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Separating European Austerity Fact and Fiction

Web Memo

Title

Separating European Austerity Fact and Fiction

A Lesson for the U.S. on Why Budget Cutting Works

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Rarely a week goes by without mention in the media of European governments’ failure to restore economic growth through “savage” budget cuts. There is only one problem with that narrative: It is not true. Government austerity is nowhere to be found in Western Europe—and neither is prosperity. But both are present in the oft-ignored east, as Estonia is outperforming its West European neighbors and likely will continue to do so in the future. Why? Because Estonia is the only Euro Zone country to implement real spending cuts and tax reform that does not involve squeezing more revenue out of an economy in recession. America should take note: Real austerity works. Fake austerity does not.