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The Poisoned Chalice of Macroeconomic Policy
The Eurozone experienced a second recession in 2011-2012, just a few years after the first one in 2008-2009. This second downturn was the fatal blow that turned Europe's Great Recession into an outright depression. The standard explanation for the emergence of this second recession is the sovereign debt crisis and the increased fiscal austerity in the Eurozone periphery that occurred during this time. Is this understanding correct? Paul Krugman says no in a new post. He points, instead, to the ECB's raising of interest rates twice in 2011 as the cause of the second recession. I agree with Krugman. This explicit ... (full story)