Why fiscal austerity in Europe can solve the crisis

This is because the reason for the tightened fiscal policy of the developed countries in Europe is to deal with the debt crisis and promote the adjustment of the economic structure.

1. Contractionary fiscal policy: a policy behavior in which the state suppresses or compresses aggregate social demand through fiscal distribution activities. It is often taken in the context of a trend that aggregate social demand has or will soon be in excess of aggregate social supply.

It typically takes the form of shrinking the size of spending through fiscal surpluses. This is because fiscal revenue constitutes a part of the aggregate social demand, and the fiscal surplus means that a part of the aggregate social demand is frozen, so as to achieve the purpose of compressing the aggregate social demand.

2. To achieve a fiscal surplus, on the one hand, it is necessary to increase tax revenue, and on the other hand, it is necessary to reduce expenditure as much as possible. If the increase in taxes is accompanied by a corresponding increase in expenditure, there can be no fiscal surplus, and the effect of increasing taxes on aggregate demand will be offset by the effect of increasing expenditure on expanding aggregate demand.

3. Debt crisis refers to the phenomenon that a large amount of debt in the field of international lending exceeds the borrower's own solvency, resulting in inability to repay debts or having to postpone debt repayment.

4. There are a number of indicators to measure a country's external debt repayment ability, the most important of which is the external debt repayment ratio index, that is, the ratio of a country's foreign debt repayment in one year to the export receipts of the current year or the previous year. In general, this indicator should be kept below 20 per cent, and above 20 per cent indicates that the external debt burden is too high.

This does not necessarily solve the crisis.

But at least it's going in the right direction.

The purpose of fiscal austerity is to reduce the fiscal deficit, reduce the rate of debt increase, and improve the fiscal debt repayment capacity.

But austerity in turn affects economic development, and the economy slows down or austerity, and fiscal revenues fall accordingly.

Unless there are significant cuts to high benefits. Otherwise, it is difficult to foresee how Europe will solve it now!

Because their personnel are united from top to bottom.

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Excessive social security has led to a fiscal collapse and a debt crisis, so it is necessary to tighten the fiscal policy for a long time.

After the austerity, there is a surplus to pay off the debt, obviously.

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Because the vast majority of currencies are now fiat currencies, that is, financial bills that the state has imposed value through law. In the past, under the gold standard, the value of money was based on the reserves of the **banks of various countries, but now, it is worthless.

Therefore, although Europe has the same currency, but the financial countries are completely independent, due to the loss of the first constraint, there is a natural "over-issuance of currency" (a large amount of borrowing is also a kind of over-issuance of currency) impulse, and for this impulse, the European ** bank is not able to intervene, so it has caused today's situation.

However, the outbreak of the European debt crisis is closely related to the United States, or rather, directed by the United States. In fact, Japan's total public debt is already twice its GDP, much worse than Greece's. But Japan's crisis was covered up by the United States...

There are pros and cons to any policy, and Europe's fiscal austerity policy is to shrink fiscal spending in the case of reduced fiscal revenues to avoid future debt defaults, although it will reduce social employment and affect the progress of economic recovery, but after surviving this period of time, after the economy slowly recovers, it will enter a virtuous circle.

In addition, if an active fiscal policy is adopted, if there is no economic recovery in the short term, it will lead to a complete economic collapse, which will implicate the rest of the eurozone.

The focus of this round of European debt crisis is mainly in Greece, Spain, Portugal and other countries caused by a series of problems caused by excessive debt. The reason for the debt crisis is that these countries are over-borrowing and spending, which makes them unable to make ends meet. Therefore, in these countries, the most we see is that Greece's response is to lay off employees (1-2 civil servants in 10 Greek citizens), reduce expenses (including reducing benefits, etc.), which is why Greek citizens have been actively on strike.

Because they are accustomed to those good carefree lives, and now they are asked to live a hard life, and they will not do it. And both ** and the IMF know and insist that only if everyone tightens their belts together and lives a hard life for a few years, slowly pays off those debts owed in the past, and removes the bubble, life will be better. This is also the reason why Greece's rescue plan has not been agreed, because the rescue party and the rescued party have not yet agreed on how to collect revenue and expenditure.

However, one thing is certain: no country will leave the eurozone, Greece's problems will be solved, and the euro will gradually become stronger. Because once a country withdraws, it represents a kind of regression! Once a country withdraws, the consequences and impact will be unpredictable and uncontrollable!

First, the approach that Europe is taking now is the so-called debt monetization, that is, the ECB directly or indirectly pays off the debts of countries in deep debt crisis by printing more euros and then replenishing them to the eurozone** or financial institutions. Here's one way.

But the symptoms are not the root causes.

Second: just like the precondition for saving Greece, the implementation of austerity fiscal policy, to put it bluntly, is to reduce the welfare of the people and give less money to the people.

Third: to fundamentally solve the problem, first of all, as these countries that are deeply mired in the European debt crisis, to boost the development of their own real economy, good economic development can make blood transfusion become a real self-hematopoiesis, is the sustainable way.

Fourth: from the perspective of the euro area as a whole, since the issuance of the euro, there has been a structural hidden danger, which has led to the inevitability of the European debt crisis to a certain extent, that is, the euro area only has a unified monetary policy, but there is no unified fiscal policy, which is also the inevitable choice for the future development of the euro area, that is, the establishment of an institution similar to the European Fiscal Office to unify the fiscal policy of the euro area.

A test hail with rubber analysis: Europe's fiscal austerity policy will reduce the source of bypasses. As a result, China's exports to Europe** declined. Item A in this question collapsed. Chinese investment in Europe will shrink. The BCD item does not meet the intent of the topic and is therefore excluded.

Comment: It is very important to understand the essence of this question, this question has a certain degree of difficulty, and it is the key to distinguish between Europe's fiscal austerity policy and this question. This question is of moderate difficulty. It is important to memorize and understand the textbook knowledge.