The debate continues over whether austerity is a regressive approach to deficit reduction. It does bring down the spending side of sovereign P&Ls. But, does the drop in expenditures undercut necessary stimulus dollars needed to revive economies in recession. Certainly, troubled nations like Spain and Italy have little hope that their recessions will end. They do not have the production capacity to export many foods. Their tourist revenue is down. Unemployment is in double digits. Some economists believe that only tens of billion in government stimulus can correct there troubles.
Christine Lagarde of the IMF sided with the stimulus camp
According to Bloomberg
International Monetary Fund Managing Director Christine Lagarde joined world financial and trade organization chiefs in warning policy makers gathering in Davos, Switzerland, next week against fiscal cuts that jeopardize growth.
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