The work of John Maynard Keynes shows us that counter-cyclical fiscal policy and an easing of austerity may offer a way out of Eurozone crisis

Abstract

Debates between ‘Hayekian’ and ‘Keynesian’ perspectives constitute one of the main conceptual fault-lines of the Eurozone crisis. In the second of two EUROPP articles covering this debate, Simon Wren-Lewis looks at how the current programme of austerity and the view that the private sector can do little wrong may be driving the continent further into recession. Policymakers must instead embrace the Keynesian response of counter-cyclical fiscal policies