Break the euro and acknowledge austerity has been a disaster? That’s a fantastic horror, suggests Nobel Prize-winning economist Paul Krugman, tongue planted firmly in cheek. People and companies aren’t shelling out in the wake of government belt-tightening, so something needs to give.

The vote revolt

Krugman makes it clear that while no new policy against austerity has been initiated, people are done with austerity measures and the officials who passed them in European nations. A lot of people have lost their jobs in these nations because of revolt over the measures. Candidates against austerity measures were voted for by the strong majority of people on May 6 when both France and Greece held political elections.

French President Nicolas Sarkozy’s economic strategy was definitely not really working, according to Krugman. Still, Franois Hollande’s defeat concerns the Economist. It believes that Hollande is taking a dangerous path with the brand new policies.

Slashing not helping

Cutting spending and getting rid of jobs might mean something if real results were soon to follow. Yet when nothing but misery became of austerity – business and customers didn’t spend more because they couldn’t – all the policies did was make the economic depression worse.

Austerity measures in Ireland were done to make an effort to get the bond markets up and the media called this a success in spite of the truth that it was definitely not succeeding at all. Most people would assume austerity would work for that, but really it just caused borrowing costs to remain much higher in Ireland than it was in many other countries.

Moving on for Europe

Krugman recommends that the euro should be abolished. If Greece, Spain, Ireland and other nations in economic trouble still had their own currency, Europe wouldn’t be in such a pickle. Troubled nations could easily restore cost-competitiveness and exports via devaluation of the currency. Iceland did it to the krona and allowed its banks to fail, and the country is now on the road to recovery.

Krugman points out that the European Union would essentially be abolished if the euro was gone, and it would trigger struggles for a time, but eventually Europe would be better than ever. He also recommends that nations with great inflation right now can trade with neighbors who are struggling, which can be another choice to consider.

The European Central Bank would have to focus on economic growth rather than inflation if anything were to work.

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