Similarly, the private sector account is always in surplus because business investments are less than household savings (Blyth 2013). Therefore, there should always be a government deficit to make the three to add to zero. The austerity measures which intend to reduce the budget deficit using reduced government spending is therefore likely to cause an imbalance between the public and private sector; hence causing numerous economic and social problems to the affected Eurozone members.One of the worst problems caused by Austerity measures is the macroeconomic problem of unemployment. According to Eurostat (2013), the Eurozone unemployment reached the highest record of 12.1% in 2013. This is because reduced government spending reduced the investment of various sectors in the country. Unemployment has then led to safety net spending and significantly reduced tax revenues for the government. As a result, the austerity measures are offset by the resulting unemployment problem.Austerity measures have also led to reduced GDP in the affected countries. This is because government spending increases GDP, and when the government cuts on spending the GDP declines. In problematic situations like the current Euro zone crisis, consumers and businesses are unable or unwilling to spend (Paul 2013). Therefore, the government should increase its short-term deficit spending in order to stimulate growth in GDP. Austerity Measures of European Governments.
Blyth, Mark. 2013. Austerity: The History of a Dangerous Idea. New York: Oxford University Press.
Eurostat. 2013. Euro Area Unemployment Rate at 12.1%. Eurostat Press Office.
Johnson, David. 2014. “Austerity has made Europe’s Depression Longer than in the 1930s.” Common Dreams, http://www.commondreams.org/views/2014/08/24/austerity-has-made- europes-depression-longer-1930s.
Paul, Krugman. 2013. “How the Case for Austerity Has Crumbled.” New York Times. http://www.nytimes.com/2012/04/16/opinion/krugman-europes-economic- suicide.html?_r=0.
Posen, Adam. 2013. “Austerity Has Made Europe's Real Problem Worse.” U.S. News. http://www.usnews.com/debate-club/is-europe-right-to-abandon-austerity/austerity-has- made-europes-real-problem-worse.
Traynor, Ian and Katie Allen. 2010. Austerity Europe: who faces the cuts? London: Guardian News.
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