Monday, April 30, 2012

Euro and US Coordinating Austerity

To add yet one more perspective on how significant the shift to austerity among advanced economies has been since 2009, I decided to add the Euro series to a chart from Paul Krugman's blog. This is real government consumption for both the US and the Euro (17 countries) area.

It is remarkable how the Euro area and the US display a strong coordinated contraction in fiscal policy starting in the first quarter of 2009 that accelerates during 2010 and 2011. This has come at a time when advanced economies (and the world) were starting a recovery from a very deep recession. No surprise that the recovery is not going as well as some thought and some countries are going back into recession.

Antonio Fatás