Austerity on Trial amid New Evidence

Economic policies are debated again as growth undershoots estimates.

Global policy makers and economists are staging a retrial of austerity as new evidence arises.

Facing another slowdown in the world economy, the U.S. and International Monetary Fund are pitched against the euro area and U.K. over whether axing budgets and debt is the recipe for recovery or recession. In academia, professors Kenneth Rogoff and Paul Krugman remain at odds.

Germany’s Push

Schaeuble used the meeting to promote “growth friendly” deficit-reduction policies he’s pursued at home. His boss, Chancellor Angela Merkel, last week said, “we always talk about austerity -- that’s the new word that’s often used -- but forget that we never talk about the fact that we have to pay back debt.”

Debt Figures

The divide may be narrower than the rhetoric suggests. The IMF has pushed cash-strapped countries in Europe’s periphery to make deep fiscal cuts. Estimates it released last week also showed spending restraint is slowing in Europe and speeding up in the U.S.

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