Wednesday, September 11, 2013

Update on "When European 'Austerity' Isn't"

Back in June 2012, I wrote a post about how little actual "austerity" had happened among European governments. Most governments had increased their level of spending between 2008 and 2011, and only three governments had decreased their spending from 2007 to 2011. Now that Eurostat has the numbers from 2012, we can see how things have changed in the past year. As before, all numbers are taken unmodified from Eurostat.

The results are interesting and kind of mixed. The region as a whole increased its spending:

What about the smaller problem countries of Greece, Portugal, and Ireland? Surprisingly, they have actually decreased their spending from 2011.

As for the larger economies of France, Germany, Italy, Spain, and the UK, all of them spent more in 2012 than they did in 2011. Contrary to the rhetoric, the UK increased its spending dramatically from 2011 to 2012, by 8.6%.

As for the change in spending since the crisis began (in 2007 or 2008), the picture is less austere than last year. Only seven countries spent more in 2008 than they did in 2012: Iceland, Romania, Ireland, Greece, Latvia, Hungary, and Lithuania. Only Ireland, Iceland, and Hungary spent more in 2007 than they did in 2012. Greece spends almost exactly as much (100.08%) as it did in 2007.

So what to make of this? Well, it is true that the smaller problem countries have decreased their spending in the wake of the crisis, though not by a great deal. The larger countries, including, notably, Spain, have all increased their level of spending, so the claims of austerity remain false. The UK, which some have claimed to be austerity central, has increased spending drastically in the past year. Overall, "European Austerity" is largely a myth.