According to Olivier Blanchard, chief economist of the International Monetary Fund, the Eurozone – and the world economy – are in a very dangerous place. In April Blanchard warned that if Greece pulls out of the euro “it is possible that other Euro area economies would come under severe pressure as well, with a full-blown panic in financial markets. Under these circumstances, a break-up of the euro area could not be ruled out. This could cause major political shock that could aggravate economic stress to levels well above those after the Lehman collapse.” Such a shock, indeed, could “produce a major slump reminiscent of the 1930s”
Since 2008, and the beginning of the present phase of the crisis, growing austerity has developed everywhere. This policy was supposed to reduce the debts and relaunch growth. And then, like a rabbit out of a magician's hat, a new alternative was flourished which was supposed to cure all ills. It was called recovery. Why this sudden turnaround by the great majority of the leaders of the euro zone? What is the reality of this policy? Has generalised austerity finished? Will the crisis continue to deepen or not in the near future ?