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Eurozone’s Top Economic Official Continues Call For Austerity, Despite Cratering Economy

By Pat Garofalo

"Eurozone’s Top Economic Official Continues Call For Austerity, Despite Cratering Economy"

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The Eurozone got some more discouraging economic news today, with industrial output dropping by its largest amount in three years. Eurozone unemployment recently hit yet another record high of 11.8 percent, with 18.8 million out of work. Spain’s unemployment rate is nearly 27 percent.

But the Eurozone is going to keep right on going with its austerity program, according to its top economic official:

The worst of the euro zone debt crisis may be over, but governments must not let up on reforms or budget cuts if they want to put the turmoil firmly behind them, the EU’s top economic official said on Friday.

In a speech to diplomats and industry officials, EU Economic and Monetary Affairs Commissioner Olli Rehn called for prioritising investment, fighting youth unemployment, continued reduction of budget deficits and tighter economic integration of the 17-member single currency area.

“Our patient may be out of intensive care, but it will still take some time before she can be given a clean bill of health,” Rehn said. “That’s why any lapse into complacency would be unforgivable. We need to stay the reform course to revitalise the European economy,” he added. [...]

[L]ower deficits were still central to emerging from the three-year public debt crisis, Rehn said, even though their is increasing debate about the impact of austerity on growth.

Spain is the case study in how budget deficits have nothing to do with the current Eurozone crisis: Spain has the Eurozone’s highest rate of unemployment, yet had balanced budgets before 2008.

The International Monetary Fund recently admitted that it vastly underestimated the detrimental effect of austerity spending cuts, and is now recommending that countries dial back their spending reductions in order to prevent stifling of economic growth. But European nations are stubbornly charging ahead. The UK, in fact, is headed towards a triple-dip recession, as its government doubles down on austerity.

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