ABSTRACT
This chapter focuses on what happened on the ground in Europe during the critical crisis year of 2012. During that year the crisis reached a critical mass. It also collided with the full force of austerity policies. The eurozone has crashed back into double-dip recession. It will contract a further 0.3pc next year, according to a chastened European Central Bank. As the Europeans define austerity, government combines tax increases and spending cuts into a package aimed at reducing a budget deficit. While there has been some debate over which combination of the two is less harmful to the economy, Europe has not yet found a combination that won't lead to stalled GDP growth, high and rising unemployment and persistent budget deficits. There is an argument to be made that government is wasteful and that spending cuts in a recession is a good time to reduce that waste.
