The crisis of the Eurozone shows no sign of resolution and indications of intensification. W.B. Yeats’s image of ‘turning and turning in the widening gyre’, formulated in another period of clouds over the European continent, is as apposite as any other. Is there a way out for Europe from the foreseeable disaster of a disorderly collapse of the euro?
The current approach demands austerity from crisis-hit countries as a quid pro quo for support. It is failing for three reasons. The first is that austerity is having a counter-productive consequence, leading to economic contraction which makes debt-burdens all the more difficult to bear. The second is that austerity-oriented policies are perceived as unjustly punitive and distributively blind, leading to social and political resistance that makes them difficult to implement and sustain. The third is that austerity cannot succeed, by itself, at restoring the confidence of the ‘markets’.