Another article on the eurozone crisis that misses the elephant in the room:
The same goes for the weakest euro-area economies, except that in their case more government spending would have depended on the willingness of the EU to provide it. Therein lies the first clear lesson of the limping EU recovery: EU institutions should be reformed to provide at least the possibility of fiscal stimulus if it’s deemed necessary. The lack of nationally differentiated monetary policies within the euro area only underscores this need, because fiscal policy is all there is.
Yes there are no nationally differentiated monetary policies in the eurozone, but that misses the more important point that the deep eurozone recession, and especially the double dip, was caused by tight money at the ECB. The US has done just as much austerity as the eurozone; it is monetary policy that explains why eurozone unemployment went from being equal to US unemployment in 2010, to nearly 5% higher.
I can’t understand why so many people in the media miss such a blindingly obvious point. But they do. Even Paul Krugman understands that fiscal policy is only needed when at the zero bound, and the eurozone has not been at the zero bound for 98% of the past 5 years.
The position held by Keynesians . . . is that fiscal stimulus is necessary only under certain special conditions. Namely, when you’re up against the zero lower bound