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Where we stand now — Restoring Growth
The latest forecasts have the eurozone economy contracting in 2012, and stagnating in 2013. Periphery countries, with the exception of Ireland, are in recession, with unemployment as high as 24 per cent in Spain. Many economists fault excessive austerity measures for killing growth, which, as I mentioned, reduces public revenues and makes it harder to tame public deficits. In an effort to jump-start their economies, heavily indebted countries are also implementing structural reforms aimed at boosting productivity and competitiveness, but while tax hikes and spending cuts have immediate repercussions on the economy, the beneficial effects of things like privatizations and labour market shakeups will only be felt years from now.
(Image: Italian Welfare Minister, Elsa Fornero tears up while announcing austerity measures in December 2011. Screengrab from video, Telegraphtv, The Telegraph: http://www.youtube.com/watch?v=MVRJ18oHsa8&feature=plcp)