Paul Krugman: Europe's Leaders Disregard Anti-Austerity Logic

Simon Wren-Lewis recently tried to show some sympathy for the devil. In a post titled "The View From Brussels" on his blog, the Oxford professor attempted to get into the mindset of European officials who defend austerity. And he got at an important point in the process, although he may have let the austerians off too lightly.

As he suggests, the crucial place to start at is why economists like himself, Brad DeLong, Martin Wolf, Larry Summers (at this point, anyway), yours truly and others are against austerity now. We're not always against fiscal consolidation; give me the right economic circumstances and I'll turn at least modestly deficit hawk. We are, instead, against implementing austerity when the interest rate is against the zero lower bound because the economy is in a liquidity trap, so the contractionary effects of fiscal tightening can't be offset by monetary expansion.