IDEAS home Printed from https://ideas.repec.org/p/iza/izapps/pp37.html
   My bibliography  Save this paper

Further Austerity and Wage Cuts Will Worsen the Euro Crisis

Author

Listed:
  • Andini, Corrado

    (University of Madeira)

  • Cabral, Ricardo

    (University of Madeira)

Abstract

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.

Suggested Citation

  • Andini, Corrado & Cabral, Ricardo, 2012. "Further Austerity and Wage Cuts Will Worsen the Euro Crisis," IZA Policy Papers 37, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izapps:pp37
    as

    Download full text from publisher

    File URL: https://docs.iza.org/pp37.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ponticelli, Jacopo & Voth, Hans-Joachim, 2020. "Austerity and anarchy: Budget cuts and social unrest in Europe, 1919–2008," Journal of Comparative Economics, Elsevier, vol. 48(1), pages 1-19.
    2. Arestis, Philip & McCauley, Kevin & Sawyer, Malcolm, 2001. "An Alternative Stability Pact for the European Union," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 25(1), pages 113-130, January.
    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 2008 - 2015 318, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    4. Olivier Blanchard & Francesco Giavazzi, 2002. "Current Account Deficits in the Euro Area: The End of the Feldstein Horioka Puzzle?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(2), pages 147-210.
    5. Olivier Blanchard, 2007. "Adjustment within the euro. The difficult case of Portugal," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 6(1), pages 1-21, April.
    6. repec:ebl:ecbull:v:6:y:2008:i:25:p:1-11 is not listed on IDEAS
    7. Augusto Graziani, 2002. "The Euro: An Italian perspective," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(1), pages 97-105.
    8. Corrado Andini, 2008. "Portugal and the competitive disinflation: let the data speak," Economics Bulletin, AccessEcon, vol. 6(25), pages 1-11.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Scharpf, Fritz W., 2014. "No exit from the euro-rescuing trap?," MPIfG Discussion Paper 14/4, Max Planck Institute for the Study of Societies.
    2. C.J. Polychroniou, 2012. "Neo-Hooverian Policies Threaten to Turn Europe into an Economic Wasteland," Economics Policy Note Archive 12-01, Levy Economics Institute.
    3. DUTCAS, Monica Florica, 2020. "The Changing Labour Market: Digitization, Unemployment Trends, And The Minimum Wage," Journal of Financial and Monetary Economics, Centre of Financial and Monetary Research "Victor Slavescu", vol. 8(1), pages 15-25, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sergio Cesaratto, 2012. "Controversial and novel features of the Eurozone crisis as a balance of payment crisis," Department of Economics University of Siena 640, Department of Economics, University of Siena.
    2. Walter Paternesi Meloni, 2017. "Austerity & Competitiveness in the Eurozone: a misleading linkage," Departmental Working Papers of Economics - University 'Roma Tre' 0223, Department of Economics - University Roma Tre.
    3. Belke, Ansgar & Dreger, Christian, 2011. "Current account imbalances in the euro area: Catching up or competitiveness?," Discussion Papers 297, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
    4. Engelbert Stockhammer & Dimitris P. Sotiropoulos, 2014. "Rebalancing the Euro Area: The Costs of Internal Devaluation," Review of Political Economy, Taylor & Francis Journals, vol. 26(2), pages 210-233, April.
    5. repec:ebl:ecbull:v:6:y:2008:i:25:p:1-11 is not listed on IDEAS
    6. Jean-Baptiste Gossé & Cyriac Guillaumin, 2010. "L'impact des chocs externes sur et dans la zone euro : un modèle VAR structurel," Working Papers hal-00493384, HAL.
    7. Christoph Schmidt & Benjamin Weigert, 2013. "Weathering the crisis and beyond: perspectives for the Euro area," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(4), pages 564-595, August.
    8. Philip R. Lane, 2013. "Growth And Adjustment Challenges For The Euro Area," The Economic and Social Review, Economic and Social Studies, vol. 44(2), pages 273-295.
    9. Paternesi Meloni, Walter, 2016. "Austerity and competitiveness in the Eurozone: a misleading linkage," MPRA Paper 75962, University Library of Munich, Germany.
    10. Ángel Estrada & Jordi Galí & David López-Salido, 2013. "Patterns of Convergence and Divergence in the Euro Area," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 61(4), pages 601-630, December.
    11. Ms. Ruo Chen & Mr. Gian M Milesi-Ferretti & Mr. Thierry Tressel, 2012. "External Imbalances in the Euro Area," IMF Working Papers 2012/236, International Monetary Fund.
    12. Marcin Bielecki & Michał Brzoza‐Brzezina & Marcin Kolasa & Krzysztof Makarski, 2019. "Could the Boom‐Bust in the Eurozone Periphery Have Been Prevented?," Journal of Common Market Studies, Wiley Blackwell, vol. 57(2), pages 336-352, March.
    13. Philip R. Lane, 2008. "EMU and Financial Integration," The Institute for International Integration Studies Discussion Paper Series iiisdp272, IIIS.
    14. Michał Brzoza-Brzezina & Pascal Jacquinot & Marcin Kolasa, 2014. "Can We Prevent Boom-Bust Cycles During Euro Area Accession?," Open Economies Review, Springer, vol. 25(1), pages 35-69, February.
    15. João Sousa Andrade & Adelaide Duarte, 2011. "The Fundamentals of the Portuguese Crisis," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(2), pages 195-218, June.
    16. Angelini, Elisabetta Croci & Farina, Francesco, 2012. "Current account imbalances and systemic risk within a monetary union," Journal of Economic Behavior & Organization, Elsevier, vol. 83(3), pages 647-656.
    17. repec:zbw:rwirep:0241 is not listed on IDEAS
    18. Philip R. Lane & Sébastien Wälti, 2007. "The Euro and Financial Integration," Palgrave Macmillan Books, in: David Cobham (ed.), The Travails of the Eurozone, chapter 9, pages 208-232, Palgrave Macmillan.
    19. repec:hal:spmain:info:hdl:2441/1hlgq13piu8cirvmd44v0hs2v1 is not listed on IDEAS
    20. Corrado Andini, 2008. "Portugal and the competitive disinflation: let the data speak," Economics Bulletin, AccessEcon, vol. 6(25), pages 1-11.
    21. Ricardo Cabral & Francisco Louçã, 2019. "The euro at twenty: Follies of youth?," Revista de Economia Critica, Asociacion de Economia Critica, vol. 27, pages 59-69.
    22. Emiliano Brancaccio & Francesco Saraceno, 2017. "Evolutions and Contradictions in Mainstream Macroeconomics," SciencePo Working papers Main hal-03458622, HAL.
    23. Spahn, Peter, 2012. "Integration durch Währungsunion? Der Fall der Euro-Zone," FZID Discussion Papers 57-2012, University of Hohenheim, Center for Research on Innovation and Services (FZID).

    More about this item

    Keywords

    euro crisis; austerity; wage cuts;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izapps:pp37. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.