Top European Union Official Signals Support For Shifting Focus Away From Austerity

The anti-austerity chorus is getting louder. On the heels of the International Monetary Fund’s warning to the U.S. against pursuing severe spending cuts and the European Union’s Economic and Monetary Affairs Commission indicating that it is moving away from the same, European Commission President Jose Manuel Barroso signaled that he’s in favor of shifting away from austerity:

“While I think this policy is fundamentally right, I think it has reached its limits,” Mr. Barroso said. “A policy to be successful not only has to be properly designed, it has to have the minimum of political and social support.” […]

In his speech, Mr. Barroso hinted that some countries could be given longer to get their budget deficit in line with EU rules, which ostensibly limit it to 3% of gross domestic product.

“Even if the policy of correcting deficit is fundamentally correct, we can always discuss fine-tuning of pace,” he said. He noted, however, that EU finance ministers would have to agree to any change in the timelines.

Voices outside of government have also chimed in: Bill Gross, founder of investment firm Pimco, criticized the idea that austerity in the United Kingdom and Europe would lead to growth and instead argued that they should be spending money. This all comes on top of a new study that poked holes in the seminal research that many austerity hawks had relied on to make their case.

Meanwhile, demand for eurozone government debt has lead to the lowest yields for Spanish and Italian bonds in more than two years. Lower borrowing costs add even more firepower to the argument that EU countries should switch the focus away from deficit reduction and toward stimulus spending to get their economies back on track.