US, Europe can’t thrive by austerity alone

When other Group of 8 nations pressed Angela Merkel to support measures to stimulate euro-area economies at a summit over the weekend, it wasn’t because of a mere philosophical difference between the German chancellor and other G-8 leaders.

Since 2008, the United States and Europe have put into practice two radically different theories of how indebted governments should respond to economic duress. On this side of the Atlantic, the Obama administration relied on stimulus to keep a deep recession from turning into a long depression. Meanwhile, much of Europe has chosen the course the Tea Party movement has urged the US Congress to follow: Countries such as Britain, Greece, Italy, and Spain have all slashed public-sector expenditures now — in many cases at Germany’s instigation — in the hope of reassuring spooked financial markets.

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