The economically illiterate Simon Nixon
We are carrying this “hooray crisis over” article from yesterday’s WSJ because it highlights the naïve supply side view that has unfortunately many adherent especially in conservative political parties in Europe (and the US of course as well). Simon Nixon calls Spain an unprecedented experiment in using austerity and reform to get out of a debt crisis, and argues economic data released over the past few weeks point to an imminent economic recovery. Because, Nixon says, the construction sector has hit bottom and unit labour costs have dropped, the stage is set for a business-investment led recovery despite future fiscal consolidation by the public sector presumably remaining a drag on the economy in the near future. Furthermore, he argues that market sentiment the credibility of Spain's bank restructuring is improving and funding conditions for banks, government and firms could improve soon.