Euro zone austerity shrinks economy

Count your blessing that the United States did not put deficit reduction over stimulating jobs as our solution to the Great Recession.  Europe’s austerity approach has given them no blessings to count.

 “The euro zone's…economy shrank in the second quarter, having flatlined in the first, despite continued German growth which economists said could soon be snuffed out,” read the first line of a Reuters story yesterday.  “The 17-nation currency bloc contracted by 0.2 percent on the quarter data showed on Tuesday.” 

Economists say it is likely to get worse.

While there was anemic growth of 0.3 percent or less in Germany, Austria and the Netherlands and France had zero growth for the third consecutive quarter, the news was very bad for the other European countries.

How much did some of these national economies drop.

Cyprus down 0.8 percent.

Finland down 0.7 percent.

Greece down 6.2 percent.

Italy down 0.7 percent.

Portugal down 1.2 percent.

Spain down 0.4 percent.

"Overall it confirms the idea that the euro zone is in a recession phase," Aline Schuiling, economist at ABN AMRO, said.  "What we see is a vicious circle of budget cuts, high interest rates in the periphery and sovereign debt rising…We expect another contraction in Q3."

According to the Reuter’s story there is a “growing debate inside and outside Europe about the sense of austerity drives.”

What definitely doesn’t make any sense is for there to be any debate about the U.S. following the austerity, cut-the-deficit-priority European model.