The recent slight improvement in the GDP growth rates in the eurozone has led European policy-makers to proclaim victory and assert that the austerity programmes imposed within the eurozone are paying off. But is this really the case? In this Commentary Paul De Grauwe and Yuemei Ji argue that the improvement in the eurozone business cycle is the result of the ECB’s announcement of its Outright Monetary Transaction (OMT) programme, and that austerity has left a legacy of unsustainable debt that will test the political resilience of the debtor countries.
Paul De Grauwe is Associate Senior Research Fellow at CEPS and Professor at the London School of Economics. Yuemei Ji is a Lecturer in International Economics and the Political Economy of European Integration at University College London. The authors are grateful to Daniel Gros for useful comments.