On his blog. Here, I’d like to share the conclusion (my bold). The whole text is quite dense and in places technical, but worth a read, especially now when in Finland all the major political parties compete over how large budget cuts they intend to make after the elections.
The reason that unemployment rose so sharply in the Euro countries between 2008 and 2014 has nothing much to do so-called trade imbalances or differential ULCs.
Those imbalances (as they call them) and different ULCs are not new. What happened in 2008 was a major aggregate spending collapse which was then reinforced by the imposition of austerity.
If I graphed the change in fiscal position (as measured by the differential austerity imposed) and the change in the unemployment rate I would get a very strong positive relationship (more austerity, higher the rise in unemployment rates) which would have some meaning.
That should be the starting point for the European Council – but then that would require them to ask questions about their patently dysfunctional fiscal rules.