations of public assets, the rise of violent extremist groups (e.g., neo-Nazis in Greece), criminality, suicides, nationwide street protests, strikes . . . Such problems are reminiscent of the interwar period.”
Oliveira agrees on the need for change, but points out that now is the time to alleviate socioeconomic turmoil, not to implement further austerity with the pretense of fostering political union, he said. The outcome might end up being exactly the opposite, as daily news from Europe shows: “The least disruptive solution to this dilemma is to make such reforms in times of abundance, not during a severe recession,” Oliveira says.
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