According to a new study from the National Institute for Economic and Social Research, a London-based research organization, the austerity measures implemented across Europe in an attempt to get the continent’s debt under control and stem its financial crisis have actually made matters worse, stunting growth and increasing debt:
In a damning examination of Europe’s coordinated fiscal consolidation, the London-based National Institute for Economic and Social Research said the ratio of debt to gross domestic product will be around 5 percentage points higher in both the U.K. and the euro zone because of the spending cuts and tax rises pursued from 2011 to 2013.
NIESR said the implications of its study — which is the first to model the quantitative impact of coordinated austerity measures across the EU — is that the current austerity strategy being pursued by individual member countries, as well as the EU as a whole, is fundamentally flawed and is making matters worse.
“Not only would growth have been higher if such policies had not been pursued, but debt-to-GDP ratios would have been lower,” the report, written by economists Dawn Holland and Jonathan Portes, said. “It is ironic that, given that the EU was set up in part to avoid coordination failures in economic policy, it should deliver the exact opposite.”
According to another recent study, 116 million Europeans are at risk of falling into poverty, while the continent is doubling down on austerity.
The U.S. has rebounded from the financial crisis faster than Europe, in part, because it did not engage in the same level of austerity, sucking money out of an economy that was already weak. However, the so-called “fiscal cliff” that it set to hit at the end of the year would actually entail more fiscal contraction than that experienced by several European countries that have gone all in on austerity.