I do not have a lot of time to write these days so this means that it is more homework for you. These days the euro zone is yet again tested by the markets in its commitment to the EURO. And as we are used to by now it the solution that envisages is more government spending as austerity has not worked.
Here is my question: where is this austerity that everyone keeps talking about?
The charts below show that public expenditures,public deficit and public debt increased since 2008 and remained above the level achieved before the economic crisis. Moreover, even hourly labor costs increased after 2008 albeit at a slower pace. It is true that government final consumption has slowed down after 2010 but not stopped and it remains above the 2010 level.
I know that my readers are smart people and they will catch me if I try to cut corners.To bring more details to the story here is the government expenditure as % of GDP for the PIIGS countries. I still do not see the austerity measures. The government expenditures increased for most of them above 50% (fifty) of GDP and than in the last year went down just below that level (except for Spain). Nevertheless, the current level of G as % of GDP is still above the 2000-2007 levels. Thus, we can talk about money badly spent, or saving certain sectors of the economy with public money, etc but we cannot talk about austerity yet.
Source: ECB, IMF