But, in fact, the ongoing fiscal tightening is a necessary consequence of the misalignment of the social contract: already during the boom period preceding the crisis, public commitments in these countries were entered into at the cost of future generations; the crisis then revealed that: first, projected expenditure was too high in view of plausible revenues; and second, these projected revenues had to be revised downwards as the whole economy was rebased downwards.
Moreover, the problem is by no means specific to the euro area, as vividly documented by the intense political debates in other industrialised economies, such as the US, the UK or Japan. The misleading attribution of fiscal austerity to European governance arrangements creates excessive political costs for the much needed strengthening of institutions, and should be rejected.