"We've seen this before" in Europe. Austerity (Germany after WWI) breeds extermism and intolerance.
The central - and perhaps fatal - flaw of the euro is that it is a common currency without a common fiscal policy. ... Some anti-American Europeans ... take cold comfort from the fact that an economic meltdown rooted in the United States exposed the euro's inherent instability, but it is little solace to the Greeks, the Spanish, the Portuguese and the Irish that the tight fiscal conditions and long-term misery they face might have been avoided had that meltdown not taken place. Had those countries rejected the euro, they could have devalued their currencies to weather the financial storm. As it is, they face a Hobson's choice: to stay in the euro zone or leave and be driven into bankruptcy and destitution.
We've seen this before. In 1919, having witnessed firsthand the vindictiveness of the Paris peace talks at the end of World War One, John Maynard Keynes wrote in The Economic Consequences of the Peace that the punitive reparations imposed on Germany and Austria in the Treaty of Versailles were so severe that widespread poverty would inexorably lead to the rise of extremist politics and a second world war. Twenty years later, Nazism had brushed aside the democratic Weimar Republic, and the world was at war again.
Now, ironically, it is Germany imposing savage economic retrenchment on its neighbors. Citizens of the poorer European nations have been given no option but to pay off their debts, endure austerity for the foreseeable future, or be expelled from the euro zone. Half of young Spaniards under 25 are jobless, and even the most optimistic EU estimates suggest austerity will continue in the southern nations for at least a decade. For younger Europeans, that means leaving their country of birth to find jobs in Germany, Britain, or the Benelux countries, or staying home and unemployed. For those at or near retirement it means returning to work, if they can, to supplement their devalued pensions. There is no easy alternative to this punitive regime.
Pushing austerity rather than policies for growth has spurred an alarming rise in populist extremist parties, the clamor for the dissolution of established national borders, the resurgence of regional nationalism in Scotland, Catalonia and elsewhere, and the widespread resurgence of xenophobia and racial intolerance. There is now severe poverty in Europe on a scale not seen since immediately after World War Two. ... Greeks have lost a third of their earning power in the last five years and their prime minister, Antonis Samaras, warns that the social cohesion of his country is “endangered by rising unemployment, just as it was toward the end of the Weimar Republic in Germany.”
http://www.iol.co.za/news/world/getting-europe-out-of-its-mess-1.1458989#.UQO6oBny-2w
You would think that Germany (of all countries) would understand the disastrous effects of a policy of severe austerity.
Of course, many Germans may look at history and say "It can't happen again. Things are different now."
Always a dangerous way to view history.
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