Austerity, European commission, European Central Bank, International monetary dund, World Bank, Structural Adjustment Programs, welfare state, Keynes


There is a general belief among may European policymakers that the current debt problem in some Eurozone countries is caused by the unsustainable levels of governmental spending required to maintain overly generous welfare state programs, a bloated public sector, overly generous pension levels, state subsidies, and low user fees for services. Their proposed solution lies in implementing stringent austerity measures designed to discipline debt-ridden governments by cutting public budgets, reducing the number of public sector workers, curbing social benefits, and sharply narrowing the scope of the welfare state. Based on a belief in ‘expansionary austerity,’ this approach repudiates a key Keynesian principle for dealing with a recession—namely, the use of government spending to pursue full employment. This paper will examine the austerity measures forced upon several heavily indebted European nations by the ‘Troika’— the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF). Also examined will be the introduction of components of the IMF and World Bank’s Structural Adjustment Programs (SAP) into the Eurozone context, and the resulting social and political instability.

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