Amid Euro-Slump, IMF Clever Technocrats Are Forced to Rethink Austerity


Howard Schneider
Washington Post
April 18, 2012

Spain and other embattled European countries may be slashing government spending too quickly, the International Monetary Fund warned Tuesday, saying deep budget cuts could be choking off economic growth vital for curing their financial crises.

The findings were detailed in a new IMF study that raises basic questions about how Europe is responding to the debt crisis unsettling the continent’s markets and depressing its economies.

While concerns about Europe’s health eased in recent months after political and economic leaders took new steps to contain the problems, anxiety has been on the rise again lately.

The cost Spain faces for borrowing money has been increasing amid doubts about whether it can control spending while also rekindling economic growth. The government successfully sold around $4 billion of short-term bonds on Tuesday — but the interest rate Spain must pay to attract investors has nearly doubled in a month.

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