Euro zone policy may turn to relax 3/60 hurdle and to EuroTARP

The mood has turned against austerity in the euro zone because it is now rightly seen as anti-growth. The question is what next. Here I will hazard a few predictions of where euro zone policy is headed.

Let's use the framework I set out when framing the political economy of the European sovereign debt crisis last summer. I think the main social psychology component of this framing was in talking about how policy adapts when policy makers have publicly committed to one that is ill-suited for the economic circumstances. I spoke a bit about policy inertia in the context of wanting to provide some modicum of consistency. This is part of what supports any status quo. But as the policy starts to visibly fail, the questioning of the status quo increases and the status quo becomes unstable.


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