No "Buts" About It

From the NPR website:

The story itself is fine, though the "but" in the headline suggests that the editor who wrote it expected austerity to lead to (short-term) growth.  Most of us economists don't find the coincidence of fiscal tightening and slumping growth so surprising (see e.g., Krugman).

Last week's summit agreement to tighten enforcement of the budget rules in the "stability and growth pact" doesn't help matters.  One is reminded of the old joke that the Holy Roman Empire was "neither Holy, nor Roman, nor an Empire."  I suppose actually enforcing the rules would make it more of a "pact," but forcing procyclical fiscal policies won't be good for stability or growth (see this post by Antonio Fatas). 

So its not surprising that the Washington Post reports "In Europe, summit optimism fades." The half-life of "summit optimism" seems to be declining, which means that Europe must either (a) really fix things or (b) hold summits more frequently.  I think they're converging towards continuous summit.