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Further Austerity and Wage Cuts Will Worsen the Euro Crisis

  • Andini, Corrado

    ()

    (University of Madeira)

  • Cabral, Ricardo

    ()

    (University of Madeira)

This note argues that the solutions to the euro-area crisis proposed by the EU governing institutions in cooperation with the IMF, based on further austerity and wage cuts, will worsen the crisis. They are unlikely to reduce both sovereign and external debt ratios of countries experiencing these problems. Quite in contrary, they are likely to further reduce the real GDP growth of these countries.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Policy Papers with number 37.

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Length: 16 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:iza:izapps:pp37
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  1. Philip Arestis & Kevin McCauley & Malcolm Sawyer, 2000. "An Alternative Stability Pact for the European Union," Macroeconomics 0004043, EconWPA.
  2. Jacopo Ponticelli & Joachim Voth, 2011. "Austerity and anarchy: Budget cuts and social unrest in Europe, 1919-2008," Economics Working Papers 1342, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2012.
  3. Ray Barrell & Sylvia Gottschalk & Dawn Holland & Ehsan Khoman & Iana Liadze & Olga Pomerantz, 2008. "The impact of EMU on growth and employment," European Economy - Economic Papers 318, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  4. Corrado Andini, 2008. "Portugal and the competitive disinflation: let the data speak," Economics Bulletin, AccessEcon, vol. 6(25), pages 1-11.
  5. repec:ebl:ecbull:v:6:y:2008:i:25:p:1-11 is not listed on IDEAS
  6. Augusto Graziani, 2002. "The Euro: An Italian perspective," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(1), pages 97-105.
  7. Olivier Blanchard, 2007. "Adjustment within the euro. The difficult case of Portugal," Portuguese Economic Journal, Springer, vol. 6(1), pages 1-21, April.
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