Austerity Insanity

(10 am. – promoted by ek hornbeck)

Cross posted from The Stars Hollow Gazette

Doing the same thing repeatedly and expecting different results is the definition of insanity. It then must follow that Germany’s Chancellor, Andrea Merkel has got to be insane.

Eurozone in new crisis as ratings agency downgrades nine countries

Standard & Poor’s strips France of its AAA credit rating, rekindling fears in the markets over future of single currency

S&P said austerity was driving Europe even deeper into financial crisis as it also cut Austria’s triple-A rating, and relegated Portugal and Cyprus to junk status.

The humiliating loss of France’s top-rated status leaves Germany as the only other major economy inside the eurozone with a AAA rating, and rekindled financial market anxiety about a possible break-up of the single currency.

S&P brought an abrupt end to the uneasy calm that has existed in the eurozone since the turn of the year by downgrading the ratings of Cyprus, Italy, Portugal and Spain by two notches. Austria, France, Malta, Slovakia and Slovenia were all cut by one notch.

The agency said that its actions on eurozone ratings were “primarily driven by insufficient policy measures by EU leaders to fully address systemic stresses”. It added that fiscal austerity alone “risks becoming self-defeating“.

Germany,too may be facing a downgrade as it slips into recession as its economy is contracting in the face of the deflationary economic policy of the euro zone. So what does Frau Merkel do? You got it, more austerity.

Merkel: Europe Faces ‘Long Road’ to Win Back Trust

German Chancellor Angela Merkel said Standard and Poor’s downgrades of nine countries underline the fact that the eurozone faces a “long road” to win back investors’ confidence, pushing Saturday for it to move quickly on a new budget discipline pact and a permanent rescue fund.

I agree with Chris in Paris at AMERICAblog that the ratings agencies should be rendered useless considering their part in the current economic crisis but they are right about austerity. The Europeans led by Merkel are ignoring reality.