Posted Monday, April 2, 2012, at 8:59 AM
Photograph by Cristina Quicler/AFP/Getty Images.
Crushed by banking crises and austerity, the Eurozone's unemployment rate has now risen to 10.8 percent.
It's going to strike many readers and journalists as obvious that this is in some sense happening "because" Europe has "too much debt." But again let me remind you that what an overly indebted country needs is to work more, not less. A scenario in which consumption is flat but output rises as new people enter the labor force and existing workers pull longer hours is fairly bleak. If you work more, you want to get more stuff. But if a country has borrowed far too much money in the past, it may have no choice but to inflict a "work more, consume the same amount" scenario on its population. That, after all, is how you repay debts. It makes nobody happy, but it works. What Europe is implementing, however, is something quite different. In response to high debts, fewer Europeans than ever are working, with the non-work concentrated in the very countries with the highest debt. It's a complete and total policy fiasco.