I just wanted to flag two important articles on Europe. First, Simon Wren-Lewis reminds us that while extreme austerity is being imposed on Europe’s periphery, the core has also pursued contractionary fiscal policies. Here’s the IMF’s estimate of the cyclically adjusted primary balance — a measure of what the non-interest budget balance would have been at full employment:

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Basically, faced with a huge blow to private demand from a burst housing bubble and deleveraging, Europe has responded not as 75 years of economics said it should, with temporary stimulus, but with Herbert Hoover — or, better, Chancellor Brüning — policies of retrenchment. And policy makers pronounce themselves shocked both to find that the bottom is dropping out of Europe’s economy and that their perceived authority and wisdom is being rejected by voters.

Meanwhile, Mark Mazower, an actual European historian, says better and with more authority than I could what I’ve been trying to get at: the Chancellor Brüning reference is not a joke: