Some economists and political leaders demonize European austerity as “savage.” They say it will only deepen and prolong recession. They are right, but for the wrong reasons.
Instead of taking an axe to government spending, as they claim, every Eurozone country has actually increased total government expenditures since 2007. Today, not a single Euro member has lower government spending than it did in in 2007 — the year preceding the crisis.
Estonia and Ireland have made significant progress in shrinking government expenditure initially increased during the crisis, although Irish spending cuts also came with a 7 percent increase in the total cyclically adjusted tax burden.
According to data from the European Commission, the Eurozone member average of the total cyclically adjusted tax burden increased by about 5 percent from 2007 to 2010.
The problem with European austerity is that the people are tightening their belts while governments are not. Austerity is “savage” because Europeans make sacrifices to support bloated public sectors while those in government make no sacrifices themselves.